Jyoti Balasundaram, Member (J)

1. The appellant in its factory at Durgapur manufactures Pig Iron, Steel Ingots and Iron Steel products. Prior to August, 1983 the said products were classifiable under erstwhile Tariff Items 25, 26 and 26AA respectively. The appellant had been paying Central Excise duty on the said items following the "later the better" principle; as such no Central Excise duty was paid on such Iron in crude form when used for the manufacture of Iron Steel Products. Appropriate Central Excise duty was determined and paid on Iron or Steel products when cleared. In the manufacture of Steel Ingots and various Iron Steel products Steel Melting Scrap arises. Steel Melting Scrap arising in the process of manufacture is captively consumed and is also cleared by the appellant to the Mini Steel Plants manufacturing Steel Ingots, Steel Castings or semi-finished Steel with the aid of Electric Arc furnace at "Nil" rate of duty after observing the procedure set out in Chapter X of the Central Excise Rules, 1944 (hereinafter to be referred to as the Rules) in terms of Notification 150/77 dated 18-6-1977 as amended by Notification No. 209/77 dated 2-7-1977.

2. By the show-cause-notices dated 21-11-1980 and 23-11-1981 Central Excise duty on iron used in the manufacture of Steel Melting Scrap cleared during the period from 12-12-1977 to 30-9-1980 and April 1981 to October 1981 respectively under Notification No. 150/77, was sought to be recovered under erstwhile Rule 10 of the Central Excise Rules. It was alleged in the notice that no excise duty on Iron in crude form falling under erstwhile Tariff Item 25 was paid before use in the manufacture of Steel Ingots and Steel Melting Scrap, and as such, iron used in the manufacture of Steel Melting Scrap was liable to duty.

3. The appellant replied to the said notices by its letter dated 15-5-1981 and 8-1-1982, stating inter alia that Notification No. 150/77 as amended conferred the benefit to the Industrial Consumers upon condition of following the procedure laid down in Chapter X of the Rules to obtain duty free Melting Scrap. It further stated that since the Government has accepted the "later the better" principle the question of raising demand did not arise and no duty is and was required to be paid at the iron stage when used for manufacture of Steel Ingots. The appellant further stated that clearances were effected with the full knowledge and permission of the concerned Superintendent, Central Excise who issued certificate in form CT-2 at the consignee's end and thus extended period of limitation was not applicable in its case.

4. The Collector of Central Excise, Bolpur by the impugned order dated 9-6-1987 confirmed the demand holding that the appellant has contravened the basic provision of Central Excise Law with intention to evade payment of duty and hence extended period of limitation is applicable. It was further held that Notification No. 150/77 has got no application and duty on Iron used in the manufacture of Steel Melting Scrap was payable at the time of clearance to the Mini Steel Plants. Hence this appeal.

5. We have heard Shri N. Mukherjee, learned Advocate Shri M.S. Arora, learned DR.

6. The argument of the learned counsel on the limitation aspect is well founded - the Department had knowledge of the manufacturing process in all plants of the integrated steel plant. It cannot be said that there was any suppression on the part of the appellants. In fact, the show cause notices do not contain any allegation of suppression. In these circumstances, we are of the opinion that the extended period of limitation cannot be invoked in this case and the demand, if upheld, has to be confined to a period of 6 months prior to the date of issue of show cause notice.

7. On merits, we find that duty on iron in crude form not paid when used captively in the production of steel melting scrap, is leviable at the time of despatch of such steel melting scrap which have not complied