ORDER
J.H. Joglekar,
1. M/S Sudhir Electricals Ltd manufactured water filters of capacity not exceeding 40 litres which bore the brand name of M/s Bajaj. These filters were exempt from payment of duty in terms of Notification No 76/86 dated 7.3.1986. In view of the unconditional exemption, the assessees surrendered their licence and were thereafter filing declarations as required under Rule 174 of the Central Excise Rules, 1944. In the declarations, they had given the processes of manufacture in the following words “From steel circles into steel containers made and buffing, polishing, punching, labelling with brand name Bajaj, candles in water filter and micro clin candles is fixed as purfier etc.” Mr Sudhir Gupta was the director of the said unit and Mr S.B. Mishra was the manager. Subsequent to a visit and investigation by the officers, Show Cause Notice dated 22.10.1991 was issued alleging that the assessees had manufactured ceramic water filter candles falling under Heading 69.11 without taking out a licence, without maintaining the accounts and had cleared them for captive consumption and for selling outside without payment of duty. The manufacturing process was described in the Annexure citing Mr Mishra’s statement as “fixing up the ceramic pipe on candles by mounting and applying cement and then packing…”. After hearing the assessees, the Commissioner passed orders confirming the duty not paid of Rs 26,24,515.39 and imposing penalties of Rs 1.00 lakh on Mr Gupta and Rs 25,000/- on Mr Mishra but not imposing any penalty on the assessee unit. Ceramic water filter candles in stock were confiscated but were allowed redemption on payment of fine.
2. We have heard Mr R.G. Sheth, the learned counsel for the appellant and Mr T.D. Bodade, the Departmental Representative for the revenue.
3. It was argued that the appellants did not manufacture the ceramic candles at all but these were procured from other manufacturers and dealers. We have seen the sample invoices placed on record, whereby the appellant unit had procured such candles from other sources. The Show Cause Notice made the presumption that fixing up the candle in the water filter by way of application and addition by cement amounted to manufacture. This presumption is wrong. The assessee unit receiving fully manufactured candles for fitment into a system for purification of water cannot be termed as manufacture of the candles. The Show Cause Notice clearly made a wrong assumption which the Commissioner in adjudication perpetuated on merits. We find that the confirmation of the demand on the assumption that the process undertaken by the appellants amounted to manufacture does not survive.
4. Even otherwise in the face of the various declarations field by the assessees from time to time, it has to be held that the department was aware of the process undertaken i.e. fixation of the candles in the water filters and therefore on limitation also the appellants have an unassailable case.
5. Thus both on merits and on limitation we find that the appeals succeed and are allowed with consequential relief.