[Order per : P.K. Kapoor, Member (T)]. - This is an appeal against the order dt. 9-11-1989 passed by the Collector of Central Excise, Ahmedabad. Briefly stated the facts of the case are that the appellants are engaged in the manufacture of lighting bulbs and fluorescent tubes falling under sub-heading 8539.00 of the Schedule to the Central Excise Tariff Act, 1985. They also manufactured for captive consumption lead-in-wire, capping compound, stamping paste and coating solution for G.L.S. Lamps and Fluorescent Tubes. They declared lead-in wire under sub-heading 8539.00 and capping compound under sub-heading 3801.90 and claimed exemption under Notification No. 217/86 dated 2-4-1986. On 20/28-8-1986, the Central Excise officers visited the appellants factory and drew samples of solution prepared in the factory for the coating of G.L.S. Lamps/F.L. Tubes and also of stamping ink and sent them to the Chemical Examiner for test. After testing the sample the Chemical Examiner gave the following findings :

(i)      Coating solution for G.L.S. Lamps.

The sample is in the form of white liquid. It is composed of cel­lulose derivative (other than Nitro Cellulose), Plasticizers, Inorganic Fluorescent pigments and volatile organic solvent. The content of volatile organic solvent is more than 53%. It gives track free adherent coating. As per the manufacturers description and intended use, the sample appears to have characteristics of cellulose lacquer.

(ii)     Coating solution/Compound for F.L. Tubes.

The sample is in the form of white liquid. It is composed of cel­lulose derivative (other than Nitro Cellulose), Plasticizers, Inorganic Fluorescent pigments and volatile organic solvents. The content of volatile organic is more than 53%. It gives track free adherent coating. As per the manufacturers description and intended use, the sample appears to have characteristics of cellulose lacquer.

(iii)    Stamping ink.

The sample is in the form of Black coloured paste. It is composed of Silver Nitrate (photosensitive chemical), lead borate, polyhy-dric alcohol and methyl alcohol. It merits classification as a type of ink.

2. On the basis of the test results it appeared to the Deptt. that stamping ink was classifiable under sub-heading 3215.00 of the Central Excise Tariff Act, 1985 and under Tariff Item 14-I (5) of the erstwhile Central Excise Tariff. The Deptt. also felt that coating solution for G.L.S. bulbs and F.L. Tubes were classifiable under sub-heading 3208.30 of the Central Excise Tariff Act, 1985 and under T.I. 14-II of the erstwhile Central Excise Tariff. A show cause notice was therefore issued to the appellants on 17-3-1987 alleging that during the period 1-1-1982 to 28-2-1986 that they had manufactured the said items for captive use without obtaining Central Excise licence and without filing any classification list. The show cause notice also alleged that they had failed to observe the Central Excise procedure and had not paid the Central Excise duty on the said goods used in the manufacture of G.L.S. Lamps and F.L. Tubes. The appellants were therefore charged with the contravention of Rules 174, 173B, Rule 9(i) read with Rule 173F, Rule 52A, Rule 53 read with Rule 173G of the Central Excise Rules, 1944 and were asked to show cause as to why central excise duty amounting to Rs. 49,34,479.39 should not be recovered from them under Rule 9(2) read with Section 11A of the Central Excises and Salt Act. The appellants denied the allegation and in particular they contended that coating solution used in the manufacture of fluorescent tubes could not be deemed as excisable since it had a short shelf life and was not marketable. However, the Collector rejected the appellants contention. He observed that the appellants had started paying duty on lead-in-wire and capping compound and dropped the demand in respect of coating solution for G.L.S. Lamps. However, he confirmed the demand of duty amounting to Rs. 47,49,998.32 in respect of coating solution for F.L. Tubes for the period 1-3-1982 to 28-2-1986 and also imposed a penalty of Rs. 5 lakhs on the appellant.

