Confiscation upheld for 1.87 million Gutkha pouches and packaging machines in clandestine manufacturing operation

CESTAT Bangalore upheld confiscation of 90 bundles containing 1,872,720 Gutkha pouches, three packaging machines, and related materials seized during clandestine removal operations. The appellant rented premises for manufacturing Gutkha without paying duty. Despite statements from laborers and lorry driver establishing manufacturing activity, CESTAT set aside the demand for duty, interest, and penalty imposed on appellant due to insufficient evidence. The tribunal modified the order to maintain confiscation while removing financial penalties, following precedents in similar tobacco manufacturing cases.

---

---

Issues Involved:

1. Whether the 90 bundles containing 1,872,720 Gutkha pouches and related materials, three packaging machines seized by the Police/Central Excise Department are liable for confiscation.
2. Whether the duty demanded from the appellant with interest and penalty is sustainable.

Issue-wise Detailed Analysis:

1. Confiscation of Seized Goods and Machines:

The case involves the seizure of Gutkha pouches branded as "Raj Kolhapuri," along with related materials, three packaging machines, and a lorry by the Banavasi Police on 03.11.2009, which were later handed over to the Central Excise Department. The investigation revealed that the Gutkha and machines were seized from a rented premises, where Gutkha was manufactured without payment of duty. The appellant denied renting the premises or manufacturing the Gutkha, despite statements from the lorry driver and laborers indicating otherwise. The Tribunal found that the duty-paid character of the Gutkha was not established, and based on the evidence, including the retrieval of machines from the premises, the goods and machines were liable for confiscation. The Tribunal upheld the confiscation order by the Commissioner, finding no need for interference.

2. Sustainability of Duty Demand, Interest, and Penalty:

The Commissioner had confirmed the duty demand based on the assumption that the machines were installed and used for manufacturing Gutkha from the date of electricity connection to the premises, i.e., 29.03.2007. However, the Tribunal found no investigation was conducted to verify the procurement of raw materials, electricity consumption, or transportation details. The Tribunal noted the absence of evidence showing the premises were leased to the appellant from 01.07.2008 or that manufacturing was carried out by another person. The Tribunal referenced similar cases where demands were not sustained due to lack of evidence. Consequently, the Tribunal set aside the duty demand, interest, and penalty imposed on the appellant, as the demand was based solely on the installation date of the electricity meter without supporting evidence.

Conclusion:

The Tribunal modified the impugned order by upholding the confiscation of the seized goods, machines, and related materials but set aside the confirmation of the duty demand, interest, and penalty on the appellant. The appeal was disposed of accordingly.

---