D.N. Panda, Member (J) - (1.)THIS batch of three appeals were filed by Revenue against order dated 12.11.2007 passed by learned Commissioner, Dibrugarh dropping the charges levelled by show cause notice dated 13.9.2006 against the Respondents M/s. Khushi Aromatics and M/s Kothari Products Ltd. finding that these two Respondents were not related persons in terms of Section 4(3) of Central Excise Act, 1944 (hereinafter referred to as 'the Act') and the proceeding was time barred without the extended period being invokable in absence of essential ingredients of proviso to Section 11A of the said Act. He also dropped the charges made by the Show Cause Notice against the Respondent M/s Kothari Products Ltd. and Sri Mitesh Kothari. A common order of adjudication was passed by the learned Adjudicating Authority to deal with the following allegations against the Respondents:
(i) The respondent M/s Khushi Aromatics having three partners were all related to each other (See: para 19 at page 13 of order in original) and members of Kothari family, were the promoters and major share holders of the Respondent Kothari Products Ltd., engaged in the manufacture of odoriferous substance and mixtures. It had unlawfully availed benefit under Exemption Notification No. 32/99 dated 8.7.99 and claimed refund of duty to the extent not set off against cenvat credit.
(ii) The respondent Kothari Products Ltd was engaged in manufacture of Pan Masala and Pan masala containing tobacco at its manufacturing unit at Jorhat had purchased raw materials from the Respondent M/s Khushi Aromatics and evaded Central Excise duty resorting to mis -declaration, mis -representation and wilful suppression of facts paying excess duty of excise on the input so purchased at a higher value due to over -valuation of such goods by that Respondent to enable M/s Kothari Products to avail excess Cenvat credit and the Respondent was not eligible for exemption under Notification No. 32/99 -CE dated 8.7.1999 in view of no exemption granted to Pan masala containing tobacco falling under Chapter 24 of the Tariff.
(iii) The Respondent M/s Khusi Aromatics had mainly manufactured perfumes/flavours for use in the manufacture of Pan masala and Pan masala containing tobacco and cleared the same to M/s Kothari Products Ltd Jorhat. The mixture of odoriferous substances and mixture of the particular variety/brand/trade names so cleared by that Respondent to M/s Kothari Products Ltd were not cleared to any other party. The declared assessable values of the products cleared to M/s Kothari Products Ltd were more than two hundred percent of the cost of production of the products with the exception in case of two products, wherein the assessable value is less than the cost of production. The Respondent had availed refund of the amount of duty paid by it to the extent not set off against Cenvat Credit and had also availed benefit of exemption Notification No. 32/99 dated 8.7.1999.
(iv) The Respondent M/s Khusi Aromatics had resorted to exaggeration of assessable value of the products cleared by it to M/s Kothari Products Ltd Jorhat and paid excess duty of excise than the duty as determinable under Section 4 of the Central Excise Act, 1944 read with Rule 8 and Rule 9 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 and availed refund of the excess duty of Excise under exemption Notification No. 32/99 -CE dated 8.7.1999 on one hand and passed excess and irregular Cenvat Credit to M/s Kothari Products Ltd on the other hand.