3. On behalf of the appellants, Shri C.S. Lodha, ld. Advocate submitted that the appellants had been manufacturing electric bulbs since 1975 and they had commenced the production of fluorescent tube lights in 1978. He contended that the Collector had erred in holding on the basis of the Chemical Examiner’s report that the solution in question was a cellulosic lacquer capable of giving track free coating on surfaces. He stated that on this basis the Collector had arrived at the incorrect finding that coating solution for fluorescent tubes was classifiable under Tariff Item 14-III prior to 28-2-1986 and under sub-heading 3208.30 after 1-3-1986. He added that for the purpose of coating tubes fluorescent powder dissolved in certain resins is used. He claimed that in order to avoid coagulation the coating solution is required to be constantly stirred and stated that the solution is applied to the inner surface of the tubes and thereafter the tubes are baked at high temperatures resulting in evaporation of chemicals and a coating of fluorescent powder being formed on the tubes. He submitted that even though the entire activity of coating of fluorescent tubes with the said solution from 1975 onwards was known to the Department, for the first time a show cause notice was issued on 17-3-1987 demanding duty on the solution in ques­tion for the period 1-1-1982 to 28-2-1986. He referred to the declaration under Notification 201/79 dt. 19-2-1980 submitted to the Superintendent of Central Excise in which various inputs including fluorescent powder used in the manu­facture of tubes were included. He also referred to the letter dt. 24-3-1980 ad­dressed by the appellants to the Superintendent in which it was stated that from 1978 onwards they had added the production of fluorescent tubes and the details of the process of coating of tubes with fluorescent powder was also explained. He stated that the ground plan filed by the appellants with the Central Excise authorities also clearly indicated the location of the coating section in appellants factory. Shri Lodha added that in response to the Superintendent’s letter dt. 26-6-1986 the appellants vide their letter dt. 31-7-1986 had furnished the man­ufacturing details of various items including coating solution. He stated that on 8-8-1986 and 21-8-1986 the Superintendent directed them to furnish further in­formation regarding coating solution and other intermediate products and the required information was furnished by the appellants on 2-9-1986. He contended that under these circumstances there could be no allegation of suppression and the show cause notice has to be deemed as time barred. He submitted that the show cause memo was based entirely on the test report of the chemical exam­iner who had not touched upon the essential aspects of stability and marketabil­ity of the disputed product. Shri Lodha submitted that the Collector failed to appreciate that the findings recorded by him were contrary to the evidence led before him including the cross examination of the witness. He added the Collector had also disregarded the evidence of Dr. Potnis which clearly showed that fluorescent powder inside the tubes could be easily rubbed off. In this re­gard he also placed reliance on Board’s letter No. 22/8/58-CX. 4, dt. 12-7-1958. Shri Lodha contended that the Collector had erred in holding that the appellants had not produced any proof that the goods had no shelf life and it was not marketable, since the onus to prove that the product in question was capable of being bought and sold and was known to the market was on the Department. On these grounds, he pleaded that the impugned order may be set aside. In support of his contentions he cited the following case law:-

(i)      Collector of Central Excise v. Calcutta Steel Industries & Others - (S.C.);

(ii)     Collector of Central Excise v. Mafatlal Fine Spg. & Wvg. Co. - (Tribunal)

(iii)    Padmini Products v. Collector of Central Excise - (S.C.);

(iv)    Collector of Central Excise v. Ambalal Sarabhai Enterprises - (S.C.);

(v)     Mahatha Petro Chemicals v. Collector of Central Excise - ;

(vi)    Bharat Forge & Press Industries (P) Ltd. v. Collector of Central Excise - (S.C.)

4. On behalf of the respondents, Shri Sharad Bhansali, learned SDR stated that the Collector had correctly invoked the extended period under proviso to Section 11A on the grounds of suppression since the appellants had failed to declare the disputed coating solution in the Classification List in which both excisable and non-excisable goods are to be declared. He pointed out that in the letter dt. 19-2-1980 the appellants had only declared the various inputs including fluorescent powder for the purpose of claiming the benefit under Notification 201/79. He stated that in arriving at his finding that the disputed coating solution possessed the general composition of cellulosic lacquer and was capable of giving track free dry film on being coated on different surfaces, the Collector had relied on the Chemical Examiner’s report as well as the definition of lacquers in a number of books. He added that the Collector had also pointed out that the report of Dr. Potnis could not be of any assistance to the appellants since the finding in the report that the film had no adhesion was on account of tests having been carried out after baking of the film at 500°C. In this regard Shri Bhansali also referred to the Collector’s observation that in the various books on lacquers listed by him, no optimum limits of the percentage of binder resin had been stipulated. He contended that the appellants claim that the solution in question was unstable and did not have much shelf life has to be rejected since the sample was drawn on 20-8-1986 and the Chemical Examiner had stated that at the time when it was tested, it was in the form of a white liquid and had not solidified. On these grounds he pleaded for the rejection of the appeal.

5. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the following are the main points that arise for consideration in this case.

(i)    Whether the Collector’s order holding that ‘Coating Solution’ for fluorescent tubes used by the appellants for captive consumption could be deemed as an excisable product liable to Central Excise duty under Tariff Item 14-III prior to 28-2-1986 and under sub-heading 3208.30 after 1-3-1986 is sustainable.

(ii)     Whether demand issued on 10-3-1987 seeking to recover duty for the period 28-2-1982 to 28-2-1986 on the ‘Coating Solution’ in question was time barred.

6. Taking up the first point, we find that in arriving at his finding that the ‘Coating Solution’, in question was an excisable product falling under Tariff Item 14-III prior to 23-2-1986 and under sub-heading 3208.30 after 1-3-1986, the Collector mainly placed reliance on the following report given by the Chemical Examiner after testing the representative sample of the product :-

“The sample is in the form of white liquid. It is composed of cellulose derivative other than Nitro Cellulose/Plasticizers, inorganic fluorescent pigments and volatile organic solvents. The content of volatile organic is more than 53%. It gives track free adherent coating. As per the manufacturers de­scription and intended use, the sample appears to have characteristics of cellulose lacquer.”

7. The appellants case is that ‘coating solution’ in question could not be treated as cellulose lacquer since in any lacquer/paint the percentage of binder solids has necessarily to be between 20% and 30%, whereas the percentage of binder solids in the disputed product had been certified by experts as being 4.5%. They have also contended that the product in question could not be treated as lacquer also for the reason that it was not capable of giving a tack free adherent film or coating on surfaces. In this regard the appellants have contended that the Chemical Examiner had not tested the sample to determine whether the product was capable of giving decorative or protective coating. The appellants have also contended that the coating solution in question could not be deemed as an excisable product since it is not known in the market as a lacquer capable of being used for giving a protective coating and it is also not marketable. In support of their contentions the appellants have mainly placed reliance on the report of Dr. S.P. Potnis, Director, Department of Chemical Technology, University of Bombay.

8. The Collector has listed a number of books on the subject in support of his finding that in respect of lacquers there are no optimum limits in regard to the percentage of binder (resin). Hence, in our view, the appellants contention that the percentage of binder solids in lacquer/paints has necessarily to be between 20% and 30% cannot be of any assistance to them. We find that the Collector was also justified in rejecting the appellant’s claim that the coating solution in question was not capable of giving a track free coating on different surfaces since the experts on whose opinion the appellants were relying had carried out the test on the coated solution after it had been baked at 500ºC.

9. It is seen that the appellants claim that ‘Coating Solution’ in question could not be deemed as excisable since it was not marketable, was rejected by the Collector on the following grounds :-

“A point is raised that product cannot be termed as ‘goods’ as it has no shelf life. In this respect, the party has not produced any proof that the product has no shelf life and hence, it is not marketable. Their plea without any proof has no evidential value. In view of the above, I hold that coating solutions for F.L. Tubes and G.L.S. Lamps are chargeable to duty under T.I. No. 14-III of erstwhile First Schedule to the Central Excises and Salt Act, 1944 as it stood prior to 28-2-1986. The said solutions were classifiable under sub-heading 3208.30 of Central Excise Tariff Act, 1985.”

10. In the case of Cipla Limited v. Union of India reported in , the Hon’ble Karnataka High Court relying upon various judgments of the Hon’ble Supreme Court has held that the test of marketability is an essential criteria to decide the exigibility to duty of goods speci­fied under the Tariff Act and this test is to be applied even to transient items captively consumed in the- manufacture of finished products. Paras 17 to 28 of the said judgment being relevant are reproduced below :-

17. A faint attempt was made on behalf of the Department by Sri Ashok Haranahalli to justify the order made by the second respondent. It was also his argument that after the Tariff Act, 1985, came into force, the marketability test is not a criteria to decide the exigibility to duty as specified under the Tariff Act. Reliance was also placed on the Rule of Interpretation, viz., Rule 2(a), in support of this argument. It was, therefore, contended that ‘BMS’, though it is an intermediate product, has all the essential characteristics of a finished product and is, therefore, exigible to duty under the Act as an organic compound. Relying on this Rule, it was also argued that it need not be proved by the Department that the goods are marketable or are actually bought and sold.

