1. Facts of the case in brief are that the respondent imported two consignments of "class E other high temperature insulating paper". In both the cases, the goods were assessed under Heading 39.01/06 of the Customs Tariff Act, 1975 and for the purpose of countervailing duty under Item 17(2) of the Central Excise Tariff on the ground that the goods consisted of presspahan paper board laminated with polyester film. Subsequently, the respondent made two refund applications contending that the goods were classifiable under Chapter 48 CTA read with Notification No. 37/78-Cus. In terms of this notification, electrical grade insulation paper and electrical grade insulation paper board falling under Chapter 48, were partially exempt from basic customs duty and there was full exemption from countervailing duty. The Asstt. Collector of Customs, however, closed both the refund claims and informed the respondent that since the assessment, of E class insulating paper was under consideration of the Central Board, of Excise and Customs, he would take up the matter after the Board had taken a decision on this point; Against this decision of, the Asstt. Collector closing their claims, the respondent filed an appeal before the Appellate Collector. The Appellate Collector held that the Asist. Collector should have applied his own mind and, should not have closed the refund claims. The Appellate Collector further went into the merits of the assessment and observed that the subject goods were a composite material inasmuch as the paper had been laminated with a thin plastic film. The goods had to be assessed in terms of Rule 3(b) of the Rules for the Interpretation of the Customs Tariff. In terms of this rule, composite goods had to be, classified on the basis of that material or component which gave the goods their essential character. In respect of the subject goods, the Appellate, Collector observed that the essential character of the goods 'came/only from paper and not from the polyester film as, the polyester film by itself did not have the insulating property. That being so, the Appellate, Collector held that the subject goods, had to be assessed as paper under Chapter 48 of the CTA. Consequently, the respondent was also entitled for exemption in terms of Notification No. 37/78-Cus. The Central Government was, however, tentatively of the view that the Appellate Collector was not correct in holding that the composite goods got their essential character from paper and not from polyester film. It 'appeared to the Govt. that the subject composite material owed' its essential characteristics of electric insulation to the plastic portion rather than to the paper backing. That being so, the correct classification of the goods appeared to be under Heading 39.01/06 CTA with CV duty under Item 1-7(2) CET whereunder assessment had been done originally by the Custom: House. By the subject show cause notice, the Central Government called upon the respondent, as to why the original assessment should not be restored. The proceedings initiated by this show cause notice have since been transferred to this Tribunal and have been taken up as the subject appeal.

2. The case was heard on 21-6-1983. The Department's representative made a preliminary point saying that the Appellate Collector had exceeded his jurisdiction by going into the merits himself instead of directing the Asstt. Collector to decide the refund claims on merits. He, therefore, desired that the Bench should set aside the Appellate Collector's order and remand the matter to the Asstt. Collector. The respondent countered this argument by saying that the Appellate Collector had recorded reasons for going into merits of the claim. The reason was that the Asstt. Collector had abdicated his responsibility and closed the refund claims on the ground that the point at issue was under consideration of the Board. We agreed with the respondent that in the circumstances of this case, the Appellate Collec