Manufacture by de-mineralisation of water sustains excise duty, while non-filing of classification details justifies extended limitation.

De-mineralisation of water was treated by majority as manufacture because removal of calcium and magnesium created a commercially distinct product with a different name, character and use; the product was therefore classifiable and dutiable under the tariff. The dissent considered the process only purification or softening, retaining the essential identity of water and not creating excisable goods absent manufacture and marketability. On limitation, the majority held that failure to file the required classification list after the new tariff came into force amounted to suppression, so the extended period applied and the demand was not time barred; the dissent would have treated the demand as time barred.

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Issues: (i) whether de-mineralisation of water amounted to manufacture and whether the product was classifiable and exigible to duty under the tariff; (ii) whether the demand was barred by limitation and the extended period could be invoked.

Issue (i): whether de-mineralisation of water amounted to manufacture and whether the product was classifiable and exigible to duty under the tariff.

Analysis: The competing views turned on whether removal of calcium and magnesium from river water brought into existence a new commercial commodity with a distinct name, character and use. The majority view held that the process produced de-mineralised water as a different commodity, that water treated with ion exchange media fell within the tariff entry for water of similar purity, and that excisability followed. The dissenting view held that the process was only softening or purification, that the essential identity of water remained unchanged, and that mere mention in the tariff could not by itself create excisability without manufacture and marketability.

Conclusion: The majority held that the process amounted to manufacture and that the product was classifiable and dutiable under the tariff.

Issue (ii): whether the demand was barred by limitation and the extended period could be invoked.

Analysis: The majority held that the appellants had not filed the required classification list after the new tariff came into force, that the department was justified in treating the omission as suppression, and that the extended period under the limitation provision was attracted. The dissenting view held that the department had full knowledge of the process, that there was no fraud or wilful suppression, and that the demand was time barred.

Conclusion: The majority held that the extended period was validly invoked and that the demand was not time barred.

Final Conclusion: By majority, de-mineralised water was treated as excisable goods, the duty demands were sustained, and the appeals failed. The dissent would have treated the product as non-excisable and the demands as time barred.

Ratio Decidendi: A process that brings into existence a commercially distinct commodity with a different name, character or use amounts to manufacture for excise purposes, and the extended period of limitation applies where non-compliance with classification obligations amounts to wilful suppression.

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