Deeming fiction under excise law cannot extend small scale exemption to a khandsari molasses procurer.

A deeming provision for khandsari molasses was confined to duty recovery at the consumption point and could not be expanded to treat the procurer as an actual manufacturer for small scale exemption notifications. Because the exemption scheme applied to manufacturers and depended on factory, clearance and manufacture conditions, the procurer was held outside its scope and the exemption claim failed. On limitation, the notices were found to have been issued and received within the relevant period, and the limitation objection was not substantiated. The legal fiction was therefore kept within its stated purpose, and the Revenue's position prevailed.

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Issues: (i) Whether a procurer of khandsari molasses, deemed to be a manufacturer under the excise rules for the limited purpose of duty recovery, was entitled to small scale exemption under Notifications No. 1/93-C.E. and 7/97-C.E.; (ii) Whether the demand was barred by limitation.

Issue (i): Whether a procurer of khandsari molasses, deemed to be a manufacturer under the excise rules for the limited purpose of duty recovery, was entitled to small scale exemption under Notifications No. 1/93-C.E. and 7/97-C.E.

Analysis: The deeming fiction created by Rule 7A and Rule 9C was held to operate only for collection of duty on khandsari molasses at the consumption point. The legal fiction could not be extended beyond its purpose to confer a benefit under small scale exemption notifications, which were framed for manufacturers of excisable goods and were subject to conditions tied to factories, clearances and manufacture. The notifications were read as applying to actual manufacturers, and the procurer of khandsari molasses, though deemed a manufacturer for duty recovery, did not fit within that scheme.

Conclusion: The procurer was not entitled to small scale exemption. The finding was against the assessee and in favour of Revenue.

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

Analysis: The notices were shown to have been issued and received within the relevant period, and no material was produced to establish that they were served beyond the normal period of limitation. The limitation plea was therefore not substantiated on the record.

Conclusion: The plea of limitation failed. The finding was against the assessee and in favour of Revenue.

Final Conclusion: The legal fiction for khandsari molasses could not be enlarged to extend small scale exemption, and the limitation objection also failed, so the Revenue's appeals succeeded and the contrary appellate orders were set aside.

Ratio Decidendi: A deeming provision must be confined to the purpose for which it is created and cannot be extended to confer benefits under a separate exemption scheme unless the notification itself so provides.

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