TaxTMI 
TaxTMI 
2012 (4) TMI 707
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....f M/s. Loknath Prasad Gupta carrying on business in 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 ab....
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....liability of Rs. 18,26,81,905/- towards settlement of the dispute involving alleged duty evasion of Rs. 105,37,71,452/- for the period 1-5-2001 to 31-3-2006. In the application for settlement, 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 ca....
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.... penalty as directed by the order. 10. It is the aforesaid order of the CCESC passed on 29-2-2008 that is under challenge before us in the present writ petition. 11. The learned counsel for the petitioner even at the outset fairly stated that he would not press the challenge to the duty liability before this Court and that he would confine the claim only to the penalty and 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....
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....se notice alleged excise duty evasion of Rs. 34.50 crores, the CCESC had reduced the same to Rs. 16.70 crores and even in such a case the interest was directed to be paid only at 10% per annum. (c) The CCESC has in several cases passed orders directing the levy of token amount of interest and consistent therewith, should have also reduced the interest to be paid by the petitioner to 10% per annum. (d) Full and true disclosure in the settlement application does not necessarily 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 f....
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....ion of Rs. 17,00,00,000/- made by the CCESC it cannot be said that there was no full and true disclosure by the petitioner. 15. As against the above arguments of the learned counsel for the petitioner, Mr. Mohan Parasaran, the learned Additional Solicitor General of India, submitted that the CCESC has not acted arbitrarily but has applied its mind to each and every aspect of the case as required by Section 32F(7) of the Act. According to him, even in the matter of determining the amount of excise duty evaded by the petitioner, the CCESC has supported its conclusion with reference to incontrovertible figures and 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....
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....eaf as recommended by the Direct Taxes Enquiry Committee, popularly known as Wanchoo Committee. However, the CCESC has to settle cases only in accordance with law and the provisions of the Act and it has no power to go beyond those provisions. The power to grant immunity from penalty is conferred upon the CCESC by sub-section (1) of Section 32K of the Act. If it is satisfied that any person who made the settlement application "has co-operated with the settlement commission in the proceedings before it and has made full and true disclosure of his duty liability", it may grant to such person, subject to conditions which it may think fit to 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....
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....SC and the ultimate duty liability determined by the CCESC, was an important and relevant circumstance. The contention of Mr. Bagaria, learned counsel for the petitioner, to the effect that the calculations and working of the CCESC for arriving at the duty liability are based on surmises or conjectures or probabilities and, therefore, it cannot be said that the petitioner did not make a full or true disclosure of the duty liability is only one facet of the case. In this connection, we have referred to paragraphs 41 to 44 of the impugned order. We have gone through the same and record our observations in the following paragraphs. 20. In paragraphs 41 to 44 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 ....
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....oned in para 21 above are not disputed by both the sides. What is disputed is the quantum of moisture content in the finished Khaini. The Bench has observed that if all the ingredients including moisture are added the resultant total comes to 121.8 whereas the weight of the ingredients is in percentage basis which is relatable to 100. Further, the Tobacco content has been shown on dry basis in the test reports whereas the weight percentage of other ingredients include moisture content and moisture has also been calculated separately. The Bench notes that the moisture cannot exist in vacuum and has to be contained in a substance. Further, in case the weight of the moisture 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....
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....anufacture and some part of the same would evaporate. The Bench is also not inclined to believe the version of the applicant that the whole quantity of water put in would evaporate during the process. It also defies logic. Considering that the total weight of all the ingredients that had been put in were 100 Kgs and a quantity of 50 Kgs of water had been added into it, some of which would evaporate during the process of manufacture and the total of all the ingredients including moisture would not be 150 Kgs. In this regard the Bench observes that the said ratio of Tobacco to Khaini which is 62:100 confirms to the observations made above. If the weight of other ingredients is added to quantity of Tobacco, the same comes as under :- Tobacco 62 Lime 06 Ground Nut Oil 10 Snuff 11 Other 01 Total 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 ....
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.... as possible to the actual duty sought to be evaded is palpably and ably demonstrated in the order, if we may say so with respect. 22. We are unable to subscribe to the contention of the learned counsel for the petitioner that the scale of evasion of duty is a totally extraneous reason for not granting full immunity from penalty. The case before us is one where evasion of duty to the extent of Rs. 40,00,00,000/- (approximately) has been worked out. It is a substantial amount and in our opinion the CCESC has rightly kept it in mind while refusing to grant immunity. We are also unable to assent to the proposition that this is a case where only a token penalty ought to have been levied. We are satisfied that the CCESC has exercised its discretion properly, having due regard to all relevant factors. 23. So far as the interest is concerned, 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 ....