Purification of water alone does not create an excisable commodity; bona fide belief also defeats extended limitation.

Mere purification, softening, or demineralisation of water by removing impurities and mineral ions does not create a new excisable commodity with a different name, character, or use, so treated water of this kind is not classifiable as dutiable goods under sub-heading 2851.00. Because no excisable product emerged, the duty demand lacked foundation. The note also states that, where the assessee held a bona fide belief consistent with that view, suppression could not be inferred and the extended period of limitation was unavailable; the associated penalty and confiscatory consequences therefore could not survive.

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Issues: (i) whether the product cleared by the assessee was excisable water classifiable under sub-heading 2851.00 of the Central Excise Tariff Act, 1985; (ii) whether the demand, penalty, and invocation of the extended period were sustainable.

Issue (i): whether the product cleared by the assessee was excisable water classifiable under sub-heading 2851.00 of the Central Excise Tariff Act, 1985.

Analysis: The water produced by the assessee was subjected to treatment only for removing impurities and mineral ions, resulting in softened water. The process did not convert water into a new commodity with a different name, character, or use. The reasoning adopted in the earlier Tribunal decision dealing with similar treatment of water was applied, together with the Board's own view that treated purified water of this kind was not to be treated as dutiable merely because of such processing.

Conclusion: The product was not held to be a separately excisable commodity falling under sub-heading 2851.00.

Issue (ii): whether the demand, penalty, and invocation of the extended period were sustainable.

Analysis: Since the assessee's process was found not to result in excisable goods, the foundation for duty demand failed. The record also supported a bona fide belief that the process did not create a dutiable commodity, so suppression could not be inferred for the purpose of extending limitation. In consequence, the penalties and confiscatory consequences based on the same demand could not survive.

Conclusion: The extended period was not invokable and the demand with penalty was unsustainable.

Final Conclusion: The impugned order was set aside and the appeals were allowed, with the assessee succeeding on both excisability and limitation.

Ratio Decidendi: Mere purification, softening, or demineralisation of water by removal of impurities does not amount to manufacture of a new excisable commodity, and where the assessee acts under a bona fide belief consistent with that position, the extended period of limitation cannot be invoked.

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