18. In the light of these arguments, it becomes necessary to go back to the earliest of the decisions of the Supreme Court in Union of India v. Delhi Cloth Mills [1977 (1) E.L.T. (J 199) (SC) = AIR 1963 SC 791]. The Supreme Court considered the connotation of the term, ‘goods’ which is not defined in the Central Excise Act, vis-a-vis the meaning of the term, ‘manufacture’. It was held that excise duty is on the manufacture of the goods and not on the sale. ‘Goods’ in the context of the levy of duty under the Central Excise Act, it was held, should be understood as an article or a new substance known to the market and which is bought and sold.

19. This test was applied and followed by the Supreme Court in the case of Union Carbide India v. Union of India and Others -.

20. Agreeing with the contention of the appellant before the Supreme Court, it was held, on facts, that the aluminium cans produced by them cannot be described as ‘goods’ for the purpose of excise duty, inasmuch as they are not marketable and are prepared entirely by the appellant for the flash lights manufactured by it. It was reiterated in para 7 of the Judgment by Sri Pathak, J. (as he then was) that the question whether an article or substance manufactured is capable of being sold to a consumer should be examined on the facts of each case. It was also ruled that, if the manufacturer avers in the affidavit that a particular product is unknown in the market and no satisfactory material to the contrary is placed by the Department, the contention of the manufacturer must be accepted, since the burden shifts to the Department to prove that they are excisable goods under the Act. His Lordship also referred to the meaning given to the expression “goods” for the purpose of Central Excise Act in South Bihar Sugar Mill’s case reported in 1978 (2) E.L.T. (J 336) (S.C.) in which it was held, “to become goods an article must be something which can ordinarily given to the market to be bought and sold”.

21. Same was the view taken by the Supreme Court in yet another decision in Geep Industrial Syndicate Ltd. v. Central Government and Others - (S.C.).

22. All these three decisions were relied upon by the petitioner before both the Assistant Collector, who passed the two orders, the latter being the one im­pugned in this writ petition.

23. Apart from the fact that the second respondent had to apply the marketability test to the facts of the case, the defiant attitude of the second respondent in trying to avoid the real issue was demonstrated by the petitioner’s Counsel that he (second respondent) has not even made a reference to the three decisions of the Supreme Court relied upon by them before the Adjudicating Authority and referred to by me in the earlier order made in W.P. No. 7428/88. It was, therefore, argued vehemently by Sri Pochkhanawalla that the Assistant Collector’s order, made in defiance of the order made by this Court and the di­rection given in W.P. No. 7428/88 deserves to be quashed by this Court.

24. In the absence of any evidence adduced by the Department, and having regard to the persistent and determined attitude which the adjudicating authority has adopted in this case, no useful purpose would be served in remitting the matter to him again. The second respondent who is expected to exercise his quasi-judicial function in a judicious manner has failed to discharge his function as an adjudicating authority under the Act, applying the law as declared by the Supreme Court in the cases referred to before him and in the light of this Court’s order in the previous writ petition.

25. Therefore, I proceed to decide the writ petition on the basis of the law laid down by the Supreme Court as applicable to the uncontroverted facts of this case. The well accepted position in law is that the time honoured test of marketability should be satisfied even in respect of transient item which is captively consumed in the manufacture of other finished products. This view is re­iterated again in the two later decisions of the Supreme Court in : (i) Bhor Industries Ltd. v. Collector of Central Excise - (S.C.), and (ii) Ambalal Sarabhai Enterprises case reported in (S.C.).

26. It is relevant to notice that in particular, the Supreme Court has held that marketability is an essential ingredient in order to be dutiable under the Schedule to the Central Excise Act and also under the Tariff Act, 1985. In both the decisions, his Lordship Sabyasachi Mukharji has referred to the earlier decisions of the Supreme Court in DCM Mills case (ii) South Bihar Sugar Mills case and (iii) Union Carbide case, and affirmed and reiterated the ratio laid down in the said decisions.

