ORDER
G. Sankaran, Sr. Vice-President
1. This appeal is against Order-in-Appeal No. 204-CE/KNP/83, dated 13-9-1983 passed by the Collector of Central Excise (Appeals), Delhi, rejecting the appeal filed by M/s. Malayagiri Sandalwood Oil Distillery, Kanpur (hereinafter referred to as the appellants) against order dated 27-8-1980 passed by the Assistant Collector of Central Excise, Kanpur. By this order, the Collector (Appeals) held that the process of extraction of sandalwood oil from sandalwood undertaken by the appellants amounted to a process of manufacture, that the resultant sandalwood oil was a new product different from the raw material sandalwood and that, therefore, the benefit of Central Excise Notification No. 119/75 dated 30-4-1975 was not admissible to the appellants. The Collector (Appeals) also found that the period of limitation applicable to the demand of duty was five years because of the suppression of material facts on the part of the appellants. In the result, he upheld the Assistant Collector’s order except for a direction that the exact amount of duty should be recalculated.
2. We have heard Shri Lachman Dev, Consultant, for the appellants and Shri K.C. Sachar, Departmental Representative, for the respondent-Collector.
3. It is seen from the record that the appellants had addressed to the Superintendent of Central Excise a letter dated 4-8-1977 setting out clearly that they were distillers and exporters of sandalwood oil and that they not only manufactured their own goods but also goods for others on job basis. In the latter case, the raw material was supplied by the respective owners and the appellants did the distillation work and returned the goods produced by them on collection of job charges or, if it suited their (the appellants’) purpose, purchased the goods. The description of the goods in question was also clearly set out as sandalwood oil and sandalwood powder and refused powder. In the present proceedings we are concerned only with sandalwood oil. The value of the goods cleared during the year 1976-77 was also set out separately for the appellants’ own production and the production on job basis. The value of the goods in the latter category (which included goods returned to the suppliers of the raw material as well as goods purchased from them) was stated to be the value determined in accordance with Notification No. 119/75 dated 30-4-1975. It was further contended by the appellants in this letter that since the value of the excisable goods falling under Item No. 68 CET did not exceed Rs, 30,00,000/- during 1976-77 and their capital investment on Plant and Mahinery did not exceed Rs. 10,00,000/-, they were eligible for exemption under Notification No. 176/77, dated 18-6-1977 and that they were outside licensing control of Central Excise authorities. In response to this letter, the Superintendent of Central Excise wrote to the appellants on 28-9-1977 directing them to apply for Central Excise licence and to complete other formalities. They were further directed not to clear any goods for export or for home consumption out of their factory till the grant of permission by the Superintendent and further to furnish particulars of the goods manufactured and cleared from 18-6-1977. On 14-10-1977, the appellants submitted the required documents under protest. Along with this letter, they submitted a note setting out the process of manufacture and some other particulars. It was clearly set out therein that apart from the distillation of sandalwood oil which the appellants did for their own production, they were also doing job work on behalf of other parties and that after distillation of sandalwood oil it was despatched to those parties or the appellants purchased the oil if it suited their purposes. They had also filed two classification lists bearing Nos. 1/77 and 1/78.
4. It is Shri Lachman Dev’s submission that having regard to the above correspondence and approved classification lists, the department was in the know of the fact that the appellants were manufacturing sandalwood oil on job basis and yet they approved the classification lists. Though Shri Sachar submitted that classification list No. 1/77 had not been approved in so far as the item of job work mentioned at S. No. 4 was concerned, Shri Lachman Dev drew our attention to the statement in the Assistant Collector’s Order-in-Original under the heading “Brief facts of the case” that classification lists No. 1/77 and 1/78 were approved on 22-2-1978 and 10-3-1978 respectively. We have, therefore, to proceed on the basis that the classification lists had been approved. The classification list No. 1/78 shows approval on the face of it.
5. Shri Lachman Dev further submitted that both the show cause notices issued by the department, the first on 8-1-1980 covering the year 1978-79 and the second on 26-3-1980 covering the period from 22-6-1977 to 30-3-1978 invoking Central Excise Rule 10 did not allege any suppression of material facts on the part of the appellants nor did they propose any personal penalty. He further submitted that the understanding prevalent at the material time was that for Item 68 goods manufactured on job charge basis, duty was payable only on the job charges and not also on the value of the raw materials furnished by the suppliers to the job workers. In the circumstances, no mala fide intent to evade duty or suppression of facts could be attributed to the appellants. Further, the assessment returns in Form RT 12 had also been approved by the department and the gate passes had also disclosed the aspect of job work. In view of these circumstances, it was submitted that the longer period of limitation was not available to the department.
6. We have considered the submissions of both sides. A five-Member Bench of this Tribunal has held in the case of National Organic Industries Ltd. v. Collector of Central Excise, 1985 (21) ELT 252 that when a raw material is processed or converted by the job worker into another product having a different name, character or use, such a process or conversion would amount to manufacture for the purpose of levy of excise duty and the benefit of duty concession in terms of Notification No. 119/75 would not be admissible. In this decision several authorities including Gujarat High Court’s judgment in Anup Engineering Ltd. v. Union of India -1978 ELT J 533 were considered. Though Shri Lachman Dev relied on the decision of Gujarat High Court, he did not argue the point further before us in view of the aforesaid five-Member Bench decision. In the present case, it is evident that sandalwood and sandalwood oil are two distinct and different commodities, and in our view, no proof is required in this regard. We hold that the sandalwood oil manufactured by the appellants was correctly held to be excisable under Item No. 68 CET and ineligible for duty concession in terms of Notification No. 119/75.
7. The question then arises whether the department was entitled to invoke the larger period of limitation of five years for demanding duty from the appellants. We have earlier noted the sequence of events and the correspondence exchanged between the appellants and the department. As early as on 4-8-1977 the appellants had made known to the department the fact that they were producing sandalwood oil not only on their own account but also for others on job charge basis from the raw material supplied by them and that the value of sandalwood oil produced on job charges basis was determined in accordance with Notification No. 119/75 dated 30-4-1975. This notification stated that the value on which duty would be payable in such cases would be the job charges collected by the jober. This position had also been reiterated in further correspondence. Then we have two classification lists which had been approved by the department. Above all it is to be noted that the two show cause notices dated 8-1-1980 and 26-3-1980 issued to the appellants demanding differential duty did not set out any material to show that there was suppression of material facts on the part of appellants nor even contained in any allegation to that effect. The notice dated 8-1-1980, covered the year 1978-79 and the notice dated 26-3-1980 related to the period 18-6-1977 to 31-3-1978. In view of the position that no suppression was alleged in the show cause notices, and as we have seen, the appellants had placed all their cards on the table at least from 4-8-1977, the Assistant Collector was not entitled to invoke the larger period of five years in his adjudication order. The Appellate Collector was clearly in error in upholding this order. The two notices were also clearly beyond the normal period of six months for recovery of short levied duty. Therefore, we find that the notices were barred by limitation.
8. In the result, we set aside the orders of the lower authorities and allow the appeal with consequential relief to the appellants.