(1.) IN this appeal against Order -in -Original No. 10/98 dated 15.9.98 passed by the Commissioner (Adjn) of Central Excise, the short point in dispute regarding the merits is whether the product manufactured by the appellants which they have declared as Industrial Diamond would fall under 7101.80 viz. Dust and Powder of natural or synthetic precious or semi -precious stones etc. as has been confirmed in the Order -in -Original impugned or under Sub -heading 7101.90 - "other" as has been claimed by the appellants all along. The appellants have all along claimed that in view of the industrial approval by the Government for setting up this joint venture the product to be manufactured by them is only Industrial Diamonds (stones) albeit of micro dimensions. Therefore, being covered under Sub -heading 7101.90 of the Central Excise Tariff Act, 1985 they would be fully exempted from Excise duty under Notification No. 53/86 -CE, dated 10.2.86, as amended. The said Notification issued under Rule 8(1) of the Central Excise Rules, 1944 exempts goods fall under Chapter 71 of the said Tariff from the whole of the duty and the items mentioned in the Schedule appended thereto. Serial Number 2 of the said Schedule reads as under:
(2.) IT is also seen that the show cause notice dated 10.3.98 covers the period of demand on the above ground from 10.3.93 to 28.2.98 i.e. the extended period under proviso to Section 11A(1) has been invoked and the appellants have been charged with suppression of information.
(3.) HEARD learned advocate for the appellants, who submits that their appeal would even succeed on the ground of limitation. He takes us through the paper book and submits on the events leading to the issue of show cause notice. He submits that even before the appellants manufacturing process had commenced, they had written a letter dated 11.3.88 to the Range Superintendent of Central Excise informing him of their intention to shortly manufacture Industrial Diamonds (stones) and claiming classification under Sub -heading 7101.90 as well as, the said exemption under Serial No. 2 of the Notification No. 53/86. He submitted that though this letter was despatched by Registered Post with A/D, as they did not receive any reply, the issue was again reagitated before the Superintendent by their letter dated 17th August, 1988. In these letters, they had claimed that they were not required to make declaration or any undertaking in the form annexed to the said Notification, as the exemption was not based on the value of clearances made in the financial year under proviso 2 thereof. A copy thereof was endorsed to the jurisdictional Assistant Commissioner of Central Excise. The Superintendent reacted vide letter dated 18.8.88 seeking particulars with respect to raw materials used, process of manufacture of the item and use of the item. This information was supplied by the appellants to the Superintendent vide letter dated 19th August, 1988, wherein it was declared that graphite was the main raw material that when the said item was packed with catalysts and subjected to high pressure and temperature, the graphite was converted into industrial diamond, which after treatment with acid produced synthetic industrial diamond. The end use of the item declared to be for wide application in Engineering industry especially in machine tools, grinding, sawing, drilling polishing and lapping applications. They also informed that similar products imported at present were not attracting any counterveiling duty in the Custom house. On consideration thereof, the Superintendent vide his letter dated 22.8.88 addressed to the appellants in their earlier name and title informed them that their case was not covered by the said Notification and hence they have requested to take out a Central Excise licence and observe all the Central Excise procedures and clearances should be only on payment of duty. The learned Advocate submitted that no reason was given why their classification under 7101.90 and claim for exemption under the said Notification was disallowed by the Superintendent, neither was it informed to them whether the goods were being treated as excisable under which alternative sub -heading of the Tariff. Being aggrieved by the said decision of the Superintendent, the appellants vide letter dated 27th August, 1988 approached the Additional Commissioner of Central Excise, Madurai, wherein a similar information was again given on the initial lack of response of the Superintendent and then his decision requiring them to apply for licence was also informed. They had also claimed that the Superintendent has not assigned any reasons in his letter as to why the exemption claimed was sought to be denied. They had again submitted that counterveiling duty was not being charged for imports and that they were the first pioneer industry in the country to manufacture synthetic industrial diamond. They had prayed for suitable advise in the matter so that they may start commercial production which would result in reduction of import of the stones. They requested for very early clarification. In respect to the personal enquiry through the Superintendent of the jurisdiction, the following information was submitted by the appellants to the said Assistant Commissioner of Central Excise vide letter dated 2nd November, 1988: