TaxTMI 
TaxTMI 
2017 (2) TMI 573
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.... 8 No. Tobacco and Kashi Chhap Tobacco and Shri Dharmpal was the proprietor. M/s Milan Products, Mauranipur, District-Jhansi was registered with Central Excise Department and were manufacturing branded manufactured Tobacco bearing brand name- Maa Chhap 8 No.Tobacco , Bharat Chhap 8 No. Tobacco , Kashi & Sagar Brand Tobacco , and Mr. Brijesh Kumar Sahu was its proprietor. M/s Madhur and Company, Mauranipur, District- Jhansi, was registered with Central Excise Department and was manufacturing branded manufactured Tobacco bearing brand-names Tota Chhap 8 No. Tobacco , Shree Chhap 8 No. Tobacco , Guruji & Kashi brand Tobacco , and Shri Govind Das was its proprietor. 2.1 The factory premises of M/s Milan & Sons were searched on 27.02.2010. The officers conducting search, came to know that Shri Sita Ram Billaiya was owner of the Brands Hathi Chhap 8 No. Tobacco . On 27.02.2010, statement of Shri Sitaram Billaiya was recorded, wherein he stated that he was registered owner of the Trade Mark Hathi and he had given Hathi brand for used by M/s Milan and Company and in lieu of the same, he was receiving some payments from M/s Milan & Company. The factory premises of M/s Milan Products was al....
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....Central Excise Officers on 27.02.2010 that M/s Milan Products, M/s Milan & Sons and M/s Madhur & Co. were engaged in the manufacture of Tota, Maa & Hathi brand of Chewing Tobacco and Shri Hari Shankar Billaiya, Shri Sita Ram Billaiya, Shri Brijesh Sahu were partners in Milan & Co. He further deposed that the records resumed at his residence on 27.02.2010, were that of Milan group of Company. On further questioning Shri Jawahar Lal Modi stated that pages 1-103 of Katcha spiral Note Book recovered from his residence contains the details of raw materials received in Milan Group of Company like Zarda Tobacco, beetle nut, bags, film purchase in cash. He further deposed that there were three partners in the Milan Group of Co. and they were Shri Sita Ram Billaiya, Hari Shankar Billaiya & Brijesh Sahu. On the basis of documents recovered at the residence of Shri Jawahar Lal Modi and on the basis of CD, Pen-drive and documents recovered from the residence of Mr. Rajesh Nikhara, Officer of Central Excise Intelligence conducted further enquiries and investigations. The investigations were also conducted at the end of raw materials suppliers and suppliers of packing materials. Shri Sita Ram Bi....
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....990 and on the basis of Chemical examiner report testifying that such preparation contained betel nut, Lime & Katha, the goods which were detained and seized were Pan Masala or Gutkha classifiable under 2403 9990. It further appeared to Revenue that to determine the correct duty liability, it was necessary to know about the number of pouch packing machines operated by the parties during relevant period. On the basis of intimation given by the appellants to the jurisdictional Central Excise Officers from time to time, the number of pouch packing machines installed in the factory were as given in Table No.33 on Page No.124 of the show-cause-notice dated 23.07.2010. On the basis of such information, the duty liability of Pan Masala/ Gutkha was calculated and stated in said Table No.33 of show-cause-notice. On the basis of above investigation and inference drawn from the investigation, the appellants were issued with a show-cause-notice No.DZU/INV./65/D/C.Ex./2010/1238 dated 30.11.2011. Through the said show-cause-notice, M/s Milan & Company, M/s Mayank & Company, M/s Madhur & Company, M/s Milan & Sons & M/s Milan Products, Shri Sitaram Billaiya, Shri Hari Shankar Billaiya and Shri Bri....
