Court allows appeal, finding duty demands unsustainable. Interest and penalty also not upheld. Appeal allowed with consequential relief.

The court allowed the appeal filed by the Appellant, holding that the demands confirmed in the impugned order were not sustainable. As the duty demand was not sustainable, the associated interest and penalty were also not sustainable. The appeal was allowed with consequential relief, if any, as per law.

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Issues Involved:
1. Procedure under Section 9D of the Central Excise Act, 1944.
2. Condition and usage of packing machines.
3. Applicability of Rule 18(2) of the CTPM Rules.
4. Imposition of penalty under Rule 18(1) of the CTPM Rules read with Section 11 AC of the Central Excise Act, 1944.

Summary:

1. Procedure under Section 9D of the Central Excise Act, 1944:
The court examined whether the procedure mandated under Section 9D was followed. The statements of Shri Ajay Kumar, Shri Bishnu Charan Ghadei, Shri Ratikanta Ghadei, and Shri Jhasaketan Bhoi, recorded on 02.08.2010, were retracted on 04.08.2010. The court found that these retracted statements have no evidentiary value in the absence of corroborative evidence and that the procedure set out in Section 9D was not followed. The adjudicating authority did not allow the cross-examination of the panchas and other witnesses, which was necessary given the retraction of statements. Therefore, the court held that the statements recorded could not be relied upon to confirm the demands.

2. Condition and usage of packing machines:
The court observed that the evidence did not indicate that the four packing machines found in the unregistered premises were in working condition and used for manufacturing Chewing Tobacco. The investigation did not bring any corroborative evidence such as purchase of raw material, packing material, or excess consumption of power. The court held that mere presence of the machines, without other supporting evidence, was insufficient to establish manufacture and clandestine clearance of chewing tobacco.

3. Applicability of Rule 18(2) of the CTPM Rules:
The court noted that Rule 18(2) would not apply if it was established that the packing machines were not capable of being used in the manufacture of Chewing Tobacco. The investigation relied solely on statements and failed to provide other evidence to establish that the machines were operational. The court held that the provisions of Rule 18(2) could not be invoked to demand duty for the period from April 2010 to August 2010.

4. Imposition of penalty under Rule 18(1) of the CTPM Rules read with Section 11 AC of the Central Excise Act, 1944:
The court found that penalty provisions under Rule 18(1) read with Section 11AC were not applicable as the investigation did not establish manufacture and clandestine clearance of Chewing Tobacco. Consequently, the penalty imposed on the Appellant was set aside.

Conclusion:
The court allowed the appeal filed by the Appellant, holding that the demands confirmed in the impugned order were not sustainable. As the duty demand was not sustainable, the associated interest and penalty were also not sustainable. The appeal was allowed with consequential relief, if any, as per law.

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