The central legal point established is the interpretation of tariff headings under the Central Excise Tariff Act based on the HSN explanatory notes and specific inclusion of goods in the tariff sub-headings.

( 1 ) A question was raised before the Tribunal whether water-well drilling rigs mounted on motor vehicle chassis fall under Tariff Heading 84. 30 of the Central Excise Tariff Act, as claimed by the respondent assessee, or under Tariff Heading 87. 05 as upheld by the adjudicating authority. The Tribunal upheld the respondents contention and set aside the order of the adjudicating authority. However, the Tribunal confirmed the claim of the appellant limited to a particular removal in respect of which separate invoices had been submitted by the respondent. The decision of the Tribunal on the main issue has been impugned before us by the Revenue. The respondent has filed a separate appeal being CA No. 178 of 1997 in respect of the latter finding limited to the demand in respect of the particular quantity.

( 2 ) THE period in respect of which the demand has been raised is 1/3/1986 to 29/2/1988. During this period the respondent assessee had cleared water-well drilling rigs mounted on chassis (hereinafter referred to as "the goods") after classifying the same under Tariff Heading 84. 30. On 1/3/1988, a notification was issued by the Central Government under Rule 8 of the Central Excise Rules, 1944 granting exemption from payment of the full amount of excise duty to "drilling rigs mounted on motor vehicle chassis", falling under Heading 87. 05 of the Schedule to the Central Excise Tariff Act, 1985. The notification reads thus:

"effective rate of excise duty on drilling rigs mounted on motor vehicle chassis.-In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts drilling rigs mounted on motor vehicle chassis, falling under Heading 87. 05 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), from so much of the duty of excise leviable thereon which is specified in the said Schedule, as is equivalent to the duty of excise leviable with reference to that part of the value thereof which represents the value of the chassis and the compressor used in such drilling rigs. "

( 3 ) THE respondent assessee then filed classification lists claiming that the goods manufactured by it were classifiable under Tariff Heading 87. 05 and as such they were entitled to the benefit of the exemption notification dated 1/3/1988.

( 4 ) ON 18/4/1988 the exemption notification referred to hereinbefore was amended by Notification No. 142 of 1988. By the amendment, the opening paragraph of the earlier notification was to read "heading 84. 30 or 87. 05" in place of "heading 87. 05". Subsequent to this clarification, the respondent assessee filed a fresh application for reclassifying the goods manufactured by it under Heading 84. 30. The appellant issued a show-cause notice subsequent thereto in which it was stated, inter alia, that the goods had been wrongly classified by the respondent for the period in question under Heading 84. 30, that the goods were properly classifiable under Tariff Heading 87. 05 and that the appellant had deliberately suppressed the true facts and made a misstatement of fact within the meaning of Sec. 11-A of the Central Excises and Salt Act, 1944 (as it was then entitled) justifying the invocation of the extended period of limitation.

( 5 ) THE respondent filed a reply to the show-cause notice claiming that the goods had been properly classified under Tariff Heading 84. 30 and that in any event there had been no suppression or misstatement within the meaning of Sec. 11-A of the Act and as such the claim was time-barred.

( 6 ) THE adjudicating authority considered the two tariff entries as well as the relevant explanatory note of the HSN together with the evidence in the form of statements of the employees of the respondent relating to the nature of the goods manufactured and came to the conclusion that the case made out in the show-cause notice was proved and that there had been a misclassification of the goods in the classification list as submitt