R. Jayaraman, Member (T)

1. For hearing the applicants' appeal on merits, they are required to deposit a sum of Rs. 4,10,89,692/- towards duty.

2. Shri Satalvad, the learned advocate, on behalf of the applicants contended that the order of the Collector is prima facie bad in law and the demand confirmed by him is also time barred. He pointed out that the demand has been made right from the date of commencement of manufacture viz. 1/5/81 to 30/4/84, by issuing a show cause notice dated 25/7/84. The applicants have filed declaration for claiming exemption from the licensing control since they were manufacturing HOPE & PP monofilament yarn, which were eligible for exemption under Notification No. 194/72 and 242/79. The aforesaid exemption Notifications totally exempted HDPE monofilament yarn of 60 deniers and above and Poly Propylene monofilament yarn of the same deniers. In view of the declaration filed, they were not required to file any classification list. All the same, they were maintaining the record of raw materials used in the manufacture of monofilament yarn. They had, alongwith the LDPE & PP, mixed HDPE granules as well. The department as late as in 1984 issued a show cause notice on the ground that the exemption is available only in respect of HDPE & PP monofilament yarn and since there is admixture of LDPE granules, exemption is not available. The duty has been demanded at the rate of Rs. 28 per kg, whereas the sale price of the rope, which is made out of the yarn itself is Rs. 23 per kg. On merits, Shri Satalvad pointed out that even as per the Board's circular relied upon by the Collector of Nagpur, admixture of LDPE granules is permissible for availing exemption. When the order of the Collector of Central Excise, Nagpur was pointed out to the Collector, though he has taken the point, he dismissed on the ground that in that case the percentage of LDPE granules was only to the extent of 20% whereas in the case of the applicants it ranges from 35% to 46% as per the raw material record maintained by them. On this ground, the Collector has rejected all other evidences in the form of affidavits to show that these are marketed as HDPE & PP yarn and also the certificate produced from SASMIRA. He also pointed out that the department has not produced any test results to rebut their contention that it is not classifiable as HDPE monofilament yarn. He also referred to the Rules of interpretation and the Section Notes relating to Section 11 and contended that where the product is a mixture composed of different articles, it should be classified according to the predominance of the articles and also the essential character. In this case, if the predominance is to be judged in the term of weight of the raw materials, H.D.P.E. is more than 50% and hence it should be classified as only HDPE monofilament yarn. In regard to the time bar, Shri Satalvad contended that the applicants being an exempted unit, they were not required to file classification list. All the same, they were maintaining raw materials record. They also filed the declaration claiming exemption from the licensing control. If the department had any doubt regarding the classification and eligibility to exemption they, could have drawn samples and tested and initiated proceedings right at the time of submission of declaration. He, therefore, contended that the allegation of suppression is not sustainable. He also pointed out that for evasion of more than Rs. 4 crores there is not even a suggestion for imposing a penalty in the show cause notice and no penalty has been imposed. This itself suggests that the department was convinced of their bonafides and no suppression can be alleged only for purpose of payment duty.

3. Heard Shri Arya. He vehemently opposed the stay application. He contended that the order of the Collector does not suffer from any prima facie deficiency. In the declaration filed claiming exemption from the licensing control the description of the goo