TaxTMI 
TaxTMI 
2012 (4) TMI 707
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....n the manufacture of "Khaini" (chewing tobacco) under the brand name "Raja" and "Champion". He owns two factories, one at Delhi and another at Kolkata. The business is being carried on by him since 1987. The factories are registered under the relevant provisions of the Central Excise Act, 1944 (hereinafter referred to as 'Act'). 3. The branded chewing tobacco which is also known colloquially as "Khaini" is exigible to Central Excise duty under the Act read with Chapter 24 of the First Schedule to the Central Excise Tariff Act, 1985. In the present writ petition, the dispute centres around the manufacture of "Raja" brand Khaini and there is no dispute regarding "Champion" brand. In order to manufacture Khaini, the following raw materials are required :- 1. Raw Tobacco 900.0 Kgs. 2. Snuff Powder 137.5 Kgs. 3. Refined Groundnut Oil 125.0 Kgs. 4. Lime 75.0 Kgs. 5. Other Chemicals (a) Kewra Water 1.5 Kgs. (b) Menthol 2.0 Kgs. (c) Black Pepper 9.0 Kgs. Grand Total 1250.0 Kgs. 4. In addition to the above, packing materials are also required which are called "laminates". The Khaini is packed in pouches of 5 gm. and 9 gm. each. 5. The officers of t....
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....ent, he explained that the admitted duty liability related to Khaini cleared from his factory without payment of duty and that the duty to this extent (i.e., Rs. 18,26,81,905/-) was supported by documents, evidence and statements collected by the Central Excise authorities. As regards the balance of duty alleged to have been evaded by the petitioner as per the show cause notice, the petitioner sought to explain what he considered to be the correct position before the CCESC. It was inter alia explained that the excise duty demand over and above the aforesaid amount of Rs. 18,26,81,905/- was based on certain allegations regarding receipt of raw tobacco and non-addition of water in the weight of the final product and it was submitted that these allegations were based purely on suspicion and surmise and were not true. It was pointed out that the allegation of duty evasion over and above the aforesaid amount by the Central Excise authorities was on theoretical assumptions and calculations without any evidence to show purchase of raw material that would be required for the manufacture of the Khaini. The petitioner stated further that out of the additional duty liability admitted in the a....
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....interest directed to be paid by the petitioner by the order of the CCESC dated 29-2-2008. In its order under challenge, so far as the interest and penalty are concerned, the CCESC directed as under :- "Interest :- Since the main applicants did not pay the duty when due, they have taken financial accommodation at the cost of exchequer. Having regard to facts and circumstances of this case, Bench is not inclined to give waiver from interest. Bench orders payment of interest at the rate(s) applicable during relevant period. Duty evaded has been calculated financial yearwise in the show cause notice. Hence interest for the duty evaded in a financial year may be calculated with effect from 1st April of the financial year following that financial year. Revenue is directed to calculate the interest as per this order and inform the main applicant about the same within 15 days of receipt of this order, whereupon the main applicant shall pay the amount of interest within 15 days of the receipt of such intimation. Penalty :- Keeping in view of the scale of evasion and other circumstances of the case, the Bench is not inclined to grant full waiver from penalty. However, keeping in view the c....
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.... mean that the applicant before the CCESC should declare the entire duty mentioned in the show cause notice. Though the petitioner is not challenging the duty liability determined payable by the petitioner, that is only because the petitioner is desirous of putting a quietus to the matter. (e) There are contradictions and weaknesses in the order of the CCESC determining the duty/liability at Rs. 58,09,79,897/- as against the admitted liability of Rs. 18,26,81,905/-. (f) As per Section 32K of the Act as it existed during the relevant time, the CCESC had the power to grant immunity from interest either fully or partly. It was the consistent practice to grant immunity from interest in full or in excess of 10% per annum. In the petitioner's case the CCESC has directed payment of interest at the applicable rates and on this basis the Central Excise authorities have quantified the interest by applying the rates of 24%, 18% and 13% for different periods. The CCESC has thus discriminated between persons similarly situated which is in violation of Article 14 of the Constitution of India. 14. The arguments of Mr. Bagaria, learned counsel for the petitioner with regard to the penalty ....
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.... percentage and calculations as is evident from paragraphs 26 to 30 and 41 to 44 of its order. He contended that the claim of the learned counsel for the petitioner that there were several contradictions and weaknesses in the method adopted by the CCESC in arriving at the excise duty evaded by the petitioner is untenable. The non-waiver of any part of the penalty Rs. 40,00,00,000/- or the interest liable to be paid by the petitioner was a well-considered decision taking into account all aspects of the case and it cannot be said that the CCESC has exercised its discretion improperly or non-judicially. 16. We have carefully considered the rival contentions. Judicial review of the order of the CCESC has its own parameters and limitations. We can only examine the decision-making process but not the actual decision arrived at by the CCESC, unless the decision is irrational, illegal or perverse. This position is well settled and reference may only be made to the judgment of S.B. Sinha, J. speaking for the Supreme Court in State of U.P. and Anr. v. Johrimal - (2004) 4 SCC 714. The following observations sum up the entire legal position :- "It is well-settled that while exercising t....
