P.C. Jain, Member (T)

1. Brief facts of the case are as follows :-

1.1. The respondents, the Joint Sector Public Limited Company of the Government of Andhra Pradesh, manufactures a product known as asphalt corrugated roofing sheets (hereinafter referred to as ACR sheets). The factory of the respondents was established in 1970 and started its production in 1971. The process of manufacture of ACR sheets is described as follows in the appeal filed by the appellant-Collector :-

"Waste paper obtained from road pickings is covered into pulp and formed into sheets. These paper sheets are dried in the sun and corrugated by the machine. These corrugated paper sheets are also called as 'Base Mats'. These base mats are impregnated with asphalt and finally painted with aluminium paste. The final product is known and marketed as ACR sheets. Thus the corrugated boards after impregnating with asphalt are conferred with special properties of thickness. Water proof, fire resistance, and therefore are specially treated paper boards."

1.2. On 25-5-1974, the Superintendent of Central Excise issued a memo to the respondent company stating that it had been decided to bring their factory under Central Excise Control since the corrugated and plain sheets coming into existence at the intermediary stage are liable to be assessed under T.I. 17(3) CET. The respondent company were, therefore, directed to apply for a Central Excise licence and to remove the goods on payment of duty. They were also required to give the production and clearance data of such intermediate sheets for manufacture of their final product ACR sheets. The above memo was followed thereafter by a formal show cause notice dated 25-5-1974. This notice was also in respect of the intermediate product namely corrugated and plain sheets which were impregnated with asphalt and cleared from the factory as ACR sheets. The respondents contested the above show cause notice vide their reply dated 8th July, 1974. Thereafter another show cause notice dated 29-7-1974 was issued by the Assistant Collector to show cause as to why a duty of Rs. 2,62,583.84p. should not be demanded from the respondent company under Rule 10-A, as it existed then, as being the duty on the intermediate product mentioned above which conformed to the description of mill board falling under T.I. 17(3). This show cause notice was also contested by the respondents vide their reply dated 5-8-1974 stating that their intermediary product differed from mill board in various respects such as (a) the manufacturing process (b) the raw material used (c) in appearance and (d) in end-use.

1.3. While the aforesaid case on intermediate product (base mats i.e. corrugated plain sheets) was in the process of adjudication, the Assistant Collector issued a notice dated 11-9-1974 detaining the finished product namely ACR sheets lying in the factory from the date of receipt of the notice.

1.4. Upon this, the respondent company filed a writ petition in the High Court of Andhra Pradesh. An interim order suspending the Asstt. Collector's detention order dated 11-9-1974 was issued by the Andhra Pradesh High Court subject to furnishing of security of Rs. 10,000/-. A counter-affidavit was filed by the department against the writ petition filed by the respondent company stating that the base mats fell under T.I. 17(3) and the ACR Sheets fell under T.I. 17(4).

1.5. From 1-3-1975, on introduction of T.I. 68 in the CET the final product "ACR sheets" was classified under T.I. 68 after filing of the classification list by the respondent company and grant of a manufacturing excise licence under T.I. 68.

1.6. A show cause notice dated 2-9-1975 was issued by the Assistant Collector demanding duty on the final product ACR sheets under Rule 10-A for the period 1971 to 31-3-1975. It is appropriate at this stage to reproduce the grounds mentioned in the notice in which an amount of Rs. 91,25,381.20p. for the period 1-8-1971 to 31-7-1975 was sought to be recovered unde