K. Prakash Anand, Member (T)

1. In this case, the department alleges that on the basis of intelligence collected, the Hqrs. Preventive staff visited the appellant's factory on 13-7-1982 and found that they were engaged in the manufacture of fuel injection pipes and lubricating pipes falling under Item 68 of the Central Excise Tariff (hereafter CET). Their enquiries revealed that in the manufacture of such pipes, they used nuts for fitting the same at both ends. Threaded as well as unthreaded nuts were being purchased by them from different parties. So far as unthreaded nuts are concerned, they were subjected to further processes to convert them into threaded nuts and then they were used for captive consumption. Some 1,08,495 pieces of nuts valued at Rs. 43398/- were found to be in stock. They were detained on 20-7-1982 allegedly for manufacturing a product falling under Item 52-CET without obtaining a Central Excise licence and clearing them without payment of Central Excise duty thereon.

2. A Show Cause Notice was issued to the appellants for manufacture without Central Excise Licence of 15,97,333 pieces of nuts falling under Item 52-CET with the aid of power during the period 1-4-1981 to 19-7-1982, removal of 14,88,838 pieces of nuts valued at Rs. 15,53,935/- without payment of Central Excise duty and by suppressing the fact of such removal with intent to evade payment of duty.

3. It was also alleged that they failed to file classification list and price list and to account for the goods in the prescribed Central Excise records and cleared the goods without cover of Central Excise gate passes. Further, it was alleged that the total production of appellants of the goods falling under Item 68-CET, with the aid of power, in all, amounted to the value of Rs.18,12,230.26 during the period from 1-4-1979 to 31-3-1980. The exemption limit under Notification No.89/79, dated 1-3-1979 being only Rs.15,00,000/, the rest of the goods were allegedly removed with the intention to evade duty contravening various provisions of the Central Excise Act and Rules.

4. In the order-in-original passed by him, the Collector of Central Excise, Bombay-II confiscated 1,08,495 pieces of nuts which were under seizure, but gave the appellants the option to redeem the same on payment of a fine of Rs.4,000/- in lieu of confiscation. He further ordered that appellants shall pay duty on 14,88,838 pieces of nuts valued at Rs.15,53,935/- which, he held, were classifiable under Item 52-CET. Duty was also demanded in respect of goods, falling under Tariff Item 68, of a value of Rs 34,390.15, removed by the appellants during the period from 1-4-1979 to 31-3-1980 in excess of the exemption limit of Rs. 15,00,000/-, as admissible under Notification No. 89/79, dated 1-3-1979. It is against this order that the appellants are before us.

5. We have heard Shri Gopal Prasad, consultant on behalf of the appellants and Shri J.N. Nigam, SDR, on behalf of the department.

6. The first point made by the learned consultant relates to the classification of goods which, we observe, he himself, in the course of arguments, described as nuts. He admitted that appellants were purchasing nuts, both threaded and unthreaded and that the latter were being threaded by the appellants themselves before being taken for captive consumption. He, however, strongly contended that the function of such nuts was not only fastening but also "facilitating the flow of oil under high pressure without leakage". It was emphasized that these nuts were leak-proof.

7. Making the argument that since the essential function of the nuts was not merely fastening, therefore, the goods were not classifiable under Item 52-CET, Shri Gopal Prasad cites in his favour the orders of the Tribunal in the case of Mis. Nagabushanam Enterprises v. Collector of Central Excise, Bangalore (Order No. 452/1988-D, dated 13.7.88) and Mis. Precision Fasteners Ltd. v. Collector of Central Excise, Bombay-II (Order No. 496/1988-D, dated 2