Per Shri V.K. Asthana :

This is an appeal filed by the appellants against the orders passed by the Collector of Central Excise, Bangalore in Order-in-Original No. 77 dt. 17.9.93. In the said order, the Ld. Collector has confirmed the payment of duty amounting to Rs. 4,15,445.85 under proviso to section 11A and imposed of penalty of Rs. 10,000/- on the appellants after holding that they are not eligible for the benefit of notification No. 230/86 dt. 3.4.86 for the clearance of certain Industrial Flavour and Fragrance falling under sub-heading 3302.00 which they had claimed to have been manufactured without aid of power but which was held to have been manufactured with the aid of power.

2. It is not disputed that the only use of power is to operate certain laboratory equipments to test both quality of the raw materials received and the end product produced. The equipment in question used for such testing is as follows :-

a) Spectrometer

b) P.H. Meter

c) Vaccum Pump

d) Distillation apparatus

e) Water purifier

f) Pouch sealer

3. Briefly the arguments of the Ld. advocate Shri K.G. Raghavan representing the appellants were as follows:-

i) The wordings of the exemption contained in notification No. 179/77 was different from that contained in the notification No. 230/86 in as much as the first notification mention about no process being ordinarily carried out without aid of power while the later notification talk of the end product being "made" He therefore argued that the decision of the Apex Court in 1991 (55) ELT 444 - Rajasthan State Chemicals Works case would apply to notification No. 179/77 and since wordings of notification No. 230/86 were different, the same would not apply there. This was so because as held in AIR 1988 SC 782, the expressions "pertaining to", "in relation to" and "arising out of" have been given in the expansive scope, whereas the words in the notification in question are more direct namely, "made".

ii) The Ld. advocate's second argument was that only a little percentage of samples are tested in their factory and such test is not on 100% basis. Therefore, the use of power for these tests is not material when the process of manufacture is viewed as a whole.

iii) The argument was in view of this very limited use of power, the electricity charges are so low and therefore it can be said that the use of power in the manufacturing process is very restricted and does not affect the process as such. In this connection, he cited the decision in 1986 (24) ELT 173 regarding the need to consider the quantum of power consumption in such cases.

iv) He further stated that w.e.f. 1.1.89 they had removed this equipment from their factory and informed the department accordingly. This showed that these tests were not necessary to be conducted and therefore were not an integral part of the process of manufacture.

v) The Ld. advocate stressed that the entire demand was time barred as the extended period under proviso to section 11A was not applicable because they were operating under the bonafide belief that the end product was exempt under the said notification whereas the decision of apex court in 1991 (55) ELT 444 was passed only on 17.9.91 and could not be retrospectively applied in their case.

vi) He also argued that on identical facts and for the use of the same equipment for testing earlier show cause notice dt. 7.6.88 had been issued for the period 1983-84 to 1987-88 and vide order No. 105/88 dt. 30.11.88, then the Collector had confirmed the demand of duty levied penalty on the same set of facts for the same unit using the same equipment in the same process of manufacture.

Therefore, in view of the well established law that any subsequent SCN on the same set of facts cannot claim the extended period. As the department was already in know of the entire issue, the present SCN, order-in-original appealed against are clearly time barred because the SCN for the period i.e. 1.1.88 to 31.12.88 was issued on 16.7.93 i.e. well b