M. Santhanam, Member (J)

1. This matter has been referred for decision by the larger bench, since by its order dated 5-5-1987, the special bench consisting of S/Shri G. Sankaran, Vice-President (as he then was), Sh. V.T. Raghavachari, Member (J) was not inclined to agree with the view taken by the three members [S/Shri S. Venkatesan, Sr. Vice-President (as he then was), Smt. S. Duggal, Member (J), Sh. K.L. Rekhi, Member (T)], in the case of Punj Sons (P) Ltd. v. Collector of Central Excise, Patna (1983 E.L.T. 1866).

2. The following facts will set out the controversy to be decided by this Bench :-

The appellants manufacture "slagwool Resin Bonded Slagwool" in their factory at Durgapur. These products are insulation material and are used for conservation of Thermal Energy. The process of manufacture is that the slag, which is a refuse separated from the metal (steel) in the process of melting, is mixed with fluxing agents like lime-stone etc. The mixed metal is melted in a cupila with hard coke. After the slag is melted, the material comes out at the bottom of the cupila and below the belt, there is a centrifugal disc, which throws the metal into atmosphere. Due to velocity of wind and the centrifugal force, the said metal takes the shape of wooly substance and is generally in loose parlance called "slagwool". These fibres cannot be spun into yarn like synthetic fibres of organic nature.

3. Prior to 1973, the appellants did not take any Central Excise Licence. They did not pay any duty either. During May, 1973, they were informed that Central Excise duty had been imposed on the products w.e.f. 30-4-1973. The appellants were directed to declare stocks and follow the Central Excise formalities. The appellants say that they complied with the instructions under the erroneous belief that they were legally to pay the duty. Later, the appellants took advice from the Technical Experts. They were informed that the products, being of inorganic nature, as a waste during steel making, process, would not fall within the family of the "man-made fibre" and were, therefore, outside the purview of TI-18. The appellants also took the advice of the Silk and Art Silk Association in Bombay. The appellants protested against the classification of the products under TI-18. They submitted a refund bill for Rs. 13,35,865.71 representing the excise duty on slagwool illegally and wrongly realised from them. The Asstt. Collector, by his letter dated 24-7-1976 rejected the claim for refund. An appeal was preferred and the matter was remanded by the Appellate Collector, Calcutta for de-novo adjudication. A fresh show cause notice was issued and ultimately by the order-in-original dated 30-11-1980, the Asstt. Collector rejected the claim for refund of duty. The appellants preferred an appeal and the Appellate Collector of Customs and Central Excise, Calcutta rejected the said appeal under the impugned order dated 19-7-1982.

4. The appellants preferred an appeal to the Tribunal in Appeal No. E/D/(SB)/(T) A. No. 3/82-D. On 5-5-1987, the Learned Members of the concerned Bench, after hearing the arguments of Sh. C.L. Beri for the appellants and Mrs. Dolly Saxena, SDR held as follows :-

There is, however, a good deal of force in Sh. Beri's submission that during the material time, slagwool did not fall under TI-18-CET as 'synthetic fibres' or 'man-made fibre', since it did not conform to the meaning of either expression.

5. However, the Tribunal noticed that there was an earlier order of the Tribunal in the case of Punj Sons (P) Ltd. cited (supra) wherein a contrary view had been recorded that though the slagwool is of mineral origin, since it is a product of manipulation by man, it is a 'man-made fibre. The papers were placed before the Hon'ble President for considering the constitution of a larger Bench to go into the question. Thus the matter is before us.

6. Sh. C.L. Beri, Learned counsel for the appellants raised the following points :-

(i) Central Excise Tarif