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....o impose, immunity from the imposition of any penalty, fine and interest under the Act with respect to the case covered by the settlement. Sub-section (2) provides for withdrawal of immunity if it turns out that the terms of the order of settlement regarding payment of the duty are not complied with. Sub-section (3) also provides for withdrawal of the immunity if the CCESC is satisfied that it was obtained by concealment of material particulars or by giving false evidence. 18. In view of the settled legal position, we are to confine ourselves to examining the decision making process followed by the CCESC in the present case. As regards the penalty of Rs. 40,00,00,000/- imposed on the petitioner, we are unable to find fault with the decision-making process adopted by the CCESC. There may be some merit in the argument of the learned counsel for the petitioner that full and true disclosure may not necessarily mean extent of the excise duty liability as stated in the show cause notice. However, one has to keep in mind the entire conspectus of facts. In the present case, the CCESC has observed in paragraph 48 of its order as under :- "48. Before finally settling the case, Be....
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....of the impugned order, the CCESC has referred to the fact that the dispute was not with regard to the total weight of inputs that are required to manufacture Khaini and the dispute was only about the weight of the water that was to be added. The Central Excise authorities had relied upon certain test reports to ascertain the water contained in the Khaini, but the CCESC rejected them as not reliable and this fact is recorded in paragraph 35 of the impugned order. The calculations made by the Central Excise authorities were commented upon and it was observed that the formula adopted by them did not account for any evaporation during manufacturing process. Having rejected the test reports relied upon by the Central Excise authorities and having disputed the accuracy of the calculations made by them, the CCESC proceeded to make its own calculations. It is this exercise which is reflected in paragraphs 41 to 44 of the impugned order. It is not necessary to examine in detail the calculations made by the CCESC in these paragraphs. Suffice to note that these calculations, as rightly pointed out by the learned Additional Solicitor General, show application of mind to the claims put forth by....
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....isture is to be excluded, it is difficult to exclude weight of 1 ingredient individually. Either the moisture is extracted from all the products or none at all. Keeping in view the above, Bench finds that in order to arrive at actual weight of the Tobacco which has been shown on the dry basis in the test reports, the most appropriate method would be to segregate the percentage of moisture content altogether and then arrive at some conclusion. The Bench further notes that in addition to Tobacco Snuff being the products of the same agricultural product would also be forming part of the Tobacco percentage shown in the test reports. Thus, the weight of the Snuff in the ratio in which the same have been put, in needs to be subtracted from the quantity of Raw Tobacco as shown in the test reports. Further, in order to arrive at the total Tobacco content in its natural state in which the same had been put in the manufactured Khaini, the same percentage that was inherent in the Raw Tobacco needs to be added. Keeping in view the above parameters, the Bench finds that simply to calculate the correct percentage of Tobacco in the finished Khaini on the basis of the total of the product being 10....
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....90 Thus in a quantity of 100 Kgs, 10 Kgs is water. If inherent moisture of all the other ingredients, which comes to about 8% is added to it, the total water contents become 18 Kgs. It is seen that the Ground Nut Oil is also liquid which should also for part of the liquid content. That makes all the liquid contents to about 28% which is quite nearer to the figure of 33% moisture shown in the test report and appears to be very reasonable. In view of above discussions, the Bench is of the view that in the circumstances of the case where there is controversies about test reports and the two sides did not agree to a fresh test, the finding duly verified from different angles would be the best possible and most accurate formula to reach the total amount of production of Khaini on the basis of the quantity of Raw Tobacco. Bench accordingly, determines that 62 Kgs of Raw Tobacco would result in the manufacture of 100 Kgs of Khaini in applicant's case. Final production figures of Khaini are therefore to be worked accordingly." These observations of the CCESC more than adequately demonstrate the application of mind and the efforts of the CCESC to arrive at an estimate of the excise duty ....
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....cerned, the case of the petitioner appears to us to stand on a better footing. It may be made clear at the outset that the learned counsel for the petitioner has agitated only the rate of interest. He has contended that in several other cases the CCESC has charged interest only at the rate of 10% whereas in the petitioner's case it has ordered payment of interest at the rates applicable during the relevant period. It is stated that for the relevant period three different rates were applicable - 24%, 18% and 13% It is submitted that despite different rates of interest prescribed by the statute for the relevant period, the CCESC in several cases has either granted full immunity from payment of interest or as restricted the rate of interest to 10% for the entire period. A list of such cases was given. The submission is that there is no ground made out for discriminating against the petitioner. It is pointed out further that the total interest liability has been calculated by the Central Excise department at Rs. 25.87 crores out of which the petitioner has paid Rs. 13,00,00,000/-. Reliance is placed on the judgment of the Bombay High Court in West Coast Ingots Pvt. Ltd. v. UOI, 2008 (2....