Judgment

KANIA, J.: - This is an appeal against the judgment of a Division Bench of the Madhya Pradesh High Court, Jabalpur (Indore Bench) in M. Petition No. 104 of 1984. The appeal is filed at the instance of the Union of India, Collector of Central Excise, Indore and two other excise officers. The respondents are the original petitioners in the aforesaid petition. We propose to refer to the parties by the description in the petition.

2. The facts necessary for the disposal of this appeal can be shortly stated.

3. The petitioner No. 1 is a Company manufacturing spun yarn. According to the: petitioners, in the manufacture of the said product they use as raw material cellulosic fibres and non-cellulosic fibres. Sometime prior to 7th July, 1983, the petitioners filed a classification list in respect of the spun yarn manufactured by them showing the same as covered by Item No. 18(III)(i) in the First Schedule to the Central Excises and Salt Act, 1944 (referred to hereinafter as the "Central Excises Adt"). The said schedule is generally referred to as the "Central Excises Tariff". This classification was on the basis that the spun yam was manufactured by them out of non-cellulosic synthetic waste. The said classification list was approved by the excise authorities on 7th July, 1983. A supplementary classification list was approved on 15th October, 1983. The petitioners were clearing the goods on the basis of aforesaid classification lists. It appears that samples were drawn out of the spun yarn manufactured by the petitioners and sent for chemical examination. There are some reports submitted by the Chemical Analyser, with the details of which we are not concerned. Without giving any show cause notice or affording any opportunity to the petitioners to be heard, on 7th February, 1984, the Superintendent of Central Excise issued a notice of demand for a total sum of Rs. 26,47,749.39 against the petitioner No. 1 on the footing that there was short payment of excise duty. This was done on the ground that the yam manufactured by the petitioners had been manufactured out of waste of synthetic fibres in blend of viscose fibres (of non-cellulosic origin) and hence the said goods manufactured by them were liable to be classified under Central Excises Tariff Item No. 18(III)(ii). It is an admitted position that the yarn manufacturing process used by the petitioners was with the aid of power. The petitioners filed the aforesaid writ petition in I the High Court of Madhya Pradesh challenging the validity of the said notice of demand dated 7th February, 1984. The High Court granted an interim stay of the operation of the demand notice on 9th February, 1984. On the same day, namely, 9th February, 1984, an order was passed by the Assistant Collector Of Central Excise modifying the approval granted to the aforesaid classification lists submitted by the petitioners which had been approved as aforesaid and classifying the aforesaid product under Item No. 18(III)(ii) of Schedule 1 of the Central Excises Act. On 10t February, 1984 a notice was issued by the Superintendent, Central Excise on the petitioner No. 1 reciting inter alia that the Assistant Collector had modified the approval of the classification lists on 9th February, 1984 and calling upon the petitioner o. 1 to show cause why the duty short levied should not be recovered from them under the provisions of Section 11-A of the entral Excises Act. A second similar show. cause notice was also issued. The petitioner No. 1, wrote to the excise authorities pointing out that in view of the aforesaid writ petition filed by the appellant, the adjudication proceedings should be stayed till writ petition was disposed of. This request was turned ,down on 5th March, 1984 and orders of adjudication were passed by the Assistant Collector modifying the classification lists and confirming the demand made under the aforesaid notice of demand. The petitioners thereupon amended the aforesaid writ petition filed b