S. Duggal, Member (J) and S. Venkatesan, Senior Vice-President.

1. M/s. Ceakay Rubber Industries stated to be a partnership concern doing business of manufacture of rubber products within the jurisdiction of Changanacherry Range, Kottayam Division in Cochin Collectorate (Kerala), had filed this revision petition before the Central Government under provisions of Section 36 of the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act). The same has been received by the Tribunal as an appeal by virtue of Section 35 P of the said Act, and is being disposed of as such.

2. The appeal is directed against order passed by the Appellate Collector, Customs and Central Excise, Madras on 11-2-1980 whereby he confirmed the order passed by the Assistant Collector, Kottayam Range on 3-7-1978 confirming demand of duty amounting to Rs. 1,42,230.02 against the appellant being excise duty for the period 1-2-1970 to 13-10-1972 in relation to the product described as 'Cushion Compound'. This was pursuant to a notice to show cause having been issued on 28-8-1974 by the Range Officer concerned and after the party had filed reply, and after consideration of ail the contentions, the Assistant Collector came to the view that the demand had been rightly made and held the appellant liable to pay the same.

3. The facts giving rise to this controversy are to the effect that the appellant's factory manufactures a number of rubber products, including one which they described as 'cushion' but concede that it is also commonly known as 'cushion compound'. Their main plea is that this item was not marketed or traded by them directly but was only used in a semi-finished stage as an intermediary product for the purpose of cushion backing of tread rubber, which is sent out to the market after due payment of duty. They thus contend that this product having been captively consumed in their factory in the same premises before reaching the stage of finished goods was not excisable to any excise duty and that the Excise authorities have erroneously held these goods to be dutiable.

4. It was further contended that, in any case, the goods having been manufactured and used within the knowledge of the concerned Excise authorities, there could be no demand by invoking Rule 9(2) of the Central Excise Rules which pre-supposes clandestine removal, and that consequently, the show cause notice having been issued under Rule 9(2), the confirmatory demand with reference thereto was not sustainable.

5. The Assistant Collector rejected all the contentions of the party, after consideration of all the pleas set forth in reply to show cause notice holding that 'cushion compound' was a product known separately in the market and there was no evidence to support the contention of the party that the 'cushion compound' which they were using for backing tread rubber, was not capable of use for resoling or retreading. He further observed that in the case of tread rubber cleared from the factory without cushion backing, duty was being collected at the time of removal and on the same basis, 'cushion compound' manufactured in the factory, which was used for backing the tread rubber, was also liable for assessment to excise duty and payment of the same, and holding that as these goods had been exempted only with effect from 14-10-1972 by virtue of Government Notification No. 208/72, dated 14-10-1972, duty for the period covered by demand notice was payable, confirmed the demand.

6. The Appellate Collector, by means of the impugned order upheld the findings of the Assistant Collector, after taking note of the contentions canvassed before him in the appeal petition as well as during personal hearing, finding that 'cushion compound', which was called by the appellant as cushion, used for captive consumption for the manufacture of cushion backed tread rubber, would also attract duty under Item 16A(2) of the Central Excise Tariff for the period up to the issuance of the Exemption Notifica