27. However, it would be necessary only to notice the additional observations made by the Supreme Court in the case of Bhor Industries referred to above. His Lordship held, that in the absence of evidence or proof produced by the Department in that case that the articles in question (Crude PVC film) were excisable goods exigible to duty, the Tribunal was wrong in not applying the proper test viz., the test of marketability and reversed its order. The Supreme Court further observed that simply because a certain article falls within the Schedule, it would not be dutiable under the Excise law, if the said article is not “goods” known to the market. It was further observed, that it would be necessary to find out whether the goods in dispute are articles known in the market as separate, distinct and identifiable commodities and whether any tariff duty should be levied merely following the description of the article in the Schedule without finding out whether those goods are things which can ordinarily come to the market to be bought and sold.

28. In Ambalal Sarabhai’s case referred to above, the question was whether starch hydrolysate is goods? The contention of the petitioner-assessee was that the starch hydrolysate manufactured by the Company was captively consumed in the manufacture of sorbitol falling under Item 68 of the Central Excise Tariff. The Supreme Court held, that while attempting to levy duty on such transient items which are captively consumed in the manufacture of another finished produce, it must be proved and established by the Department that even such items or articles are known in the market as distinct and separate articles having separate use, and therefore, would still be ‘goods’ to attract levy of the Central Excise Duty. It was further held, though actual sale is not necessary, evidence must be produced by the Department that the goods, in fact, are capable of being marketed. Observing that the Department must take a practical view on the basis of the available evidence, it was held that the revenue had failed to discharge its onus to prove that starch hydrolysate was dutiable.

11. In the case of Jagatjit Cotton Textile Mills Ltd. v. Collector of Central Excise reported in , the Tribunal relying upon the Supreme Court judgment in the case of Collector of Central Excise v. Ambalal Sarabhai Enterprises reported in has held that the burden to prove that goods are marketable and hence liable to duty is on the Department. Para 6 of the said decision being relevant is reproduced below:-

“6. We gave our anxious consideration to the arguments advanced on both sides and perused the records. It is evident from the record that both the author­ities below have proceeded to determine the excisability of the product based on process of manufacturing activity, without considering the important point about marketability of the product in determining the goods for the purpose of levy of excise duty. The material which is sufficient for the purpose of holding that there is manufacturing activity and emergence of a separate product are not sufficient for the purpose of coming to the conclusion about the marketability of the product. The Department has not brought on record any evi­dence to show that these goods were either sold or marketable as such. On the other hand the appellants have taken this stand from the beginning and in support of their contention they have produced certificate from the Gujarat State Fertilizer Corporation who is sole manufacturers of caprolactum to show that caprolactum in molten form is not marketable. This important piece of evidence was neither considered by the Department nor rebutted. Supreme Court has categorically held that marketability of the product is an essential ingredient in order to be dutiable under the Excise Law in the Bhor Industries Limited (supra) and further same view was reaffirmed by the Supreme Court in the case of Collector of Central Excise v. Ambalal Sarabhai Enterprises reported in (S.C.), wherein it was observed that test of marketability should be satisfied even in respect of transient item which is captively consumed in the manufacture of other finished product and in particular it held that marketability is an essential ingredient in order to be dutiable under the Schedule to the Central Excise Tariff Act. Simply because certain articles fall within the Schedule it would not be dutiable under the Excise Law if the said article is not “goods” known to the market. It has also been held that though actual sale is not necessary, the evidence must be produced by the Department that the goods in fact are capable of being marketed. The Department has not adduced any such evidence in this case. Under these circumstances, following the ratio of the decision of the Apex Court, we have no other alternative except to hold that the goods in question are not liable to excise duty.”

12. It is seen that the Collector arrived at the finding that the coating solution for fluorescent tubes was chargeable to duty under Tariff Item 14-III prior to 28-2-1986 and thereafter under sub-heading 3208.30 on the grounds that the appellants had not proved that the product in question did not have any shelf life and hence it was not marketable. Since as discussed above before holding the goods as excisable it was incumbent upon the Department to establish on the basis of proper evidence that the ‘Coating Solution’ in question was known to the market and it was capable of being marketed. No effort having been made at all by the Department to enquire into this essential requirement, we hold that the Collector’s order in regard to the excisability and classification of the disputed goods is not sustainable since it is not reasoned and shows non-application of mind.

