JUDGMENT

SAWANT, J.:- Leave granted.

2. The respondents herein are the manufacturers of Cellulosic Spun Yarn containing man-made fibre of non-cellulosic origin, i.e., by blending cellulosic fibre and the waste of non-cellulosic origin in different proportions. They filed two classification lists being List No. 4/83 dated 5-7-1983 and List No. 9/ 84 dated 1-3-1984 under Tariff Item No. 18 111 (i) showing in each of the two lists [i] 85% of cellulosic fibre and 15% waste of noncellulosic origin, [ii] 52% of cellulosic fibre and 48% waste of non-cellulosic origin and [iii] 60% of cellulosic fibre and 40% waste of non-cellulosic origin.

3. It appears that from June 1983, the respondent-Company started manufacturing yarn out of blending of NCSW/Viscose and claimed classification under Tariff Item No. 18 Ill (i) as per the classification list effective from 5-7-1983. The main varieties were 40s and 60s and the rate. of duty in July 1983 was Rs. 1. 30 plus 15% [Additional Duty] plus 10% [Special Duty], i.e., total of Rs. 1.63 approximately, per k.g. for 4 0 s yarn. For the same count of yarn for Polyster/Viscose manufactured out of virgin fibre, the rate of duty was Rs. 9.00 plus 15% [Additional Duty] plus 10% [Special Excise Duty], i.e., total oi Rs. 11.25 per k.g. The difference in Central excise duty on these two varieties was, therefore, Rs. 9.60 per k.g. for 40s yarn. In the same manner, the difference in duty for 60s yarn was Rs. 6.75 per k.g. The clearance of yarn manufactured out of NCSW/Viscose blend started from July 1983 onwards as the classification list was filed w.e.f. 5-7-1983.

4. At the initial stage, the Assistant Collector, Central Excise, Aurangabad Division granted provisional approval and forwarded samples in both the cases to the Chemical Examiner for his report. The classification claimed by the Company was subsequently finalised granting concessional rate of duty under Notification No. 275/82 dated 13-11-1983.

5. Since the Deputy Chief Chemist in his test report observed that the yarn as classified by the respondent-Company contained fibres of non-cellulosic origin and the cellulosic fibres predominated in weight, the issue was taken for fresh proceedings. A show cause notice was issued on 12-7-1984 asking the Company to show cause as to why their product should not be classified under Tariff Item No. 18 111 (ii) as they had misclassified and misstated the products.

6. Against the said show cause notice, the respondent-Company approached the High Court by a writ petition under Arts. 226/227 of the Constitution. The High Court rejected the writ petition. Thereafter, the issue was taken up for adjudication by the Assistant Collector, Central Excise and Customs, Aurangabad Division. During the relevant period, six show cause notices for different amounts, together totalling Rs. 1,10,81,405.94 were issued to the respondent-Company.

7. By his order dated 28-8-1985, the Assistant Collector, Central Excise confirmed the demand made on the respondent of Rs. 1,10,81,405.94 and imposed a penalty of Rs. 500

8. Against the said order of the Assistant Collector, the, respondent-Company preferred a writ petition in September, 1985 being Writ Petition No. 810 of 1985 under Art. 226 of the Constitution, in the High Court.

9. On 28-10-1985 the respondent Company also preferred an appeal being Appeal No. 1424 of 1985 under Section 35 of the Central Excises and Salt Act, 1944 [the Act] before the Collector of Central Excise [Appeals], Bombay and applied for stay of the order of the Asstt. Collector.

10. The Union of India contested the writ petition and filed its counter-affidavit. While the application for stay in the appeal was still pending, writ petition came ur) for hearing on 20-11-1985 for admission, and the High Court on that day passed the following order:

"Rule. Interim stay on condition that petitioners [Respondents herein] deposit in this Court an amount of Rupees Twenty Eight Lacs by 3Ist January, 1986 and a further amount of