1. The question for decision in this appeal is correctness of demand of duty and imposition of penalty by the Collector of Central Excise, Jaipur on the appellants by his order dated 16th May, 1983. The appellants are a small scale industrial Unit registered with Director of Industries, Rajasthan as also with the Development Commissioner, Government of India. They are engaged in the manufacturing of Wrist-watches. The Development Commissioner (SSI), Ministry of Industry, G.O.I. by a Communication dated 25-7-1979 addressed to the Director of Industries, Rajasthan approved phased production programme in respect of the appellants. By this communication, appellants' unit was to manufacture/assemble hand-woven 17 jewels full lever, non-automatic wrist watches. The production programme was for 20,000 watches in the first year, 30,000 watches for second year, 40,000 watches for 3rd year and 50,000 watches each for 4th to 7th year. The communication inter alia permitted the appellants to import components in CKD condition except for prohibited items based on year to year programme permissible to unit for import. The first consignment of components of wrist watches was received by the appellants in Dec, 1979 and reached their factory on 28-12-1979. The appellants claimed to have commenced assembling of watches from the last week of December, 1979. The appellants imported components of wrist watches including watch cases and dials. They imported in all 27 consignments, all of which arrived by post at Jaipur F.P.O. All the consignments were cleared by Customs against valid import licences and they were assessed to concessional rate of duty in terms of Notification No. 240-Cus., dated 30-12-1978. Under this Notification, Wrist watch parts falling under sub-heading (2) of Heading 91.01/11 are exempt from so much of that portion of duty of Customs as is in excess of 50% ad valorem, provided that these were imported for manufacture of wrist watches in accordance with production programme duly approved by the Ministry of Industry, Director General of Technical Development. Later, the Collector of Central Excise, Jaipur issued a Show Cause Notice dated 19-4-1982 alleging that the appellants had in collusion with suppliers imported and cleared Watch movements, a banned item, instead of Wrist Watch parts and components by mis-declaring the contents of the post parcels, that the goods imported and cleared were not used in accordance with the phased production programme approved by the Development Commissioner (SSI) vide his letters dated 25-7-1979 and 28-9-1979. The Show Cause Notice lists out as many as 17 charges, which would be dealt with at appropriate places. The appellants filed reply denying the allegations, The Collector by his order dated 16-5-1983 negatived appellants pleas both on merit and on time-bar and held that though goods were described in invoices as parts/components what was actually imported was watch movements a banned item. That watch movements were not covered by the Import licences produced and that watch movements were not in CKD/SKD condition. The appellants have not fulfilled the condition of approved production programme which was material condition for concession under the Notification No. 240-Cus., dated 30-12-1978. Import of wrist watch parts and cases were in excess. The claim for differential duty was not time-barred. Dials imported by the appellants in excess of the quantity covered by the licences did not qualify concession under the Notification. He accordingly ordered the appellants to pay differential duty amounting to Rs. 5,17,104.16 (Rs. 3,68,761.28 plus Rs. 1,48,342.88) and also imposed a penalty of Rs. 1,00,000/- under Section 112 of the Customs Act, 1962. Aggrieved the appellants have filed the present appeal to the Tribunal.

2. In the grounds of appeal, the appellants have mainly challenged the Collector's findings that the imported goods were complete Watch Movements and not wrist watch parts in C