Per Justice U.L. Bhat : Appeal E/1047/94-A, though not posted for hearing along with Appeals E/435/96-A and E/436/96-A, has been heard along with the other appeals on the representation of both the sides that they are connected and may be heard and disposed together.

2. The common appellant undertakes manufacture of Printed Polyester films to make packing pouches falling under sub-heading no. 3923.90 of the Schedule to the Central Excise Tariff Act, 1985. Printing of films is done through the medium of Gravure Printing Cylinder. Cylinders are manufactured by fixing S.S. Shell of cylindrical shape over a pipe of stainless steel and the shell is subjected to copper electroplating. Designs of customers' choice are developed and computer transmitted on to the cylinders. The process involves a high degree of precision, expertise and artistry. Cylinders are manufactured to suit the needs of individual customers and thereafter P.P. films and pouches are manufactured and delivered to customers. Cylinder is covered by tariff sub-heading 5442.00. The prices of cylinders and films and pouches are fixed separately and a part of the price of cylinders (sets of four or five) is collected in advance by way of security as they are custom-made and price of end-product is collected finally as usual, by separate records. Appellant commenced manufacture in September 1977. Under Notification No. 64/86 dated 10.12.86, printed cylinders, captively used or consumed in the factory for printing are wholly exempt from Central Excise duty. Appellant was clearing the finished products on payment of duty on their value without taking into consideration the value of printed cylinders. On an inspection by Central Excise Officers, it was found that appellant was recovering from customers Rs. 4500.00 as cost of cylinder on debit notes which included expenditure on art-work, design and development. Different sets of purchase orders were being prepared for laminate pouches and cylinders. Purchase orders for cylinders were not being filed along with price lists. The cylinders were being retained for manufacture of printed pouches for the respective customers on future occasions. Whenever future orders involve alteration of design or printing matter, necessary operation would be carried out on the cylinder at extra charge, sometimes the charges being Rs. 4500.00. Thus, it was found that there was suppression of material information regarding the correct value of finished products which would include the cost of the cylinders also. Purchase orders and sale documents were manipulated by splitting up the single transaction of manufacture of finished products into two, namely, manufacture of cylinders and manufacture of finished product with a view to evade payment of duty. Show cause notice dated 1.10.92 was issued in respect of the period from September 1987 to March 1992 with the aforesaid allegations and proposing to add the price realized for cylinders to the assessable value of printed pouches as also notional interest on advance price received for the cylinders and invoking the larger period of limitation in the proviso to section 11A of the Central Excises Act, 1944 and demanding differential duty of Rs. 27,68,594.00. The notice was resisted on merits as well as on the ground of limitation. However, the Collector of Central Excise, the adjudicating authority passed order dated 31.1.94 confirming the demand except in regard to consignments in three price lists nos. 462, 436 and 676. He also imposed penalty of Rs. 15,00,000.00 under Rule 173Q of Central Excise Rules, 1944. This order is being challenged in Appeal E/1047/94-A on merits and on the ground of bar of limitation.

3. Appeal E/435/96 arises from an order passed by the Assistant Collector in regard to the period from August 1993 to January 1995 in regard to price of cylinders. Three show cause notices were issued on 27.2.94, 12.8.94 and 23.2.95. The demand was confirmed by the Assistant Collector and