P.C. Jain, Member (T)

1. The adjudicating authority has demanded duty of Rs.18711/- and has imposed a penalty of Rs.250/- on the ground that the appellant has availed of benefit of notification 208/83 dated 1.8.83 in the manufacture of iron castings. It has been stated that the said notification gives the benefit of duty on iron casting if it is made out of raw materials specified in the notification alone. The raw materials mentioned in the notification do not include M.S. Scrap which has also been used by the appellant in the manufacture of the said iron castings. It has further been stated by the adjudicating authority that the addition of steel scrap in the list of raw materials was made by amendment of the said notification w.e.f. 1.3.84. vide notification 38/84.

2. On the other hand, learned consultant has submitted that the major raw material used in the manufacture of iron castings is old iron scrap which is mentioned in the list of raw materials in notification 208/83. Addition of 20 to 30% of steel scrap is used only to improve the physical properties of the final product, namely iron castings. Addition to' this small percentage of steel scrap does not change the essential character of the raw material which remains old iron scrap since the latter scrap is in predominant quantity in the total admixture. He also pointed out that apart from steel scrap very small quantity of carbon and ferro alloys are also added. If the intention of the notification had been to allow only iron scrap in the manufacture of iron castings then even the use of carbon ferro alloys would not be permitted for the benefit of the said notification. Intention has been clearly spelt out by the Government in a circular No. l38/8/81-CX.IV dated 24.2.82 ( Annexure 'E' to the appeal) of the Government wherein it has been laid down that use of other metals by way of technological necessity in the manufacture of metals falling under Items 25, 26, 26A, 26AA, 26B, 27 and 27A will not disentitle a manufacturer from any notification on the lines of notification 119/66 dated 16.7.66 in respect of copper and copper alloys. The learned consultant also pointed out that the final product still remains iron casting despite the use of steel scrap to the extent 20 to 30% and that has not been denied by the adjudicating authority. Subsequent amendment to notification 208/83 by notification 38/84 dated 1.3.84 can be said to be of clarificatory nature or enlarging the scope of earlier notification to the extent that iron castings falling under Tariff Item 25 (16) (i) would be exempted from duty, even if it is manufactured wholly out of steel scrap falling under Item 25 (3) (ii) the amending notification 38/84 dated 1.3.84 does not take away the effect of the earlier notification where iron castings were manufactured out of raw material predominantly consisting of iron scrap falling under Item 25 (3) (i).

Apart from the foregoing plea, the learned consultant also submitted that the demand would be partly time barred as it has been raised after six months and it was known to the department that they had been manufacturing iron castings using M.S. scrap as well on the basis of earlier notification 64/72. Further, he submitted that there was no case for imposition of penalty as the learned adjudicating authority has itself admitted that the matter was not free from doubt and in view of the ambiguity the amending notification 38/84 dated 1.3.84 was issued.

3. Learned SDR merely reiterated the grounds taken by the adjudicating authority in the impugned order.

4. We have carefully considered the pleas on both sides. We find substantial force in the appellant's plea. Notification 208/83 dated 1.8.83 as it stood before 1.3.84 did not spell out that the iron castings falling under Tariff Item 25 (16) (i) should be manufactured exclusively out of raw materials stated in corresponding entry of col. 2 of the table of that notification. Character of the admixture used for the manu