COMMISSIONER OF C. EX. Vs. CHELLAPANDI MATCH WORKS

JUDGEMENT

(1.) M /s Chellapandi Match Works (respondents) were engaged in the manufacture of matches as a cottage industry. Notification No. 22/82 -C.E. prescribed concessional rate of duty for match sticks manufactured by licensed manufacturers subject to the condition that the production in any calendar month during a financial year and the production in the entire year did not exceed the respective limits (15 million matches and 120 million matches respectively) prescribed under the Notification. One Shri A. Veluchamy was the holder of licence for M/s. Chellapandi Match Works. His brother, one Shri A. Ramasamy was looking after the factory. Investigations conducted by the Department revealed that, during 1990 -91, Shri Ramasamy had clandestinely purchased 11,160 units of Central Excise Stamps by opening a duplicate RG -3 Register, without accounting them in the statutory records. It appeared to the Department that the said Central Excise Stamps had been sold profitably to Middle Sector Units. A show -cause notice was, therefore, issued to M/s. Veluchamy and Ramasamy proposing to deny them the benefit of concession under the above Notification and demanding differential duty @Re. 1 per unit on the 11,160 units of Central Excise Stamps. In adjudication of this show -cause notice, the Assistant Collector passed Order -in -Original No. 42/93, dated 17.3.1993 holding that the benefit of Notification No. 22/82 -C.E. was not deniable to the respondents as there was no evidence to show that the 11,160 units of Central Excise Stamps were used in the manufacture of matches within their factory, but the differential duty on the 11,160 units of Central Excise Stamps illegally procured and sold to middle sector units by Shri Ramasamy was recoverable from both Shri Ramasamy and Shri Veluchamy. The Assistant Collector also imposed penalties on them. Against this demand of duty and imposition of penalty, the brothers preferred appeals to the Collector (Appeals). They contended that, as the above stamps were purchased under the supervision of Central Excise officers, neither any demand of duty nor any penalty was sustainable. They also raised the plea of time -bar against the demand of duty. The Collector (Appeals) passed Order -in -Appeal Nos. 141 & 142/1993, dated 4.11.1993 setting aside the demand of duty. He, however, confirmed the penalty on Shri Veluchamy and Shri Ramasamy after finding, against them, contravention of Rules 65, 66 and 67 of the Central Excise Rules, 1944. Appeal Nos. E/2356 & 2357/1998 filed by the Department are against this order of the Collector (Appeals).

(2.) AFTER the above Order -in -Appeal Nos. 141 & 142/1993 was passed by the Collector (Appeals), Trichy, the Collector of Central Excise, Madurai reviewed Order -in -Original No. 42/93, dated 17.3.1993 of the Assistant Collector under Section 35E(2) of the Central Excises and Salt Act, 1944, pursuant to which an appeal was filed with the Collector (Appeals) against the said Order -in -Original. In this appeal, the contention of the Department before the Collector (Appeals) was that, if the 11,160 units of matches were included in the production of M/s. Chellapandi Match Works, their production would exceed the monthly production limit of 15 million prescribed under Notification No. 22/82 -C.E. and consequently they would be rendered ineligible for the a benefit of concession under the Notification. The Department, therefore, wanted the case to be remanded to the original authority for de novo adjudication to confirm the show -cause notice -proposal for denial of concession under the Notification to M/s. Chellapandi Match Works. This appeal of the Department was rejected as not maintainable, by the Collector (Appeals) as per Order -in -Appeal No. 69/94, dated 28.9.1994, after noting that the Assistant Collector's Order -in -Original No. 42/93, dated 17.3.1993 had already been modified by the Collector (Appeals), Trichy as per Order -in -Appeal Nos. 141 & 142/1993, dated 4.11.1993, whereby, in the absence of evidence of the 11,160 units of stamps having been used in the factory of M/s. Chellapandi Match Works, the demand of differential duty of Rs. 11,160/ - raised on S/Shri Veluchamy and Ramasamy had been vacated with the result that the Match Unit became eligible for the concession under Notification No. 22/82 -C.E. The Department has challenged Order -in -Appeal No. 69/94 in the present Appeal No. 2426/1998.

(3.) AFTER considering the submissions, we find that the challenge in Appeal No. E/2426/1998 against Order -in -Appeal No. 69/94 is not sustainable in view of the Larger Bench decision cited by ld. Counsel. Before the Larger Bench was Appeal No. E/1530/2001 which was filed by the Revenue challenging Order -in -Original dated 27.4.2000 passed by the Commissioner of Central Excise (Adjudication), New Delhi. The said Order -in -Original had dropped a demand of over Rs. 8 crores raised in a show -cause notice dated 30.12.1991 issued to M/s. LML Ltd. However, while dropping the demand, the Commissioner had imposed a penalty of Rs. 25,000/ - on the assessee under Rule 173Q. Appeal No. E/1836/2000 was filed by the assessee challenging the imposition of penalty, and the same was allowed by the Tribunal as per order dated 29.6.2000 holding that there could be no penalty when there was no subsisting duty demand. The Central Board of Excise and Customs, subsequently, by an order dated 24.4.2001, under Section 35E(1) of the Central Excise Act, reviewed Order -in -Original dated 27.4.2000 of the Commissioner, pursuant to which Appeal No. E/1530/2001 was filed by the Revenue. The Larger Bench held that, as the Commissioner's order dated 27.4.2000 had already merged with the Tribunal's order dated 29.6.2000 by the time the CBEC passed the review order, the Revenue's Appeal (E/1530/2001) was not maintainable. The above decision was followed by the Tribunal in the case of Bhagwati Ispat Ltd. (supra) involving similar facts.