N.K. Bajpai, Member (T)

1. This is an appeal against the orders of the Additional Collector of Central Excise, Vadodara demanding duty of excise under Section 11A(1) of the Central Excises & Salt Act, 1944 on 564.5 dozen lipsticks valued at Rs. 54,192/- removed without payment of duty by the appellants during the period from 1-4-83 to 4-5-83 and imposing penalty of Rs. 50,000/- on them under Rule 173 Q(l) of the Central Excise Rules.

2. Briefly stated, the facts are that during a visit to the appellants' premises on 13-8-1983, the Preventive Officers of Vadodara Central Excise Collectorate Headquarters noticed that the appellants were engaged in the manufacture of Lipsticks falling under Item 14F of the erstwhile Central Excise Tariff. They were also manufacturing D-O-Dur Air Freshener falling under Item 68 on job work basis on behalf of M/s. Shingar Cosmetics Pvt. Ltd., Vapi. It came to light that M/s. Topiwala Trust were the proprietors of the appellants as well as of M/s. Ideal Cosmetics Corporation which was also situated in GIDC, Vapi near the Gunjan Cinema. The lipsticks as well as Air Fresheners manufactured in the factory of the appellants were sold through a distributor -M/s. Sharp Distributors. It was also found that M/s. Topiwala Trust were getting nail polishes falling under Tariff Item 68 manufactured on loan licence basis in M/s. Shingar Cosmetics Pvt. Ltd. and selling them through the same distributors but the invoices were raised in the name of M/s. Ideal Cosmetics Corporation.

3. It is necessary to discuss the Notifications applicable in some detail. Notification 38/83-C.E., dated 1-3-1983 which came into force with effect from 1-4-1983 initially exempted first clearances of cosmetics and toilet preparations falling under Item 14F (hereinafter referred to as the said goods) for home consumption by or on behalf of a manufacturer from one or more factories upto an aggregate value not exceeding Rs. 2.5 lakhs cleared on or after the 1st day of April in any financial year from the whole of the duty of excise. This exemption was subject to the following conditions :-

(a) the aggregate value of the first clearances of the said goods from any factory by or on behalf of one or more manufacturers at nil rate under this notification shall not exceed Rs. 2.5/- lakhs in any financial year.

(b) the aggregate value of clearances of all excisable goods for home consumption .