S. Duggal, Member (J)

1. The controversy in this case emanates from rejection of the refund application filed by the appellant, namely Carew Co. Ltd., Rosa (U P.) under the provisions of section 36 of the Central Excises and Salt Act, 1944, and has arisen as a result of demand raised by the Central Excise Authorities in respect of "bagasse" consumed by the appellant in their sugar manufacturing factory during the period 1-3-1975 to 29-4-1975.

2. The facts as set out in the grounds of revision indicate that the Company, during the course of manufacture of sugar in their factory, used sugarcane as raw material and while extracting juice, the fibrous material comes out in a moist condition, known as "bagasse". The contention of the appellant is that this material is more or less a waste product and has no or very little value and as such is stored in the open in the factory premises so that after it dries up, it can be used as fuel in the boilers, which user is pleaded to be as a convenient mode of destruction of the waste material.

3. It was pleaded that after Item 68 was introduced in Central Excise Tariff with effect from 1-3-1975, the company filed a classification list showing molasses against the entry in column 5 of the format of the classification list under the heading : "All other goods". Excise duty was paid accordingly on molasses only. However, on 20-4-1977 the Superintendent, Central Excise, Saharanpur, within whose jurisdiction the factory fell, served a show cause notice on the company, requiring cause to be shown as to why duty amounting to Rs. 16,276.92, be not recovered on account of bagasse valued at Rs. 16,27,692.30, cleared from the factory. Its price was computed at the rate of Rs. 10 per quintal and has been allegedly used in the factory during the period 1-3-1975 to 29-4-1975. The notice was issued on the view that it was not an intermediate product or a component product used in the factory of production, within the contemplation of Notification No. 58/75-C.E., dated 1-3-1975.

4. The dispute is confined only to the period ending with 29-4-1975 because on 30-4-1975, the Central Government issued another Notification No. 118/75-C.E., dated 30-4-1975, enlarging the scope of the exempted goods with respect to Tariff Item 68 by providing that all goods falling under Item 68 manufactured in a factory and "intended for use in the factory in which they are manufactured..." were also exempt from excise duty. This material, known as bagasse, has, admittedly, been used during the process of manufacture of sugar after extraction of the juice from the sugarcane. As the manufacturers get benefit of the second notification dated 30-4-1975 the dispute is confined only to the period when Tariff Item 68 was introduced, namely, with effect from 1-4-1975 to 29-4-1975 when the second Notification was issued.

5. Appellant resisted the demand made by means of the show cause notice by raising, inter alia, the plea of time bar inasmuch as demand, according to them, was received by them on 7-9-1977 whereas the period of demand was 1-3-1975 to 29-4-1975, and pleading that it was a case of non-levy due to error and misconstruction on the part of the authorities and the only rule applicable was rule 10 of the Central Excise Rules and that rule 10A has been wrongly invoked. However, the main thrust of their contest to the notice was that in the production of bagasse, no process of manufacture was involved and no new product came into being and it was only a case physical extraction of juice from the cane and was parallel to the process of physical extraction of ground nut and just as the ground nut husk which was also used as fuel in the concerned factory, was not subjected to any excise duty, the fibrous material which was left out of the sugarcane as a result of extraction of juice, could also not be liable to any excise duty.

6. They pleaded in the alternative, that without prejudice to their main arguments as to time-barred as w