Power used in manufacturing operations denied excise exemption, while demand was confined to the normal limitation period.

Use of power for lifting raw materials and operating blowers in a coal-fed cupola was treated as use of power in or in relation to manufacture, so the assessee was denied exemption under Notification No. 179/77-C.E. On limitation, the show cause notice did not invoke the proviso to Section 11A of the Central Excise Act, 1944 and did not allege suppression; because the assessee acted under a bona fide belief supported by earlier decisions, the extended period was unavailable and the demand survived only for the normal six months.

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Issues: (i) Whether the assessee was entitled to the benefit of Notification No. 179/77-C.E. on the ground that the goods were manufactured without the aid of power; (ii) Whether the demand could be sustained beyond the normal period of limitation under Section 11A of the Central Excise Act, 1944.

Issue (i): Whether the assessee was entitled to the benefit of Notification No. 179/77-C.E. on the ground that the goods were manufactured without the aid of power.

Analysis: The factual finding accepted by the authorities was that power was used for lifting raw materials and for operating blowers in the coal-fed cupola, and that such use of power was in relation to the manufacture of the final products. The process resulted in goods falling under T.I. 68, and the use of power at the relevant stage brought the case within the principle that power used in lifting raw materials is use of power in or in relation to manufacture.

Conclusion: The assessee was not entitled to the benefit of Notification No. 179/77-C.E.; this issue was decided against the assessee.

Issue (ii): Whether the demand could be sustained beyond the normal period of limitation under Section 11A of the Central Excise Act, 1944.

Analysis: The show cause notice did not invoke the proviso to Section 11A of the Central Excise Act, 1944 and did not allege suppression. The assessee had acted under a bona fide belief based on earlier judicial decisions, and therefore the extended period of limitation was not attracted.

Conclusion: The demand was sustainable only for the normal six months' period and was not sustainable for the extended period; this issue was decided in favour of the assessee.

Final Conclusion: The finding on merits was upheld, but the demand was confined to the normal period of limitation, with the balance demand set aside.

Ratio Decidendi: Use of power for lifting raw materials or operating manufacturing equipment is use of power in or in relation to manufacture for denial of the exemption, but the extended limitation period cannot be invoked in the absence of suppression or invocation of the proviso to Section 11A of the Central Excise Act, 1944.

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