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....d Act. Shri Sita Ram Billaiya, Shri Hari Shankar Billaiya and Shri Brijesh Kumar Sahu are further required to show cause as to why penalty should not be imposed and recovered from under Rule 26 of the Central Excise Rules 2002 for their active role in the clandestine removal of manufacture of Gutkha without payment of Central Excise duty and knowingly misclassified their goods to escape assessment of duty liability under Pan Masala Packing Machine Rules 2008 as detailed in para above." 3. In para 48 of the said show-cause-notice, it was stated that M/s Milan & Company manufactured Gutkha and evaded Central Excise duty amounting to Rs. 7,51,14,382/- during the period from 01.12.2006 to 30.06.2008. Further as Para 48(i), it was stated that the products manufactured by M/s Milan & Company, M/s Mayank & Company, M/s Madhur & Company, M/s Milan Products & M/s Milan & sons appeared to be correctly classifiable under Tariff Item No.24039990 as Pan Masala Packing or Gutkha . The said show-cause-notice was issued by invoking provision of proviso to Sub-Section (1) of Section 11A of Central Excise Act, 1944. 4. M/s Milan & Company contended before the Original Authority that there are tw....
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.... relied on the chemical analysis report given by Shri Ram Institute for Industrial Research, Delhi conducted on samples of incomparable finished goods manufactured by some other manufacturer. They contended that on 06.10.2008, they had declared composition of their product to the department that they were manufacturing Chewing Tobacco and each 5gm pouch would contain 3 gms. of perfumed Tobacco and 2gms of Supari Powder. Thus, in view of the said composition, their product was not Pan Masala or Gutkha as defined in said Chapter Note 4 of the Chapter 24 of said Tariff Act. They further contended that the show-cause-notice did not produce any circumstantial evidence of purchase receipt and physical availability of Lime and Kattha, market report and enquiry from users establishing presence of Lime and Kattha in the product manufactured by them. They further contended that they were using two Paddle Punch Sealing Machines and such Sealing Machines did not qualify the definition given in Pan Masala Packing Machines Rules, 2008. They contended that since their product was not Gutkha and they were not using machines defined under said Rules, the duty demanded from them of Pan Masala/Gutkha....
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....n the show cause notice there is no proposal for confiscation of any goods and therefore, they are not liable for penalty under Rule 26 of Central Excise Rules, 2002. 10. Original Authority recorded that nobody had attended the personal hearing and on the basis of record, he decided the case. The Original Authority has relied on the statements which was recorded by the Officers of DGCEI and without accepting the defence reply decided the said show cause notice through his Order-in-Original No.KNP/EXCUS/000/Commr.-021-13-14 dated 31.12.2013. The order passed by Original Authority is reproduced herein below: "(i) I confirm the demand of duty of Rs. 7,51,14,382/- and Rs. Rs. 1,50,00,000/- made against M/s Milan & Co., Mauranipur, District-Jhansi (noticee No.1), and order for its recovery under Section 11A of Central Excise Act, 1944. (ii) I also confirm the demand of interest, on the above duty amount, under Section 11AA (erstwhile Section 11AB) of Central Excise Act, 1944. (iii) I also impose a penalty of Rs. 7,51,14,382/- and Rs. Rs. 1,50,00,000/- made against M/s Milan & Co., Mauranipur, District-Jhansi (noticee No.1), under Rule 25 of Central Excise Rules, 2002 readwith R....
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....e duty amount of Rs. 2,25,00,000/-, under Section 11AA (erstwhile Section 11AB) of Central Excise Act, 1944. (xv) I also impose a penalty of Rs. 2,25,00,000/- on M/s Milan Products, Mauranipur, District-Jhansi (noticee No.5), under Rule 17 of Pan Masala Packing Machine (Capacity determination and Collection of Duty) Rules, 2008, also read with Section 11AC of Central Excise Act, 1944. (xvi) I impose a penalty of Rs. 20,38,64,382/- on Shri Sita Ram Billaiya (noticee No.6) under Rule 26 of the Central Excise Rules, 2002. (xvii) I impose a penalty of Rs. 11,25,00,000/- on Shri Hari Shankar Billaiya (noticee No.7) under Rule 26 of the Central Excise Rules, 2002. (xviii) I impose a penalty of Rs. 11,25,00,000/- on Shri Brijesh Kumar Sahu (noticee No.8) unde Rule 26 of the Central Excise Rules, 2002." 11. Aggrieved by the said Order-in-Original, the appellants have preferred these appeals before this Tribunal. 12. Heard the learned counsel for M/s Milan and Company. He has contended that samples of branded Tobacco manufactured by M/s Milan & Sons, M/s Milan Products & M/s Madhur & Company were drawn on 25.08.2010 and sample of goods manufactured by them was not drawn and on....
