Individual appellant cleared of liability in clandestine pan masala manufacturing case due to insufficient evidence

CESTAT Ahmedabad allowed the appeal of the individual appellant in a clandestine removal case. Central Excise officers seized two Pouch Packing Machines manufacturing pan masala containing tobacco from an unregistered factory, along with goods and raw materials worth Rs. 15 lakhs. The tribunal found no tangible evidence connecting the appellant to actual manufacture or establishing him as manufacturer. Despite undisputed facts of seizure and clandestine operations, the tribunal held the appellant could not be treated as manufacturer liable for duty, interest and penalty. The demand order was set aside against the appellant.

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Issues Involved:
1. Determination of the manufacturer liable for payment of duty under Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008.
2. Validity of statements and evidence linking the appellant to the manufacturing activities.
3. Legitimacy of the duty, interest, and penalty imposed on the appellant.

Summary:

1. Determination of the Manufacturer Liable for Duty:
The primary issue was to ascertain who is the manufacturer liable for payment of duty under the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. The case involved the seizure of two Pouch Packing Machines (PPM) found installed in the premises of M/s Laxmi Tobacco Company during a search by Central Excise officers on 19.09.2013. The officers discovered that the machines were used for manufacturing "Pan Masala Containing Tobacco" (Gutkha) without Central Excise Registration and without paying the required duty. The machines and goods valued at Rs. 15,53,700/- were seized under the reasonable belief that they were liable for confiscation.

2. Validity of Statements and Evidence:
The Revenue's case was based on the seizure of the PPMs and associated materials, and statements recorded during the investigation. Statements from Paresh R. Amin, Purshottambhai C. Patel, and Ashwin Purshottambhai Patel suggested a partnership for illicit manufacture of Gutkha. However, no written agreement of partnership or rent agreement was found. Paresh R. Amin retracted his statement, claiming he was falsely implicated. The adjudicating authority did not take the statements on record as per section 9D of the Central Excise Act, 1944, and did not allow cross-examination of the witnesses. Consequently, these statements were excluded from the evidence.

3. Legitimacy of Duty, Interest, and Penalty:
The Tribunal found no tangible or corroborative evidence against Paresh R. Amin to connect him with the actual manufacture of Gutkha. It was established that the premises where the PPMs were found belonged to M/s Laxmi Tobacco Company, owned by Purshottambhai C. Patel. The Tribunal concluded that the owner of the premises could not escape responsibility for the manufacturing activities and the liability to pay duty. However, since there was no partnership deed, rent agreement, or evidence of Paresh R. Amin's involvement in the manufacturing activities, the Tribunal held that he could not be considered the manufacturer liable for duty, interest, and penalty.

Conclusion:
The impugned order confirming the demand of duty with interest and penalty against Paresh R. Amin was not sustainable. The Tribunal set aside the order-in-original dated 30.09.2014 and allowed the appeal of Paresh R. Amin, granting consequential relief as per the law.

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