( 1 ) THE Petitioner, a partnership firm, carries on business of manufacture of vegetable non-essential oils falling under tariff item No. 12 of the Central Excise Tariff at its factory with the solvent extraction plant situated at the suburbs of Calcutta. The petitioner is required to pay duty on the manufactured product under Tariff Item No. 12. The petitioner also manufactures acid oil by treating soap stock obtained in the process of refining vegetable non-essential oils and obtains spent earth which are only by-products resulting from the products of oil mill and solvent extraction plant. According to the petitioner the said byproducts are exempt under Tariff Item No. 68 for which no clearance was required to be obtained under the Central Excises and Salt Act, 1944 and no duty was required to be paid therefor.

( 2 ) BY a letter bearing No. IR 326, dated 26th June, 1977, the Superintendent, Central Excise, AR-III, Calcutta-III Division, the respondent No. 3 herein, intimated -the petitioner that the manufacture of acid oil out of soap stock obtained from the processing of vegetable non-essential oils in the petitioner's factory was not' covered by any other Tariff item of the Central Excise Tariff. It attracted duty under Tariff Item No. 68 being goods not elsewhere specified and duty at the rate of 2% ad valorem is leviable on such goods with effect from 18th June, 1977. It has also been stated in the said letter that in terms of notification No. 176/77, dated 18th June, 1977, the manufacturers whose capital investment made from time to time on plant and machinery installed in the industrial unit is more than Rs. 10 lakhs are required to pay duty under Tariff Item No. 68. The petitioner was, therefore, directed to take out licence for manufacture of goods covered under Tariff Item No. 68 and observe all Central Excise formalities before any removal of such goods from the factory. The petitioner was also directed to pay appropriate Central Excise duty on such goods before removal. It was also pointed out that any deviation from observing the Central Excise formalities would be tantamount to violation of the Central Excise Rules and the petitioner would be liable for penal action.

( 3 ) IN terms of the aforesaid direction, the petitioner obtained separate licence being Central Excise Licence L-4 under Tariff Item No. 68 for manufacture of goods including acid oil obtained as by-product and started making payment of duty on and from 12th August, 1977.

( 4 ) IN or about July, 1979 the petitioner, it is alleged, for the first time came to know that the Collector, Central Excise, Guntur had in fact exempted soap stock obtained as by-product in oil mill and solvent extraction plant from payment of excise duty under Tariff Item No. 68 in terms of Notification No. 115/75-C. E. , dated 30th April, 1975 issued by the Central Government along with its amendment vide Notification No. 122/75-C. E. , dated 5th May, 1975. Immediately thereafter, the petitioner by letter dated 1st August, 1979 intimated the Assistant Collector, Central Excise, Calcutta-Ill Division as follows :-"we have the following 3 independent units in the same premises at P-143, Raymond Road, Calcutta : 1. Oil mill. 2. Solvent extraction plant. 3. Vegetable oil refinery. In the vegetable oil refinery we process the oil coming out of the solvent extraction plant as well as the oil purchased from the market. Presently we are processing the crude rapeseed oil supplied by the West Bengal Essential Commodities Supply Corporation (a Government of West Bengal Undertaking) and deliver back the refined oil to them. While processing this oil, we are getting soap stock as by-product which is being later converted to acid oil by treatment with sulphuric acid. We understand that soap stock and acid oil come under Tariff Item 68 on which duty at the rate of 8% ad valorem is chargeable. As our units come under the category of oil mill and solvent extraction p