13. It is seen that by the impugned order the Collector has confirmed the demand issued on 17-3-1987 and demanded duty period 1-3-1982 to 28-2-1986 by invoking the extended period under proviso to Section 11A on the grounds of suppression of facts. In this regard, the Collector has observed that a stray letter written by the appellants to the Superintendent in some other context indicating the use of the disputed ‘Coating Solution’ for their captive consumption could not be taken as the proper declaration in regard to the manufacture of the goods in question. He has held that classification list being the basic excise document for assessment, failure on the part of the appellants to declare the product in the classification list amounted to suppression. In this regard, the appellants case is that the Department was throughout aware about their activities. They have stated that they were under the impression that the ‘Coating Solution’ was not an excisable product since it was an unstable intermediate product having a short shelf life. They have contended that the Department was itself not sure about the excisability of the said product. In this regard, the appellants have pointed out that in response to a query from the Superintendent of Central Excise they had in their letter dt. 24-3-1980 furnished the complete details of the manufacturing process of fluorescent tubes involving the coating of such tubes with coating solution. They have stated that in the copy of the ground plan of their factory filed with the Department the area earmarked for coating of fluorescent tubes was clearly indicated. The appellants have also referred to the Superintendent’s letter dt. 26-6-1986 enquiring about the process of the manufacture of coating solution and their reply dt. 31-7-1986 under which the required details were furnished. They have also pointed out that in response to the Superintendent’s letter dt. 21-8-1986 in their letter dt. 2-9-1986 they had stated that certain intermediate products including coating solution were used by them only in the manufacture of electric bulbs and fluorescent tubes and such products had never been sold by them. It is thus seen that from the documentary evidences filed by the appellants it is evident that they had kept the Department fully informed about the use of ‘coating solution’ in the manufacture of fluorescent tubes by furnishing the information sought by the concerned officers and they as well as the departmental officers were not definite about the excisability of the said coating solution.

14. In the case of Collector of Central Excise v. Chemphar Drugs & Liniments reported in , the Honourable Supreme Court has held that in order to make the demand for duty sustainable beyond a period of six months, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provisions of the Act or Rules made thereunder, with intent to evade payment of duty and something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise is required before it is saddled with any liability beyond the period of six months. Para 8 of the said judgment being relevant is reproduced below :-

“8. Aggrieved thereby, the revenue has come up in appeal to this Court. In our opinion, the order of the Tribunal must be sustained. In order to make the demand for duty sustainable beyond a period of six months and up to a period of 5 years in view of the proviso to Section 11A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, before the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful misstatement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case. The Tribunal came to the conclusion that the facts referred to hereinbefore do not warrant any inference of fraud. The assessee declared the goods on the basis of their belief of the interpretation of the provisions of the law that the exempted goods were not required to be included, and these did not include the value of the exempted goods which they manufactured at the relevant time. The Tribunal found that the explanation was plausible, and also noted that the Department had full knowledge of the facts about manufacture of all the goods manufactured by the respondent when the declaration was filed by the respondent. The respondent did not include the value of the product other than those falling under Tariff Item 14E manufactured by the respondent and this was in the knowledge, according to the Tribunal, of the authorities. These findings of the Tribunal have not been challenged before us or before the Tribunal itself as being based on no evidence.”

15. As discussed earlier, the appellant had kept the Department fully informed about their activities and in particular regarding the use of the coating solu­tion in question for the manufacture of fluorescent tubes. All queries made by the Department in regard to the said product were duly replied to. Under these circumstances, on the ratio of the judgment of the Supreme Court quoted above, we hold that the demand confirmed by invoking the extended period under the proviso to Section 11A is not sustainable and the demand which was issued for the period beyond six months was time barred.

16.  On the question of marketability, as observed by us earlier, the Collector’s finding was not reasoned and showed non-application of mind. We would have therefore, been inclined to remand the matter to the adjudicating authority to examine the question of marketability. However, in view of our finding that the demand issued for the recovery of the duty on the disputed coating solution was time barred, we do not consider it necessary to do so.

17. In view of the foregoing, we set aside the impugned order and allow the appeal