JUDGMENT

R.M. SAHAI, J.- The question of law that arises for consideration in this appeal is whether the tube mill and welding head erected and installed by the appellant for manufacture of tubes and pipes out of duty-paid raw material was assessable to duty under residuary Tariff Item No. 68 of the Schedule being excisable goods within the meaning of Central Excises and Salt Act, 1944 (Act for short).

2. To answer the issue, few facts are necessary to be narrated. The appellant was engaged in the manufacture of welded steel pipes and tubes which were classified before 1-8-1983 under Item 28-AA of the First Schedule to the Act. Later on these items came to fall under Tariff Item 25 of the Schedule. The steel tubes and pipes produced by the appellant were exempt from duty as they were produced out of duty-paid raw material. For the manufacture of these items the appellant had set up plant and machinery at its factory site. The first phase of installation was completed in the year 1974 by putting up all processes of tube-making such as slitting line, tube-rolling plant, welding plant, testing equipment and galvanizing etc. The tubes which could be rolled were in the size range of 15 mm to 50 mm. The second phase of expansion was taken up by adding balancing facility for the manufacture of steel tubes of higher diameters ranging up to 150 mm. For the expansion of the project the appellant acquired various plant and machinery, for instance, uncoiler, looper, leveller, stamping and stock guide, forming mill, welding head, cooling zone etc. The project consisted of acquiring various items and components and installing them for making a complete unit for production of steel tubes. Certain items of the plant and machinery such as uncoiler, looper etc. were purchased from the market and embedded into earth and installed to form a part of the tube mill. Components purchased from the market were like motors, coupling, gear boxes, bearing, castings etc. These were assembled and installed on the site to form part of the tube mill which was also covered in the process of welding facility. The tube mill, according to appellant, was thus not a specific machine and component but consisted of several machines and components which after the installation got embedded to earth and formed part of the plant.

3. In 1976 and 1980, a dispute arose about eligibility of the goods produced by the appellant from exemption but the proceedings, on reply by the appellant, were dropped. In 1976, the appellant was informed in reference to its letter sent on 7-4-1976 that the Government of India vide their Notification No. 31/76 dated 28-3-1976 having fully exempted the "iron and steel products" listed at S1. No. 22 of the aforesaid notification from the operation of Rule 174 of the Central Excise Rules, 1944, the appellant was not required to take any licence. In 1983, however, the Inspector, Central Excise, sent a letter to the appellant regarding manufacture of steel pipes and tubes made out of steel strips exceeding 5 mm in thickness informing the appellant that the Superintendent, Central Excise, desires checking of the records to ascertain proof of payment of duty on raw materials received in the factory for manufacture of steel pipes and tubes. The appellant was required to arrange all the relevant records at the factory premises. The letter was replied to on 16th January and the Department was requested to verify the records and also inspect the office of the appellant. In February 1984 the appellant received a letter for producing records from the date of manufacture to satisfy that the raw material was duty-paid. The premises were visited by the Assistant Collector on 28-3-1984 and he instead of recording any note about the inspection of the record relating to whether the tubes were produced out of duty-paid raw material recorded a note on the status of the working of the factory and observed that this was a thing of major importance and all the plants a