M/S. Duncans Industries Ltd., Calcutta vs Commissioner Of Central Excise, New ...

M/s National Tobacco Company Limited Agarpara, a manufacturer of cigarettes falling under erstwhile Central Excise Tariff Item No. 4 II(2), and holder of Central Excise Licence L-4 No. 3/84 for the manufacture of cigarettes, was merged with M/s Mirpara Tea Company effective from 1.4.1977. Consequent to this, it became a Division of newly formed M/s. Duncans Agro Industries Limited, Calcutta. Thereupon, Central Excise Licence L-4 No. 1-Cig/I/V/78 dated 18.2.1978 for the manufacture of cigarettes was issued to M/s. National Tobacco Company.

In April 1984, M/s. National Tobacco Company was de-merged from M/s. Duncans Agro Industries Limited and was made a wholly owned subsidiary of M/s. Duncans Agro Industries Limited in the name and style of M/s. New Tobacco Company. M/s. Duncans Agro Industries Limited, is the respondent in the two appeals filed by the Revenue and the appellant in Civil Appeal No. 754 of 2001 and would be referred to as the assessee.

As a result of demerger, a new Central Excise Licence No. L-4 No.1/Cig/IV/Khar/85 dated 9.3.1985 was issued to M/s. New Tobacco Company Limited for the manufacture of cigarettes.

As there was some dispute as to whether excise was leviable on manufacturing cost plus manufacturing profit and post manufacturing cost and profits arising from post manufacturing operations, the provisional assessments were made from July, 1973 to February, 1983. Final assessments were to be made later. On 8.5.1984, Assistant Collector of Central Excise, Calcutta issued a show-cause notice to the assessee for the period July, 1973 to February, 1983 calling upon the assessee to show cause as to why:

Collector of Central Excise, Delhi took up for hearing the proceedings arising from the show-cause notice dated 1.10.1986 and disposed of the same on 27.3.1991 with the interim directions, which are as under:

Another fact which needs to be noticed is that after the Assistant Collector Central Excise, Kharda Division, Calcutta finalized the assessment order dated 3.12.1996, the Assistant Collector Central Excise, issued show cause notice dated 27.5.1998 stating therein that the order in original dated 12.12.1997 the extra amounts realized as "additional consideration" was not taken into consideration and accordingly a demand of Rs. 21.58 crores was made on the assessee. In the meantime, Kar Vivad Samadhan Scheme, 1998 (for short "the KVS Scheme") was introduced by Finance (No. 2) Act, 1998. Pursuant to the said scheme the assessee filed a declaration under Section 89 of the Finance (No. 2) Act, 1998 in respect of the KVS Scheme. An order under the KVS Scheme was passed in pursuance to which the assessee paid the demand raised under the said scheme.

The assessee being aggrieved filed an appeal before the Appellate Tribunal at New Delhi, which was disposed of on 9.12.1997. The assessee challenged the finding/observation made by the Collector of Central Excise, Delhi that "thereafter this show cause notice will be taken up for adjudication" on the ground that after finalizing of the assessment there would be nothing left for the Collector of Central Excise, Delhi for consideration or decision and therefore, this sentence in the order should be set aside. The appeal was disposed of by observing:

For the reasons stated above, we do not find any substance in the appeals filed by the Revenue. Accordingly, Civil Appeal Nos. 4075-4076 of 2001 are dismissed and the order passed by the Tribunal in this respect is affirmed.

In the present case there is not even an allegation much less finding by the department that there has been any clandestine removal of goods without assessment. As such the penalty is liable to be set aside. The matter having been settled in the Kar Vivad Samadan Scheme, 1998 the question of determination of the duty payable or levy of penalty did not arise. In our view, the Tribunal clearly erred in upholding the levy of penalty. Accordingly, Civil Appeal No. 754 of 2001 filed by the assessee is accepted and the penalty levied is ordered to be deleted.

These two sets of appeals are disposed of in the above terms leaving the parties to bear their own costs.