A.J.F. D'Souza, Member (T)

1. The appeal to the Central Board of Excise and Customs under Section 35 of the Central Excises and Salt Act, 1944 against order-in-original F. No. V (34A) 15-49/Adj/8099, dated 3-6-82 passed by the Collector of Central Excise, Pune has been transferred to the Tribunal for disposal as if it were an appeal, under the provisions of Section 35P (2) of the said Act.

2. The appellants hold Central Excise licences to manufacture Motor Vehicles excisable under Item 34 as well as Internal Combustion Engines falling under Item 29 of the First Schedule, which are also components of parts of motor vehicles, since 1963. In May 1971, Notification No. 101/71, dated 29-5-71 was issued by which specified motor vehicle parts and accessories falling under Item 34A were exempted from duty provided it was proved to the satisfaction of the Collector of the Central Excise that they were intended to be used as original equipment parts by manufacturers of motor vehicles and the procedure set out in Chapter-X of the Central Excise Rules, was followed. The appellants applied for a L 6 licence through their application dated 4-6-71 mentioning that remission of duty was desired on motor vehicle parts under the concession given in Notification 101/71 . The Department granted the licence after all the formalities had been complied with. The appellants state that their reading was and is that the duty remission was available to them as manufacturers of motor vehicles as long as they followed the prescribed procedure and used the parts as original equipment parts regardless of whether they were used as original equipment parts of motor vehicles or as original equipment parts of the internal combustion engines manufactured by them. Accordingly their estimated requirements in the application for renewal of their L6 licence included the quantities of parts both for motor vehicles and internal combustion engines. That they were specifically authorised to avail the concession is also evident from the C.T. 2 certificate issued under Rule 156 bearing the endorsement-

"(4) The said licence authorises to obtain motor vehicle parts falling under T.I. No. 34A of Central Excise at Nil/Concessional rate of duty under Notification No. 101/71, dated 29-5-71 for manufacture of original equipment parts of motor vehicles."

The factory of the appellants was inspected from time to time and the various accounts and documents concerning motor vehicles and internal combustion engines and the L6 licence granting remission, were thoroughly audited by various Central Excise officers and authorities between 1971 and 1976 as enlisted. From the R.G. 16 which is a record of excisable goods used without payment of the whole or part of the duty for special industrial purposes and other records, it was clear that the motor vehicle parts were being used also in internal combustion engines cleared for sale. It was also within the knowledge of the department that some engines fitted with such parts were being cleared for sale as replacements but no objection was raised. On 5-10-1976, the premises was raided by a party of Central Excise officers who physically checked the stock of all excisable goods and found it to be correct. On being told by the Material Controller that motor vehicle parts were also used in the manufacture of I.C. engines sold in the open market, the officers seized parts valued at Rs. 7,02,949.79 and 9 internal combustion engines valued at Rs. 1,11,870.00. Despite repeated requests, the specific provisions of the Act or Rules which had been contravened and made the goods liable to confiscation were not made known. They also challenged the seizure as unlawful and against the provisions of Section 110 of the Customs Act, 1962 as applied to Central Excise since the goods were duly accounted for and Chapter-X did not provide for forfeiture of goods which had not yet been taken into use. However, on 31st March, 1977 a show cause notice was received a