V.T. Raghavachari, Member (J)

1. M/s. The Sirsilk Limited are manufacturers of Acetate Rayon Yarn, Acetate Staple Fibre and Acetate Tow. In respect of certain inputs with reference to such manufacture they had claimed benefit of notification No. 201/1979 relating to such of the inputs as had been purchased by them from the open market. The Assistant Collector of Central Excise under his order dated 14.8.1981 held that they were not entitled to such benefit since these inputs had been utilised only in the manufacture of other excisable goods which themselves were exempted from duty by reason of Notification No. 118/1975, such intermediate products being consumed captively in the course of further manufacture resulting in the final manufacture of the products mentioned earlier. He had also further held that as such inputs purchased from the market were mixed up with similar inputs manufactured in the factory itself for captive consumption and they were all used together in further manufacture it was not possible to correlate the inputs (purchased from the market) and the final product. On appeal the Appellate Collector of Central Excise, Madras under his order dated 30.11.1981 set aside the order of the Assistant Collector and allowed benefit of Notification No. 201/1979 as well as No. 118/1975, holding that the two notifications could be worked together. Thereafter the Government of India issued, under Section 36(2) of the Central Excises and Salt Act, a review show cause notice dated 6.10.1982 as to why the order of the Appellate Collector ought not to be set aside and the order of the Assistant Collector restored. It is the proceedings initiated under the said review show cause notice that, on transfer to this Tribunal, are being dealt with as an appeal before this Tribunal.

2. We have heard Smt. Vijay Zutshi, Senior Departmental Representative for the Appellant Collector and Shri C. Chidambaram, Consultant for the respondents. Smt. Zutshi took us through the orders of lower authorities and also the review show cause notice and made her submissions on the question raised under the notice. Shri Chidambaram supported the reasonings contained in the order of the Appellate Collector.

3. In the records before us there was a reference to writ petition No. 6668 of 1980 before the High Court of Andhra Pradesh wherein a similar issue was said to be involved. When the Consultant for the respondent was enquired about the same he further referred to two other writ petitions which were specifically with reference to the order-in-appeal in the present instance, which is the subject matter of the review show cause notice. When enquired about the disposal of the said writ petitions he stated that writ petitions 6907 of 1983 and 6908 of 1983 (relating to the impugned order-in-appeal) had been disposed of by the Hon'ble High Court without orders in view of the pendency of the present appeal before this Tribunal. He further stated that so far as writ petition No. 6668 of 1980 the same did not relate to Notification No. 201/1979 but to Notification No. 178/1977 and further the issue raised in the said writ petition was regarding rejection of the appeal by Collector as time barred and hence the said writ petition has nothing to do with the matter now in issue before us.

4. The respondents have in their paper book furnished a flow chart regarding the process of manufacture adopted by them. Since the said, chart was not clear on certain details we have had the benefit of elucidation thereof from both sides, and the flow chart mentioned below was thereafter prepared during the hearing and was seen by both sides who have agreed that the same is correct in all necessary details:

5. The relevant Notifications for consideration in this appeal are Notification No. 118/1975 dated 30.4.1975 and Notification No. 201/1979 dated 4.6.1979. Notification No. 118/1975 reads as follows:

"Notification No. 118/1975;

In supersession of the notification No. 58/75-CE, da