K.L. Rekhi, Member (T)

1. This order is made in continuation of our Miscellaneous Order No. 37/86-B1 dated 28.4.1986 in which, by a majority judgment on a preliminary point, we held that the revision application filed by the appellants under the then Section 35A of the Central Excises and Salt Act, 1944 before the Central Board of Excise and Customs was maintainable and ought to be heard on merits. The said revision application, on transfer of the proceedings to this Tribunal is now before us for disposal as if it were an appeal. We have heard the merits of this appeal on 9.7.1986 and 10.7.1986 and this order is made to dispose of the said appeal.

2. In the impugned order, the Collector has held that in the guise of bringing the defective compressors to their factory and clearing them after repairs/re-conditioning/re-making in terms of Rule 173H of the Central Excise Rules, 1944, the appellants used the returned compressors merely for salvaging a few serviceable parts therefrom which they utilised in the manufacture of new compressors and that they cleared those new compressors without payment of duty by engraving on the new compressors the serial number of the old compressors, thus "throwing dust into the eyes of the departmental officers" and in the process evading the heavy Central Excise Duty (100%) on the new compressors. The Collector has demanded under Rule 9(2) Central Excise Duty of Rs.3,07,35,200/- on 29,494 compressors so removed during the period from 1.4.1974 to 31.12. 1976 and has imposed penalty of an equal amount on the appellants under Rule 173Q.

3. During the hearing before us, the learned Joint Chief Departmental Representative reiterated the charge as held to have been established by the Collector and argued that merely by embossing the serial number of the old defective compressors on fresh compressors, the appellants could not be said to have repaired/reconditioned/re-made the old compressors. He stated that the actual state of affairs was proved by the incident of seizure of 15 new compressors carrying duplicate serial numbers of another lot of 15 defective compressors. The show cause notice in the case begins with the narration of this incident. The Central Excise Officers belonging to the Special Checking Squad of the Collector's office visited the factory of the appellants on 20.9.1976 and inspected the records and stocks relating to compressors received for repair. "They found 15 compressors received for repairs in the same condition in which they were received. They also found that 15 other compressors bearing the same serial numbers as those of the 15 compressors received lying in tact, were removed as if the 15 compressors received for repairs were repaired and returned." The learned Joint Chief Departmental Representative stated that this detection of 15 compressors embossed with serial numbers of the defective compressors "was the tip of the ice-berg". However, the learned Joint Chief Departmental Representative added that the tip of the ice-berg had since melted because the case in respect of this incident of 15 compressors was decided by the Appellate Collector in favour of the Appellants. Shri Soli J. Sorabjee, learned Senior Advocate of the appellants, stated that the incident of seizure of 15 compressors with duplicate marks was the sole evidence on which the Collector had drawn a sweeping conclusion, that the facts of that incident were not as made out by the Collector, that they had properly explained that incident to the Appellate Collector, that the Appellate Collector decided that case in their favour, that the department filed no appeal or revision against the order of the Appellate Collector and that the said order of the Appellate Collector, therefore, had become final and reliance could no longer be placed by the department on that incident. He stated very fairly that if it could be proved by evidence that the appellants had been clearing new compressors for the old ones, by mere