JUDGMENT

BHARUCHA, J. :- The appellants manufacture Liquid Paraffin I.P. It is the case of the appellants that the said liquid paraffin is packed in drums which are labelled. The labels bear the appellants monogram "Lubri-Chem". The said liquid paraffin is supplied to pharmaceutical industries. The pharmaceutical industries use the said liquid paraffin as an intermediate in the manufacture of drugs. The said liquid paraffin was classified for the purposes of payment of excise duty under T.I. 68 and, as a drug intermediate. cleared without payment of excise duty by reason of an exemption notification.

2. On 6th August, 1981, the Superintendent of Central Excise issued to the appellants a notice which stated that they had manufactured and cleared the said liquid paraffin, which fell under T.I. 8, without payment of excise duty thereon. For the period 1st February, 1981 to 31st July, 1981, they were required to show cause why duty in the sum of Rs. 30,677.04 should not be recovered from them and why penalty should not be imposed upon them. An identical notice was issued on the same day for the period 19th June, 1980 to 31st January, 1981; the amount claimed thereunder was Rs. 84,836.35. The appellants showed cause. An order was made by the Assistant Collector of Central Excise on 2nd December, 1981, wherein he held that the demands in both notices were in order and he confirmed the same. He did not, however, impose any penalty. He came to his conclusion on the ground that there was no denying the fact that the said liquid paraffin was a mineral oil and it became a medicine only after it was marketed or labelled as such. He relied upon the opinion of the Deputy Chief Chemist who, on analysis of the said liquid paraffin, had found that it was in the form of a colourless liquid having flash point above 76 degrees Fahrenheit. It had a flame height of more than 10 mm. but less than. 18 mm. The tariff description under Item 8 as Refined Diesel Oil was that any mineral oil which had its flashing point at or above 76 degrees Fahrenheit and a flame height of 10 mm. or more but less than 18 mm. fell under T.I. 8. Accordingly, the said liquid paraffin was correctly classifiable under T.I. 8. The Assistant Collector, therefore, rejected the appellants contention that the liquid paraffin was classifiable under T.I. 68. He held that the appellants had filed a wrong declaration and had suppressed the facts wilfully.

3. On 3rd September, 1982, the Assistant Collector of Central Excise passed an order which recorded that the appellants had claimed in classification lists filed by them that the said liquid paraffin was classifiable under T.I. 68 and, under a notification dated 1st March, 1975, was exempt from payment of excise duty. The appellants had been heard. When their representative was questioned about the labelling of the said liquid paraffin, it had become known that the said liquid paraffin was packed in drums which bore a label showing the monogram of the assessee. This indicated the proprietary nexus of the appellants with the said liquid paraffin. The Assistant Collector, therefore, ordered that a demand should issue against the appellants for short recoveries of excise duty, after classifying the said liquid paraffin under T.I.14-E.

4. The appellants filed appeals against the said orders dated 2nd December. 1981 and 3rd September, 1982, before the Collector of Central Excise. The Collector (Appeals) by his order dated 17th March, 1983, held that T.I. 8 gave a self-contained definition of the products falling thereunder. The product manufactured by the assessee had, on test, been found to satisfy such specifications, which fact had not been denied. In view thereof, the product was classifiable first under T.I. 8. After the first stage of manufacture the product was packed, labelled and sold for pharmaceutical purposes. On the appellants own admission, the product was of pharmacopoeia grade. The product was sold in a drum bearing the appe