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