(v) The Respondent M/s Khushi Aromatics had evaded excise duty resorting to under valuation of two products namely Compound No. 956 -N and Compound No. 1978 -N, Cleared vide invoice Nos. 50 and 51 both dated 22.3.2005 to M/s Kothari Products Ltd Jorhat declaring assessable value less than the cost of the product. Total amount of Central Excise duty and Education Cess evaded by resorting to undervaluation of the two items was Rs. 28,16,640/ - and Rs. 56,333/ - respectively.
(vi) The Respondent M/s Khushi Aromatics had paid total amount of Rs. 4,05,94,887/ - as excess duty of Central Excise under Section 3 of the Central Excise Act, 1944 read with Section 4 of the Central Excise Act, 1944 as duty of Excise on the clearance effected by it to the Respondent M/s Kothari Products Ltd. during the period from 26.12.2002 to 26.2.2005 and availed refund of the excess duty of excise under the exemption Notification No. 32/99 -CE dated 8.7.1999 to facilitate availment of excess Cenvat Credit by their related unit, whose products were not eligible for the exemption by way of refund under Notification No. 32/99 -CE dated 8.7.1999 as their product Pan Masala containing tobacco is not a specified item for exemption under the said Notification by resorting to conscious and deliberate suppression and misrepresentation of facts.
(vii) The Respondent M/s Khusi Aromatics, Jorhat (Notice No. 1) had evaded Central Excise duty amounting to Rs. 4,05,94,887/ - (Rupees four crore five lakh ninety four thousand eight hundred eight seven) availing wrong refund by fraudulent misuse of exemption Notification No. 32/99 -CE dated 8.7.1999 and Central Excise duty of Rs. 28,16,640/ - (Rupees twenty eight lakh sixteen thousand six hundred forty) and Rs. 56,333/ - (Rupees fifty six thousand three hundred thirty three) by undervaluation of excisable goods, in violation of the following Rules: 1) Rule 6 of Central Excise Rules, 2002 inasmuch as the duty was paid without correct assessment; 2) Rule 12 of Central Excise Rules, 2002 inasmuch as wrong and incorrect returns were filed; 3) Rule 8 read with Rule 9 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2002 read with Section 4 of Act, 1944 inasmuch as excess amount was paid as duty of excise by resorting to gross overvaluation of the goods and also by way of undervaluation in respect of excisable goods cleared under cover of invoice Nos. 50 and 51 both dated 22.3.2005.
(viii) The Respondent M/s Kothari Products Ltd had availed cenvat credit on all the invoices issued by the Respondent M/s Khusi Aromatics, evident from the copies of Cenvat Credit Account submitted by them. The said Respondent had also availed wrong and irregular Cenvat credit on the excess duty of excise paid by M/s Khushi Aromatics in violation of Rule 3 of Cenvat Credit Rules, 2002 inasmuch as, the excess duty of excise calculated on the assessable value determined under Section 4 of the Act, 1944 read with Rule 8 and 9 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2002, not construed as "duty of excise" leviable under Central Excise Act' as envisaged in Rule 3 of Cenvat Credit Rules, 2002, hence, not eligible for Cenvat credit.
(ix) The Respondent Shri Mitesh Kothari, Partner of M/s Khushi Aromatics and Executive Director of M/s Kothari Products Ltd was consciously and deliberately involved in evasion of duty by way of misuse of Notification No. 32/99 -CE dated 8.7.1999 at the end of M/s Khusi Aromatics and by wrong and irregular availment of Cenvat credit at the end of M/s Kothari Products Ltd. He suppressed the relationship between M/s Khusi Aromatics from the jurisdictional Central Excise officer and exaggerated the assessable value of the products cleared by them to M/s Kothari Products Ltd and paid excess duty of excise and availed refund of the excess duty of excise under Notification No. 32/99 -CE dated 8.7.1999.

