Manufacture test under excise law: mere crushing of limestone into lime fine was not treated as manufacture, and limitation also failed.

Crushing limestone into lime fine was held not to amount to manufacture because section 2(f) requires either emergence of a new and distinct commodity or an express deeming provision in the tariff, and Chapter Note 2 of Chapter 25 contained no such deeming language. The Department also failed to show that lime fine was commercially recognised as a separate excisable product. On limitation, the extended period was unavailable because the assessee had disclosed lime fine in classification lists and the record did not establish suppression or misdeclaration. The revenue demand therefore could not be sustained.

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Issues: (i) whether crushing limestone into lime fine amounts to manufacture and results in an excisable product; (ii) whether the demand was barred by limitation for want of suppression or misdeclaration.

Issue (i): whether crushing limestone into lime fine amounts to manufacture and results in an excisable product

Analysis: Section 2(f) of the Central Excises and Salt Act, 1944 requires a process to result in a new and different commodity, or to be expressly treated as manufacture by the relevant tariff notes. Chapter Note 2 of Chapter 25 of the Central Excise Tariff Act, 1985 merely describes products in specified forms and does not expressly deem the process of crushing as manufacture. The tariff contains several Chapter Notes where the legislature has specifically used deeming language, but no such deeming provision appears in Chapter 25. The Department also failed to adduce evidence that lime fine is commercially recognised as a distinct commodity created by the process.

Conclusion: Crushing limestone into lime fine does not amount to manufacture, and lime fine is not shown to be an excisable product. This issue is decided in favour of the assessee.

Issue (ii): whether the demand was barred by limitation for want of suppression or misdeclaration

Analysis: The appellants had disclosed lime fine in their classification lists from time to time, and the record did not support any suppression of facts or misstatement. Since the Department was aware of the existence of the sinter plant and the use of lime fine, the basis for invoking the extended period was not established. In any event, once manufacture itself was held not to exist, the duty demand could not survive.

Conclusion: The extended period of limitation was not available. This issue is also decided in favour of the assessee.

Final Conclusion: The appeal succeeds because the process in question was not manufacture under the governing excise law, and the revenue demand could not be sustained.

Ratio Decidendi: A process constitutes manufacture only if it brings into existence a commercially distinct commodity or is expressly deemed to be manufacture by the applicable tariff notes; absent such deeming language and supporting evidence, mere crushing or size reduction does not amount to manufacture.

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