S. Grover, Vice-President

1. M/s. Chemicals Fibres of India Limited, a Public Limited Company, hereinafter referred to as the CAFI, filed appeal before the Tribunal under Section 35-B of the Central Excises and Salt Act, 1944 (hereinafter referred as the Act) on 7th of December, 1982 against the Order No. V-2(18)l659/82/11075 dated 5th November, 1982 passed by Collector of Central Excise (Appeals), Bombay. The related Order of the Assistant Collector of Central Excise, Bombay is of 26th May, 1982 [Order No. V(18)4-l 2/82-3093]. The Appeal is signed by the Secretary of the appellant company and, therefore, is in conformity with the rules and procedure prescribed.

2. The appellant manufactures polyester staple fibre which is sold under its brand name Terene.

3. The Superintendent, Central Excise, Bombay issued a show cause- cum-demand notice on 3rd March, 1982, a copy of which has been given to us by the appellant as Exhibit 3' at page 33. In the said communication, it was stated that the CAFI with intent to evade payment of Central Excise duty had resorted to wilful mis-statement and suppression of facts and contravened the provisions of Rule 173(B) and 173(F) of the Central Excise Rules, 1944 (hereinafter referred as the Rules) inasmuch as it had :

(i) cleared 20,559.5 kgs. of polyester fibre and tops manufactured from waste, by processes involving re-cycling;

(ii) with intention to evade duty wrongly claimed exemption under Notification No. 44/80, dated 24th of April, 1980 in the classification list No. 2/81, dated 14th April, 1981; and

(iii) not paid their duty liability correctly.

4. It was, therefore, proposed to recover duty amounting to Rs. 9,25,177.50 in respect of the period during June 1981 to July 1981 under proviso to Section 11-A of the Act and the Rules and also to impose penalty under Rule 173(Q) of the Rules for contravention of the provisions of the Rules mentioned above.

5. The Superintendent called upon the CAFI to show cause to the Assistant Collector of Central Excise, Bombay within a period of 30 days as to why proposed action should not be taken.

6. The show cause-cum-demand notice was replied to by CAFI vide communication dated 31st March, 1982, a copy of which has been made available to us. Two specific contentions were taken : one, that the demand-cum-show cause notice dated 3rd of March, 1982 in respect of duty payable in june-July, 1981 was clearly barred by limitation as stipulated under Section 11-A of the Act and, secondly - which was independent and alternative contention, - that the process of manufacture employed for converting the waste into fibre did not involve re-cycling and such fibre manufactured was eligible for exemption from duty in terms of Notification No. 44/80 supra. The clearance of the fibre under the said Notification was, therefore, pleaded to be quite in order.

7. We propose to deal with the contention on limitation first because, if we are to agree with the appellant that it had disclosed all the particulars and the process and was not guilty of any wilful mis-statement or suppression of facts, then it shall not be necessary for us to go into the classification question as, in that case, the show cause-cum-demand notice dated 3rd March, 1982 for the period June-July, 1981 would be clearly hit by limitation as the normal period of six months would be said to be available to the "Revenue. On the other hand, if we are to accept the Revenue's charge that not only was there wilful endeavour to shield facts, but a clever manoeuvring was undertaken not to pay proper duty, then we shall be accepting that the extended period of limitation of five years was available and, therefore, the show cause-cum-demand notice was in order. This decision in turn would involve us and necessitate adjudication regarding the merits of the case - classification and exemption notification.

8. The limitation stipulated under Section 11-A of the Act is six months and five years depending on certain situations