Per S.S. Sekhon :

M/s. Andhra Steel Corporation Ltd., Respondents herein, referred to as the 'Assessee', manufacture Excisable goods falling under Chapter 72. They were also undertaking job work under erstwhile Rule 57F (2) of Central Excise Rules 1944. As it appears from the record, during the period from April 94 to Dec 94 they had availed Modvat credit on the input "Liquid Oxygen" and had utilized the same for the manufacture of goods on job work basis. The goods so manufactured were cleared without payment of duty. Erstwhile Rule 57C of Central Excise Rules, 1944 provided that no credit of the specified duty paid on the inputs used in the manufacture of a final product shall be allowed if the final product is exempt from the whole of the duty of excise or is chargeable to Nil rate of duty. Besides Rule 57A provided that the inputs in respect of which the credit had been allowed may be utilized in or in relation to the manufacture of final products for which such inputs had been brought in to the factory.

2. The credit availed by the assessee on 'Liquid Oxygen' utilized in the manufacture of the goods on job works basis cleared without payment of duty, appeared to be not in conformity with the provisions under Rule 57 (C) and 57 (A) of Central Excise Rules, 1944 hence a Show Cause Notice bearing O.C. No. 130/96 dated 31.01.96 was issued by the Range Officer for recovery of the irregular credit so availed amounting to Rs. 1,74,382/- during the period 7/94 to 12/94. The said Show Cause Notice was withdrawn by the Assistant Commissioner of Central Excise. Another Show Cause Notice was issued by the Deputy Commissioner of Central Excise, bearing C.No. V/72/15/21/99 dated 07.04.99 which covered the period from 4/94 to 12/94 and which proposed recovery of the irregular Modvat amounting to Rs. 3,86,485/-. This Show Cause Notice was adjudicated by the Additional Commissioner of Central Excise vide OIO No. 21/99 dated 17/27.08.99 which disallowed the credit and confirmed the demand of Rs. 3,86,485/- under Rule 571 (2) of Central Excise Rules, 1944 besides imposing a penalty of Rs. 50,000/-. Under Rule 173Q.

3. Aggrieved by the said Order in Original, the assessee went on appeal before the Commissioner of Central Excise (Appeals) who vide his OIA No. 388/2001 dated 24.01.2001 has set aside the Order in Original. He held that when the Show Cause Notice dated 30.01.96 issued by the Superintendent of Central Excise, was withdrawn by the adjudicating authority viz. Assistant Commissioner, issue of fresh Show Cause Notice invoking larger period of limitation and confirmation of the same by the Additional Commissioner is unsustainable. There was no suppression or misdeclaration. Once the Department had dropped the proceedings, then the Additional Commissioner was not legally entitled to readjudicate the case without following the Appellate Provisions as laid down in Central Excise Act, 1944. The learned Commissioner (A) has relied on CEGAT, New Delhi's judgment in the case of M/s. National Industries Vs. CCE Nagpur- 1997 (94) ELT 92 (T).

4. Aggrieved by the said OIA, the Revenue has filed this appeal on the following grounds:

(a) The learned Commissioner of Central Excise (Appeals) has erred in allowing the assessee's appeal merely on the technical ground, that when the first Show Cause Notice issued by the Superintendent of Central Excise was withdrawn by the Assistant Commissioner, the Additional Commissioner is not legally entitled to re-adjudicate the case by issue of fresh Show Cause Notice without following appellate provisions as laid down in the Act. The learned Commissioner (Appeals) has erred by failing to take into cognizance that the SCN issued by the Superintendent of Central Excise in this case was not withdrawn by the Assistant Commissioner on merits but was withdrawn only because the same issue and the same period were covered under the Show Cause Notice issued by the Deputy Commissioner of Central Excise.

(b) The learned