H.R. Syiem, Member (J)

1. This is an appeal against the order of the Appellate Collector of Central Excise, Calcutta No. 167/WB/80 dated 5-5-1980. One of the arguments put forward on behalf of the appellant is that the demand was time barred under rule 10 and since there was no clandestine removal, there cannot be said to have been any removal in contravention of rule 9 (1) of Central Excise Rules which calls into action rule 9 (2). The Appellate Collector did not deal with the question of time bar. He merely held that the goods namely, coke oven gas, burnt dolomite and blast furnace slag were not goods which fall under exemption notification No. 58/ 75-CE and therefore would have to pay duty.

2. At the hearing on 24-10-1983, the learned counsel presented a process sheet which illustrates the progress from one shop to another and the materials input and output at each shop. This process sheet is reproduced at the end It shows the inputs and outputs in the coke oven battery, the blast furnace Bessemer Converter, and the rolling mill complex. These different shops of the steel plant take inputs and yield the outputs shown on the right against each shop. It will be seen from this that it is a continuous process each leading to the next till the finished goods steel ingots/steel products are obtained. The learned counsel for the appellant said that these products have been obtained and have been emerging in the steel plant for years and this fact was well known to the Central Excise authorities, who had their own office in the plant. They were even informed on 18th March, 1976 by a letter from the Assistant Collector of Central Excise, Asansol Division, Burdwan that the coke fell outside the purview of tariff item 68 and therefore the question of maintenance of R. G. 1 did not arise. This letter itself was a reply to a query from the steel plant regarding the status of coke and whether any action was needed by the steel plant under the Central Excise laws in respect of that product. It is therefore with no little surprise that they received the show cause notice dated 16-11-1977 from the Assistant Collector demanding payment of Rs. 602,117.57. He argued that the coke, coke oven gas and burnt dolomite etc. were all intermediate goods which fell under item 68. He argued that under notification No. 58/75-CE as amended by notification No. 77/75-CE, the Board had given exemption to intermediate goods falling under item 68 used in the manufacture of other goods. By subsequent notification 118/75-CE, the Government of India enlarged the scope of the exemption to all 68 goods used in the factory irrespective of the finished goods they are used for. This proves the intention of the Government that such goods should not be leviable to duty but should be exempted. Such a liberal view is supported by a judgement of the Board No. 106/1982 dated 23-4-82. In this order the Board ruled that the expression intermediate goods has not been clearly defined and this would not permit the interpretations made by the Collector that this must be intermediate in the process of the manufacture of the final product. In a liberal way many of the products which help in the manufacture of the ultimate finished products could be covered by this expression. The fact that such a liberal interpretation was intended by the Government is established by subsequent notification No. 118/75-CE permitting exemption in respect of these products. The Board accordingly held that the goods, though not intermediate in the usual accepted sense, were covered by exemption notification No. 77/75-CE.

3. The learned counsel then referred to rule 173 PP. A look at the rule would show that the provisions of rules 10 and 11 would apply so that the period of six months or five years are counted from the close of the accounting year followed by the assessee. This provision was inserted by a notification dated 6-8-77. Therefore, it was a part of the law when the show cause notice was is