G.A. Brahma Deva, Member (J)

1. This appeal is directed against the Order-in-Original No. 22/89 dated 28-12-1989 passed by the Collector of Central Excise, Jaipur.

2. The appellants M/s. J.K. Synthetics Ltd. are engaged in the manufacture of polyester fibre and tops. In the manufacture of fibre, they were using DMT and Mono Ethylene Glycol as principal raw materials. It appears that in the manufacture of polyester fibre, polyester waste is generated at various stages of manufacture. The appellants were mixing this waste along with waste purchased from the open market and subjecting the waste to manufacturing process, which they called 'recycling process', whereby they recovered DMT in a plant, which they called 'Waste recovery Plant'. The case of the Department is that such Ethylene glycol recovered as a bye-product during the recovery of DMT from polyester waste in the waste recovery plant, was excisable under Heading No. 2905.90 of the Tariff Schedule and was liable to excise duty on clearance of Ethylene glycol for the period 1-3-1986 to 3-5-1987. Accordingly, Show Cause Notice dated 20-9-1988 was issued for the recovery of duty amounting to Rs. 9,65,567.25 for the said period and penalties were proposed for contravention of the various provisions of Central Excises and Salt Act and Rules. This Show Cause Notice was duly answered by the appellants contending that demand raised by the Department was barred by time as the extended period of limitation under Section 11A was inapplicable to the facts of the case among other points. The Collector of Central Excise and Customs, Jaipur, who adjudicated the proceedings, negatived the contention of the appellants and confirmed the demand on the ground that appellants have contravened various rules relating to filing of classification and other statutory requirements. Penalty of Rs. 2,00,000/- under Rule 173-Q and Rs. 2,000/- under Rule 226 of the Central Excise Rules, 1944 were also imposed. Aggrieved by this order the appellants have come before us by way of this appeal.

3. We have heard Shri A.N. Haksar with Shri Sanjay Grover, learned Advocates for the appellants and Shri S. Chakraborty, learned J.D.R. for the respondent.

4. Shri A.N. Haksar, learned counsel for the appellants, mainly raised two issues in this case, viz., (i) demand was barred by limitation and (ii) value adopted by the Collector was not in accordance with the provisions of the Valuation Rules, 1975. On point of time-barring aspect he urged that extended period of limitation under Section 11-A was inapplicable to the facts and circumstances of the case as the Department was fully aware of the recovery of ethylene glycol in the appellants' waste recovery plant. In this connection he drew our attention to various letters addressed by the appellant company, an earlier adjudication Order dated 22-5-1985 passed by the Assistant Collector in which it was clearly mentioned that appellant was recovering ethylene glycol in its waste recovery plant and R.T.5 form filed by the appellant showed that the appellant was utilising ethylene glycol obtained by it in its waste recovery plant. He said that the appellants' Unit was under the physical control of the Department and Department was kept informed about it at all the stages of the fact that it was utilising ethylene glycol obtained by it in its waste recovery plant. He contended that it is a clear case where the Department slept over the matter and one fine morning it awoke by issuing Show Cause Notice but by that time it was clearly barred by time. He stated that though this point was specifically taken by the appellants as main defence, the Collector erred in not considering this point but confirmed the demand for non-filing of a classification list which is not relevant to the issue. He contended that non-filing of a classification list cannot be considered as a positive action or deliberate withholding of information to invoke larger period under Section 11A when the