K.S. Venkataramani, Member (T)

1. This is an appeal directed against the order of the Collector of Central Excise, Madras, dated 28-10-1987 by which he had demanded a duty of Rs. 1,02,14,154.84 under Rule 9(2) of Central Excise Rules, 1944, besides imposing a penalty of Rs. 30,00,000/- on the appellants under Rule 173Q of the Central Excise Rules.

2. The appellants are manufacturers of bimetal bearings and bushings at their units at Hosur and Coimbatore. One of the raw materials required for its manufacture is bimetallic strips. These are manufactured at the appellants' own Strip Mill Division situated at Madras. The Department licensed the Strip Mill Division at Madras in March 1986; following the coming into force of the Central Excise Tariff Act, 1985 with the new Tariff Schedule. However, the Department found that the Strip Mill Division had been manufacturing bimetallic strips earlier as well without obtaining Central Excise Licence and clearing the goods without payment of duty over the years. A Show Cause Notice dated 31-3-1987 was, therefore, issued to the appellants asking them to show cause why

(i) the Bimetallic strips manufactured in the Strip Mill should not be class