K. Prakash Anand, Member (T)

1. As per Notification No. 118/75-C.E., dated 30.4.1975, the Central Government Exempted goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944, manufactured in a factory and intended for use in the factory in which they were manufactured, or in any other factory of the same manufacturer, from the whole of the duty of excise leviable thereon. Where such use was in a factory of a manufacturer, different from the factory where the goods had been manufactured, the exemption was allowable subject to the proper officer being satisfied that the goods were intended for such use. The case of the department is that appellants, who are manufacturers of sugar, also produced steam, an excisable product, and utilised it in the adjacent Distillery unit without payment of duty on such steam. It is alleged that they incorrectly availed of Notification No. 118/75.

2. In the order-in-appeal against which the appellants are before us, it has been observed that factory as per the definition in Section 2(e) of Central Excises and Salt Act, 1944, is "any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on". According to Collector (Appeals), the word precincts had to be interpreted to mean any space enclosed by walls or other boundaries of a place or buildings. He held that the precincts would mean the open space enclosed by common boundary wall. Separate building for manufacture of different excisable goods, it was held, would not be covered by term precincts. Having taken the view, that the distillery unit of the appellants was not a part of their sugar "factory", the Collector (Appeals) held that the steam used in such distillery was not entitled to the benefit of exemption Notification No. 118/75, insofar as it is related to consumption of the excisable goods within the same factory or precincts thereof.

3. On the other hand, the Collector (Appeals) conceded that the distillery was another factory of the same manufacturer, that is the appellants. However, so far as the appellants claim to exemption on this account is concerned, this has been denied on the ground that appellants were required to prove to the satisfaction of the Assistant Collector that the impugned goods had actually been used in their other factory and to follow the Chapter X procedure. Since they failed to follow this procedure, they were not entitled to the benefit of Notification No. 105/82, the Collector (Appeals) held.

4. Appellants had also stated in the reply to the show cause notice that demands of duty raised were substantially barred by limitation. This claim was rejected by the Collector (Appeals) on the ground that appellants failed to declare to the department that the steam was being used in the distillery unit, a premises distinct from the one where the steam was being manufactured.

5. We have heard Shri K.P. Joshi, Advocate, for the appellants and Shri L.C. Chakraboraty, JDR, for the department.

6. The learned advocate has emphasised that both the sugar manufacturing unit as well as the distillery was under the same management, control and establishment. Therefore, it is claimed, the entire production should be considered as being of one "factory".

7. Secondly, the point is made that even if it is held that the steam was not used in the same factory or precincts thereof, appellants would be entitled to the benefit of Notification No. 118/75, in view of the other provision relating to the use of such excisable goods in another unit of the same manufacturer.

8. Finally, Shri Joshi emphasised that most of the demand of duty is hit by time-bar as the department cannot demand duty for the extended period, since there was no allegation in the show cause notice of any suppression o