Per Jyoti Balasundaram :

In this case, a duty demand of Rs. 2,43,702.21 P. has been confirmed on a quantity of 20,000 litres of liquid electrolytes produced in the appellants factory by mixing of duty paid Potassium Hydroxide (Solid KOH) with DI water to obtain solution of required specific gravity (used for formulation processes and testing of cells used in stationery batteries) and a quantity of 61,379.90 litres of solid KOH and LIOH (Lithium Hydroxide) despatched alongwith the stationery batteries manufactured by the appellants to their customers, on the ground that liquid electrolyte is an excisable commodity attracting 15% ad-valorem of Special Excise duty under sub heading 38.23 of the Schedule to the CETA 1985, and not entitled to the benefit of exemption under Notification No. 217/86-CE dated 2.3.86 since the stationery batteries for which the liquid electrolyte was used were exempt from duty under Notification No. 68/86-CE dated 10.2.86. The Adjudicating authority has also imposed a penalty of Rs. 60,000/- upon the appellants.

2. We have heard Shri R. Nambirajan learned Advocate who contends that the mixing of potassium hydroxide with water in the appellants factory and