G. Sankaran, President

1. Being aggrieved with the Order-in-Appeal No. 11/87 (G)(D) dated 3-2-1987 passed by the Collector of Central Excise (Appeals), Madras, M/s. Andhra Sugars Ltd. have filed the instant appeal.

2. The facts of the case, briefly stated, are that M/s. Andhra Sugars Ltd. were engaged in the manufacture of Aspirin. For this purpose they used to bring into their factory excise duty paid Acetic Anhydride, falling under Item 14AAA of the First Schedule to the Central Excises and Salt Act, 1944 (the said Schedule being hereinafter referred to as "the Schedule"), as a raw material. The manufacturing process is essentially to react Acetic Anhydride with Salicylic Acid resulting in production of Aspirin (falling under Item 68 of the Schedule) and Acetic Acid. The reaction could be represented as follows:

[The chemical formula for Acetic Anhydride is (CH3CO)2° and that for Acetic Acid (CHa COOH)]. The resultant products are separated by a further chemical process. The appellants had paid duty on the Acetic Acid which was one of the resultant products in the above reaction. Later on, they filed two claims for refund of the duty paid on Acetic Acid during the periods from 1-8-1985 to 2-11-1985 and 3-11-1985 to 10-3-1986. The claims were made on the ground that the duty had already been paid on the 'input' Acetic Anhydride, that there was basically no difference between Acetic Anhydride and Acetic Acid in that the latter was the product of addition of a molecule of water to two molecules of the former resulting in two molecules of the latter and that they would not be separately chargeable to duty since both figured under the same Tariff Item 14AAA in the Schedule. It was further contended that Acetic Acid was a by-product in the manufacture of Aspirin. The Asstt. Collector of Central Excise issued a notice to the appellants on 5-2-1986 asking them to show cause why the claims should not be dismissed for the reasons set out therein. After considering the reply to the notice and hearing them in person, the Asstt. Collector passed an order on 26-5-1986 allowing the refund claim. The Assistant Collector noted in his order that both the Anhydride and the Acid belonged to the same family and had similar properties and were classified under the same item in the Schedule. The Asstt. Collector, therefore, concluded that no duty was liable to be charged and Acetic Acid. The Additional Collector of Central Excise, Guntur, called for and examined the records of the proceedings leading to the Assistant Collector's order for the purpose of satisfying himself as to the legality or propriety of the order passed. He was of the opinion that the Asstt. Collector had erred in passing the aforesaid order in that the appellants' Acetic Acid which emerged as a by-product in the manufacture of Aspirin was entirely different from Acetic Anhydride and enumerated as a separate sub-item of Item 14AAA of the Schedule. The Acid was separately liable to be charged to duty and the grant of refund of the duty paid on the Acid was not proper and correct. He accordingly directed the Asstt. Collector to apply to the Collector of Central Excise (Appeals) to set aside the Assistant Collector's order and order recovery of the amount refunded. The Additional Collector passed this order in purported exercise of his powers under Section 35E(2) of the Central Excises & Salt Act, 1944 (hereinafter called 'the Act'). The Asstt. Collector accordingly filed an application before the Collector (Appeals) which was disposed of by the latter by the order which is challenged in the proceedings before the Tribunal. In this order, the Collector (Appeals) held that the Additional Collector was competent to exercise the powers of the Collector and direct the Asstt. Collector to file the aforesaid application before the Collector (Appeals). As regards the dutiability of Acetic Acid he held that it was enumerated separately from Acetic Anhydride in the tariff entry. As regar