ORDER
1. This is an appeal against the order of the Appellate Collector who has upheld the lower authorities’ order regarding levy of duty and penalty on the appellants.
2. It is seen from the record that the appellants, who are manufacturers of storage batteries, received lead bars for conversion of the same into powder. The appellants’ case is that they received lead bars from M/s Ashok Batteries, Kanpur for converting these into lead powder on job work basis and returned the same to them and that no manufacturing process is involved as making the powder from lead slabs does not amount to manufacture. It is, however, seen that part of the lead gets converted into lead oxide during the powdering process and for this reason the lower authorities had held that there is a distinct change in name, character and usage of the final product emerging out of the powdering process and hence the duty liability. The process of manufacture as ascertained by the lower authorities is that the lead bars (are) converted first into lead pellets and then these pellets are put in rotating drums where on account of friction, part of the lead gets converted into lead oxide. According to the Department, lead oxide of 60% to 80% purity emerges in the process. The appellants have, however, pleaded that the oxidisation is voluntary, incidental and inevitable. The appellants have cited a number of decisions before the lower authorities to show that since a mere change of physical form takes place, no manufacture can be said to have taken place.
3. The learned Counsel for the appellants, in the course of hearing, argued that the matter arose out of audit objection and they had given the clarification vide their letter dated 14th August, 1980 and that since there was no communication from the Department until the show case notice dated 15th March, 1982, they were under the bona fide impression that their explanation had been accepted and there was no duty chargeable on the goods. He stated that the demand has been raised for the period 17th September 1979, to 29th December, 1980. He made the point that the demand was barred by limitation and extended period of five years in this regard could not be invoked under the law. He also pleaded that Rule 9(2) was not applicable in the case as there was no clandestine removal of goods. He further pleaded that there was no wilful suppression of the facts. The appellants, according to him, were under the bona fide belief that the conversion of lead into powder did not amount to manufacture. Further, according to him, the Department had been made aware of the fact of the manufacture of goods under reference on account of audit objection and also of the reply dated 14th August, 1980 of the appellants sent to the Superintendent (Range 6) Division 8, Bombay. The Department had slept over it and issued the demand in 1982.
4. The learned Counsel for the appellants has forcefully pleaded that it has not been proved that what was manufactured was lead oxide.
5. We find from the record that the lower authorities did some investigation regarding the manufacturing processes and also as to the final product that emerges by way of powder. So far as the manufacturing process is concerned there is no dispute, but so far as the composition of the end-product is concerned there is no evidence on record to show the basis on which the lower authorities gave the findings that the powder that emerged in the process had 60% to 80% purity lead oxide. The Learned Counsel for the respondent could not also throw any light in this regard. This is a question of fact which should have been determined after subjecting the powder to test and the appellants should also have been given the evidence on which the lower authorities have given findings that the oxide content of the powder is of 60% to 80% purity. The conclusion as to whether the powder which emerges out of the process carried out in the appellants’ factory is a manufactured product or not basically depends on the oxide content of the powder.
6. The decision in this case basically is to rest on whether the product which emerges has lead content as high as of 60% to 80% purity as indicated in the Appellate Collector’s order or whether there is a small percentage of lead oxide which incidentally gets formed during powdering process. During the hearing, the learned Counsel of the appellants was asked as to what was the intended product which was required to be obtained from the process carried out in the factory of the appellants. He could not enlighten us in this regard. The Collector (Appeals) has observed that the cathodes anodes are made out of this powder for use in the storage batteries. If this is so the material of which these electrodes are made must have a specified composition with specified lead oxide and lead content. We do not have full facts in this regard with us and we also find that in the findings of the Appellate Collector, no basis has been given by the Appellate Collector that the lead oxide content is of 60% to 80% purity.
7. In view of this we are constrained to remand the case to the lower authorities to decide the case afresh in the light of the above after making available to the appellants the evidence on which the findings regarding the lead oxide content have been given and also to give them an opportunity to make their pleading in this regard. We refrain from giving any finding in respect of other points raised as these would be relevant only if the product under reference is excisable.