1. In this case, a penalty of Rs. 200/- was imposed on the appellants and duty of Rs. 5,557.72 demanded from them 'under Rule 173Q of the Central Excise Rules, 1944 on the ground that during the period from 30-5-1971 to 21-9-1971 they manufactured and removed glass mica tapes and fibre glass varnished tapes without obtaining a Central Excise (Licence and without paying the duty as applicable to electric insulation tapes 'under Item 59 of the Central Excise Tariff. The facts briefly are that Item 59 was introduced in the Central Excise Tariff by virtue of Finance Bill, 1971 effective from the midnight of 29-5-71/30-5-71. Soon thereafter, on 9-6-71 the appellants wrote a letter to the Central Excise authorities at Kalyan in order to find out whether the appellants' product was liable to duty under the new item.
This letter was received by the Department on 16-6-71 and the Department informed the appellants that the matter was receiving attention and a further communication would follow shortly. The appellants received no further communication with reference to their letter. In the meantime, the Collector Issued a trade notice dated 19-6-71 the relevant portion of which is as under : "Electric insulating tape is a tape impregnated or coated with insulating compound used for covering joints in or open ends of electric wires and cables. Such tapes may have for backing, textiles, cellulosic film or paper." The appellant's version is that their tapes did not conform to the above definition contained in the trade notice and in the absence of any further reply to their specific letter to the Department, they presumed that their products were not dutiable. However, about 3 years later, the preventive staff visited their factory and after their investigations a show cause notice was issued to the appellants on 12-3-74 which has ultimately resulted in the present proceedings.
2. The case came up for hearing on 11-8-83. The appellants did not attend the hearing but wrote a letter dated 28-6-83 requesting that their case may be decided on the basis of their written submissions.
Accordingly, we took ;up consideration of merits of the case. The Department's representative maintained that the appellants manufactured insulating tapes of fibre glass and that though the appellants claimed multiple uses of their tapes their tapes were covered by Item 59 of the tariff.
3. On merits, the main plea of the appellants is that the term "electric insulating tape" as understood commonly, popularly and in commercial parlance Is the tape which is impregnated with insulating material and one side of which as coated with adhesive material and it is commonly used for covering joints in and open ends of electric wires and cables. They state that the same meaning was given to this item in the Collectors trade notice referred to above as well. They contend that varnish treatment of their fibre glass tapes makes them moisture proof and more heat resistance, that no doubt such tapes acquire the property of electric insulation also but this property is incidental only, that their tapes are used for electric purposes (to cover and tie up and hold in position coils of copper wire which is already insulated by enamel) which are quite different from electric insulation and that their varnished tapes are not known in commerical parlance as electric insulating tapes and as such they do not fall (under Item 59 of the tariff.
4. The appellants have further argued that since they themselves had approached the Department immediately after .the budget and since the Department's own interpretation as contained in the trade notice meant that no duty was chargeable on their products, their clearances did not amount to clandestine removals coming under the provisions of Rule 9(2), that in view of the Supreme Court's judgment in Elphiniston Mills case, only Rule 10 could apply in their case and since the demand for duty was issued to them on 12-3-74 for the period from 30-5-71 to 21-9-71, it was time-barred. They have added that if at all any duty is payable by them, they are entitled to re-calculation of duty after allowing them deduction of trade discount, and duty element from their sale price etc. and that on this basis the duty would work out to Rs. 4,436.88 and not Rs. 5,557.72.
5. We have carefully considered the matter. We find force in the appellant's plea relating to time-bar since the appellants had themselves declared their products to the Department immediately after the budget and wanted to know about their excisability. Though the Department acknowledged their letter and promised a further reply, none was sent to the appellants. The lower authorities have stated that no individual reply to the appellants was necessary in view of the general clarification contained in the trade notice. But we find that the trade notice hardly clarified the point so far as the specific product manufactured by the appellants was concerned in view of the claimed different use and purpose of the appellants' product. The Assistant Collector admitted it in his order that the appellants had no malafide intention. In the circumstances, imposition of penalty on the appellants is not justified and the demand for duty made from them after 3 years is clearly time-barred. Accordingly, without going into the other points raised by the appellants, we allow this appeal on the ground of time-bar alone. The penalty imposed on the appellants and the duty demanded from them are set aside.