(2.)HEARING the Respondents and Considering their reply as well as submissions, learned Adjudicating Authority framed following issues in para B at page 26 and 27 of order of adjudication which read as under:
a) Whether M/s Khushi Aromatic and M/s Kothari Products Ltd are related concerned under the Act, 1944. b) Whether the Show Cause Notice which relates to the period from 26.12.2002 to 26.2.2005 is time barred and extended period of five years is invokable under Section 11A of the Act. c) Whether Rule 9 and 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000 are applicable in determination of the value and duty payable in respect of the goods sold to M/s Kothari Products Ltd by M/s Khushi Aromatic.

d) Whether refund of Rs. 4,05,94,887/ - refunded to M/s Khushi Aromatics under Notification No. 32/99 -CE dated 8.7.1999 is excess or not ? e) Whether or not there is evasion of duty in the matter of short payment of Central excise duty by way of under valuation of the goods 'sold' against invoice No. 50 and 51 issued to M/s Kothari Products Ltd. as the notice is availing exemption under Notification No. 32/99 -CE dated 8.7.1999. f) Whether claim under Section 11 -D as envisaged in the show cause notice is enforceable or not. g) Whether the Cenvat credit taken by M/s Kothari Products Ltd against the goods sold by M/s Khushi Aromatics has been availed wrongly by M/s Kothari Products Ltd.

h) Whether penalty is imposable on Shri Mitesh Kothari under Rule 26 of CEX Rules, 2002 for personal involvement and whether he suppressed the relationship between M/s Khushi Aromatics and M/s Kothari Products Ltd.

(3.)THE issues framed as above were decided in the adjudication in the following manner:
a) Two concerns i.e. M/s Khusi Aromatics and M/s Kothari Products Ltd were held to be not related in terms of Section 4(3)(b) of Central Excise Act, 1944. b) Proviso to Section 11A(1) of the Act was held to be not applicable to all the cases for which extended period was not invokable for no wilful mis -statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty. Accordingly, show cause notice was time barred.

c) Show cause notice was held to be time barred and the two firms were held to be not related and the value of the goods was required to be determined under Section 4(1)(a) of the Act. Charges brought against the Respondent M/s Khushi Aromatics were held to be un -sustainable. d) There was no 'excess' refund granted to the Respondent M/s Khushi Aromatics.
e) There was revenue neutrality because the Respondent M/s Khushi Aromatics was availing exemption under Notification No. 32/99 -CE dated 8.7.1999. Under the said Notification whatever duty paid by the assessee through PLA was refunded back. Hence in any case there was no loss of Revenue made. There was also no evasion of duty. It was thus revenue neutral. Accordingly, the charges brought by the show cause notice were held to be unfounded.
f) Both the business concerns were held to be not related or deemed related persons. Goods were required to be valued under Section 4(1)(a) of the Act, 1944 and the sole consideration for the sale was transaction value. Therefore, the allegation brought against the Respondent M/s Khushi Aromatics that Central Excise duty collected in excess and were deposited in Government exchequer is not sustainable because whatever the duty was charged was deposited in the Government account.

g) There was no evidence to prove that Sri Mithesh Kothari was personally involved or had suppressed the relationship between M/s Khushi Aromatics and M/s Kothari Products Ltd, if any, with an intent to evade Central Excise duty. Therefore, the charge brought against Sri Mitesh Kothari was untenable.

Being aggrieved by aforesaid decisions of the learned Adjudicating Authority, Revenue came in appeal in terms of review order passed on 15.2.2008 by Sh. H.K. Saran, learned Chief Commissioner of Central Excise of Shillong Zone and Shri Amar Singh, learned Chief Commissioner of Central Excise Ranchi Zone holding that the order of adjudication dated 12.11.07 was neither legal nor proper in terms of the reasons stated in para 6.1 to 6.8 of review order and raised following questions:

(i) Whether the Commissioner's order holding that M/s Khushi Aromatics and M/s Kothari products Ltd. are not inter connected undertakings and there is no mutuality of interest between them, is legally proper and correct in the light of the evidence on record.

(ii) Whether the evidence on record justifies the Commissioner's findings that M/s Khushi Aromatics and M/s Kothari Products Ltd., are not related within the meaning of Section 4 of Central Excise Act 1944.

(iii) Whether the evidence on record justifies that Rule 9 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000 is not applicable for determination of assessable value of the clearance by M/s Khushi Aromatics to M/s Kothari Products Ltd.

(iv) Whether the Commissioner's order No. 03/COMMR/ADJ/CE/DIB dt. 12.11.07 dropping the demands raised and actions proposed in the show cause notice under F. No. 32/KZU/KOL/Gr.D/SRU/06/6819 dt. 13.9.2006 is legal and proper.