Self-use assembly of desert coolers was treated as non-excisable manufacture, and the duty demand was held time-barred.

Assembly of a small number of desert coolers from duty-paid bought-out parts, for exclusive self-use in offices and factory and not for sale, was treated as not amounting to excisable manufacture because the goods were not assembled as marketable units. The demand also failed on limitation because the activity was carried on under a bona fide belief of non-dutiability and the department had regular knowledge through inspections; in the absence of fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty, the extended period could not be invoked.

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Issues: (i) Whether assembly of a small number of desert coolers out of duty-paid parts for exclusive own use and not for sale amounted to manufacture and rendered the goods excisable. (ii) Whether the duty demand was barred by limitation.

Issue (i): Whether assembly of a small number of desert coolers out of duty-paid parts for exclusive own use and not for sale amounted to manufacture and rendered the goods excisable.

Analysis: The goods were assembled in the appellants' workshop from bought-out exhaust fans and water pumps and fabricated scrap, the appellants were not in the business of manufacturing or selling desert coolers, and the assembled coolers were used only in their own offices and factory. On the reasoning applied to similar facts, articles so assembled for self-use and not offered for sale were not treated as ready-assembled marketable units attracting excise duty.

Conclusion: The assembly did not amount to excisable manufacture, and duty was not payable on the coolers.

Issue (ii): Whether the duty demand was barred by limitation.

Analysis: The appellants acted under a bona fide belief that the coolers assembled for self-use were not dutiable, and the department had regular knowledge of the activity through inspections. In the absence of fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty, the extended period could not be invoked.

Conclusion: The demand was time-barred.

Final Conclusion: The impugned order was unsustainable, and the appeal succeeded in full in favour of the appellants.

Ratio Decidendi: Articles assembled from bought-out components for exclusive self-use and not offered for sale are not excisable, and the extended limitation period cannot be invoked without proof of fraud, wilful suppression, or similar culpable conduct.

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