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....ent of Uttar Pradesh and the test report indicates that the samples contained only Supari and Tobacco and test report indicates that there was no Lime and Kattha in the said samples and therefore, he has raised question about the authenticity of test report given by Shri Ram Institute for Industrial Research, Delhi. He further contended that the test report given in respect of goods manufactured by other manufacturers was not applicable to him for demand of duty. He further contended that test report was applied retrospectively to them. He contended that since the goods manufactured by them could not be established to be Gutkha and Pan Masala and they have not been given opportunity to show cause as to why the goods manufactured by them should not be classified as Gutkha or Pan Masala in the said show cause notice, therefore, they have been denied opportunity to present the case to establish that the goods manufactured by them were not Gutkha and Pan Masala and Revenue has without giving opportunity concluded the classification of the goods was under Tariff Item No.2403 9990 and this is how Revenue has pre judged the issue and without giving opportunity conclude that the goods manu....
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....ifiable under Tariff Item No. 2403 9990. The action by Revenue to unilaterally conclude that the goods manufactured by them were Pan Masala/Gutkha was equal to adjudicating the matter without giving opportunity to present the defence. Therefore, such show cause notice is not sustainable. 14. The learned counsel for M/s Madhur & Company, M/s Milan Products, M/s Milan & Sons, Brijesh Kumar Sahu, Hari Shankar Billaiya and Sita Ram Billaiya submitted that the pleadings by counsels in respect of M/s Milan & Company and M/s Mayank & Company has very clearly brought out that all the manufacturers were manufacturing branded Chewing Tobacco and declarations about the same were given at appropriate time to the department. He further submitted that the records were maintained in the manufacturing units, and that the manufacturing units were repeatedly visited by the Officers of the Department and that some of the RG-1 Registers maintained by them contain the signatures put by the Officers during their visit and nobody had ever doubted that the goods manufactured by them were not branded Chewing Tobacco. The samples drawn from the seized goods were instead of being forwarded to Central Revenu....
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....of the same was ordered to be given to the appellants or their counsels to present their case on the same if they wish to do so. Revenue through its reply dated 11.08.2016 reported that the electronic devices were recovered from residential premises of Shri Rajesh Nikhara and Shri Jawahar Lal Modi and therefore, both were summoned on 12.03.2010, 22.03.2010, 06.04.2010, 08.06.2010, 29.06.2010, 29.07.2010, 22.09.2010 and 11.11.2010 to present themselves for opening the electronic devices and to tender statements. They further clarified that Shriram Institute for Industrial Research, Delhi is an accredited laboratory and is also approved testing laboratory of Delhi Government however, for the quarry on the order by the Department of Revenue through which Shriram Institute for Industrial Research, Delhi has been recognized as laboratory for testing of samples in place of Central Revenue Control Laboratory, New Delhi has not been replied by Revenue. 17. On the report submitted dated 11.08.2016 submitted by Revenue in compliance to above stated Misc. Interim order dated 08.07.2016, the learned counsel for the appellants have argued that the case record indicates that the information fro....
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....sh the case. He further contended that in the show-cause-notice which were issued by other adjudicating authority for confiscation of seized goods, the said adjudicating Authority was not required to determination whether the seized goods were Gutkha or Chewing Tobacco. 19. Having considered the rival contentions, we find that initially in all the statements recorded on 27.02.2010 i.e. the date of search, every statements indicates that appellants were manufacturing branded Chewing Tobacco and none of the statements indicated that the goods manufactured by the appellant as on 27.02.2010 were Gutkha or Pan Masala. We also find that the appellants had obtained the Central Excise Registration, they had submitted the details of the goods to be manufactured by them, the factory premise were repeatedly visited by Central Excise Officers before 27.02.2010, the visits by Officers were recorded in RG-1 Registers of the same of the notices. The record indicates that such Officers never raised any doubt about the nature of the goods manufactured them to be Gutkha or Pan Masala. On introduction of Pan Masala Packing Machines, Rules 2008 when the details were obtained from the appellants by ju....