S. Duggal, Member (Judicial)

1. This matter which was originally before the Central Government by way of revision petition under Section 36 of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act) has been received by the Tribunal as an appeal by virtue of provisions of Section 35P of the Act, and is being disposed of as such.

2. This appeal is directed against a composite order passed by the Appellate Collector of Customs and Central Excise, Madras whereby he disposed of appeals filed by the present appellant along with two appeals of other parties because there were identical questions for determination. This was by his order dated 11-2-1980, which had, in turn, confirmed the order passed by the Assistant Collector of Central Excise, Kottayam on 5-7-1978.

3. The facts giving rise to the controversy are to the effect that the appellants, claimed to be a partnership concern, is manufacturing certain products relating to tyre industry and it is alleged that one of the products which is finally turned out for clearance from the factory is termed as "tread rubber with cushion backing". They also manufacture a product which is described commonly as "cushion compound" but the appellants contend that the product which they are making is simply known as "cushion" and that it is not finished goods but an intermediary product which they use for Cushion Backing of the tread rubber which is finally taken out of the factory after paying the requisite excise duty. This product which they describe to be plain "cushion" is, according to them, consumed inside the factory when it is in semi-finished stage and thus cannot be treated as goods commonly known as "cushion compound" and that the latter product is a finished product mostly used for re-soling or retreading of tyre.

4. It appears that in the classification lists, which the appellants had been filing from time to time under the requisite rules, before the Central Excise authorities, this product which they now term as "cushion" was not shown to be liable to excise duty and accordingly no duty was paid thereon but some time in 1974, on 24-9-1974 to be precise, the Range Officer of the area served a notice on the appellants calling upon them to show cause as to why excise duty for the period 1-4-1968 to 13-10-1972 amounting to Rs. 1,01,288.36 be not realised on this product which had been produced by them and used as cushion compound for Backing as Tread Rubber. The appellants contested this notice by contending that although the product has been broadly known as Cushion Compound but in reality it was substance different from the same and was only in the nature of a semi-finished product, to be called only as 'cushion', and that it was not being sent out or traded in the market as cushion compound but only used inside the factory for the preparation of another finished product on which full excise duty as levied was being paid under Tariff Entry 16A(2) of the Central Excise Tariff and that no separate duty was payable on this article known as 'cushion'. The notice was also resisted on the ground that it was barred by time as Rule 9(2) could be attracted only in case there was clandestine removal as contemplated by Rule 9(1) of the Central Excise Rules and that since the appellants had been showing all the goods made, produced or used by them in the classification list, which was approved by the Central Excise Authorities, it could not be said that there was any suppression of truth on their part, and that the notice was thus not enforceable. They further urged that Rule 10 of the Central Excise Rules also stood in the way of enforcement of the demand. They also seemed to have questioned the mode of valuation resorted to by the Excise authorities. It was further pleaded that goods having been used and the finished products having been cleared and sold in the market the realisation of the proposed amount would lead to undue hardship for them as the levy, which was in