1. This appeal was filed by M/s Tata Iron and Steel Company Limited, Jamshedpur directed against an order passed by the Appellate Collector, Central Excise, Calcutta dated 30-7-1979 whereby he rejected the appeal of the appellant-company on the point of classification, of their products which they described as "(1) harrow discs and (2) coal-cutting picks, falling under Tariff Entry 26AA of the Central Excise Tariff, (hereinafter referred to as C.E.T.).

2. It appears that the aforesaid two products are being manufactured in a factory owned by the appellant company, under the name and style of "Agrico", where agricultural implements are produced by forging process, out of duty paid steel materials. It is contended that no duty is leviable on such forged products of iron and steel if made out of duty paid semi-finished steel material.

3. According to the appellant, they have been manufacturing number of products at the said factory under AL-4 Licence which they held since 9-12-1968, but when sometime in 1976, an application was made, in the usual course, for renewal of the aforesaid licence, they were advised by the Assistant Collector, Jamshedpur vide his letter dated 16-2-1976 that although the licence in question had been renewed as requested by the Company, no licence was required as this Agrico Unit of the Company was exempt from having a licence as it was producing only forged products. It is averred that the company still wanted to be very clear and they again approached the Assistant Collector to grant them personal hearing as they felt that notwithstanding the fact that their products were exempt from duty, it was necessary to have their licence renewed but the Assistant Collector, Central Excise again by his letter dated 19-3-1977 so informed them that in view of Notification No. 31/76-C.E., dated 28-2-1976, iron and steel products which were exempt from payment of whole of the excise duty, were also exempt from the operation of Rule 174-A of the Central Excise Rules, and that in his view, the continuance of the licensing control over the fully exempted iron and steel products of Agrico, Jamshedpur would be tantamount to contravention of the provisions of the notification and consequently renewal of the licence was not required. He categorically stated that the "licensing control over 'Agrico' is hereby withdrawn and that they may claim refund of licence fee paid against the AL-4 licence, in question". This letter is shown as Annexure B.

4. However, a notice to show cause dated 13-2-1978 was addressed to the Company by the Assistant Collector, Jamshedpur alleging that they had contravened provisions of Rule 173-Q(l)(a) read with Rule 173-PP of the Central Excise Rules inasmuch as they had removed goods falling under Tariff Item 68 without payment of duty, and so they were called upon to explain as to why penalty should not be imposed on the company for having removed excisable goods without payment of duty and why the duty payable on these goods should not be recovered under Rule 9(2) of the Central Excise Rules, 1944.

5. This show cause notice was resisted, by means of a reply dated 31-5-1978 (Annexure C) whereby the company took up the position that since the products manufactured at Agrico plant were exempt from payment of duty, they had been so cleared during the period which was the subject matter of the notice, namely, 1-3-1975 to 17-6-1977. However, the Assistant Collector by his order dated 19-6-1978 rejected the contentions of the appellant company that their products manufactured at 'Agrico' were all duty free items, and holding that although 'hammers', being a forged product were covered under T.I. 26AA, and did not attract T.I. 68, the other two products namely 'harrow discs', and 'coal-cutting picks' clearly fell within the description of T.I. 68 and hence dutiable and so the demand of duty in respect thereof was confirmed for the period 1-3-1975 to 17-6-1977, excluding the opening balance held on 1-3-1975