Per S.S. Sekhon:

The appellants are manufacturers of batteries and during the course of manufacture, they prepare 'Compound Rubber' which is captively consumed in the manufacture of Battery containers. The however did not file the classification list for these goods, being excisable, but claimed the benefit of Notification 71/68 dt. 1-4-68. The benefit of the notification is subject to the provision that Modvat Credit should not have been availed on the inputs contained in the manufacture of the goods. The Show Cause Notice dt. 10-9-90, for the period 1 -3-86 to 31 -5-90, was therefore issued. The Collector confirmed the demand. As he found there was no provision for the Reversal of MODVAT once credit was taken.

2. This was prior to the decision of the Supreme Court in the case of Chandrapur Magnet Wires Pvt. Ltd. 1996 (12) RLT 1 (SC) = 1996 (81) ELT 3 (SC). Therefore, the Tribunal set aside the order and allowed the appeal vide its Order No. 1087/76 dt. 25-6-96, to redetermine the penalty, after taking into consideration any evasion of duty established after considering the appellants plea for the benefit of the notification in question in the light of the facts in the case and the Supreme Court decision in the case of Chandrapur Wire Magnets (supra).

3. Against the very same order-in-original, Revenue's appeal was decided by the Tribunal, vide Order No. 1298/1996 dt. 19.8.96. In this order, the Tribunal held, while the application of Notification 71/68 vide the Remand was in Order No. 1087/ 96 dt. 25.6.96, and it was for the Respondents to impress upon the Collector, the appeal before them was concerned about the controversy relating to the retrospective effect of Notification 377/86. They found, that it did not purport to have retrospective effect as no such inference could be seen in Notification 377/86. They held that the benefit of this Notification No. 3 77/86, was available for the period commencing 29-7-86 and not prior to that and they specifically observed –

"We take note of the fact that the question whether the respondents are „ entitled to a larger relief under Notification No. 71/86 requires to be decided by the Collector and the Notification No. 377/86 will have practical significance only if respondents are held to be not entitled to Notification No. 71/68"

4. The Collector consequent to these decisions, of the Tribunal, considering the process of manufacture, especially the statement of one Sh. Rajagopal, Assistant Production Manager came to the finding that what was emerging from the mixing machines of natural rubber, synthetic rubber, chinaclay, sulphur, etc. were 'irregular shaped sheets of Compounded Rubber', which he found to be not covered a 'sheets' but as 'Primary Rubber' and thereafter on a comparative study of two notifications concluded that Notification No. 71 /86 did not exempt 'compounded rubber in the form of irregular sheets 'from payment of duty as according to him it covered only 'sheets' and also he found only Notification No. 3 71/86 prescribed a concessional rate of duty on such goods. He also found that Notification No. 68/86 dt. 10.2.86 exempted parts of Stationery Batteries. Stationery Batteries and containers in the form of plates x sheets were concluded by him to be only parts thereof and 'irregular sheets of compounded rubber in primary form' could not be held to be such parts. Therefore, he applied the benefit of Notification No. 371/86 with effect from 29.7.86 on' irregular sheets of compounded rubber' and did not extend the benefit under Notification No. 71/68. He also did not find any reasons for applying the ratio of the decision in the case of Chandrapur Magnet Wires Pvt. Ltd. of the Supreme Court which was specific direction given to him by the Tribunal in the effects of this case as he did not find ' irregular sheets' to be part of battery. He therefore, confirmed the duty demand and imposed a penalty under Rule 173Q (1).

5. We have heard both sides, considered the submissio