TaxTMI 
TaxTMI 
2017 (7) TMI 476
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....t) read with Rule 25 of Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. Further ordered for confiscation of 8 bags of Ronak brand Gutkha containing 94,200 pouches of MRP Rs. 1 seized at the time of inspection and further allowed the same to be redeemed on payment of fine Rs. 25,000/- and further imposed penalty of Rs. 25,00,000/- for contravention of the provisions of the Central Excise Rules, 2002 & Pan Masala Rules, 2008 and further have been pleased to impose penalty of Rs. 50,00,000/- on the other appellant M/s Vinayak Ultra Flex Private Limited under Rule 26 of the Central Excise Rules, 2002. 2. The brief facts of the case are as follows:- 2.1 The appellant, Wizard Fragrances, at Gorakhpur, is a Proprietorship unit and is engaged in the manufacture of Pan Masala containing tobacco (Gutkha) falling under sub-heading 24309990 of the Schedule to the Central Excise Tariff Act, 1985 under the 'brand name Ronak'. 2.2 The appellant set up this unit for manufacture of the aforesaid products in December, 2007. The appellant was initially paying duty based on the value of the goods cleared in terms of the provisions of Section 3 of the Cen....
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....n Masala manufacturing units under Notification No. 42/2008-CE dated 1.7.2008. In this letter, the details of the facilities/machinery available with the appellant and other relevant were furnished by the Superintendent to the Deputy Director, DGCEI. In this letter, the fact regarding installation of one pouch making machine at the appellants factory was also indicated and the monthly duty liability of Rs. 12.50 lakhs were informed. The DGCEI thereafter addressed another letter dated 13.8.2008 to the jurisdictional Commissioner calling for further details about the various units under their jurisdiction manufacturing Pan Masala. In response to this, the Superintendent of Central Excise (AE), Allahabad addressed a letter dated 14.8.2008 giving various details called for by the DGCEI along with other relevant information, as desired. 2.8 The officials of the DGCEI thereafter visited the factory premises of the appellant on 22.8.2008 and conducted investigations regarding the installation of the plant and machinery in terms of the declarations filed by the appellant under the compounded levy scheme. The DGCEI authorities drew a Panchnama dated 22.8.2008 pertaining to the factory pre....
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....aily diary reports, details of their visits, reports etc. maintained by the local officers about the declarations filed by the appellant under the compounded levy scheme. 2.12 A show cause notice dated 10.12.2008 was issued by the DGCEI alleging that, in all eight pouch making machines were found installed in the premises of the appellant on 22.8.2008 and, therefore, excise duty demand is to be calculated based on eight machines. Accordingly, the show cause notice demanded duty under Section 11A read with Section 3A of the Act for the months of July and August 2008, with proposal to impose penalty. 3. The show cause notice dated 10/12/2008 was adjudicated on contest and the learned Commissioner have been pleased to frame the issue as:- "whether there were 8 pouch packing machines installed and operated in the factory premises of M/s Wizards on the date of visit of DGCEI officers on 22nd August 2008 as alleged by the department or only 1 pouch packing machine was there as claimed by M/s Wizard. The learned Commissioner took note of the visit note/confidential report of Shri Ranveer Singh, Joint Commissioner dated 4th October, 2008 which was submitted to the Chief Commissioner as ....
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....ing pouches of Ronak brand Gutkha which is the brand owned by the proprietor Shri Amar Tulsiyan. The speed of two machines were checked by me and were found to be 210 pouches per minute & 206 pouches per minute. The average speed of these machines can be taken as 208 pouches per minute. It is also pertinent to point out that GIDA Industrial Estate is located in the outskirts of Gorakhpur city and the approximate distance from the main city is about 10 Kms. The owner of the company was not present at the time of the visit. However, Shri Narendra tiwari, S/o Shri Jata Shankar Tiwari was found present. On casual enquiry, he informed that he was working there since the last 4 months. The Superintendent (Vig.) was directed to call Shri Tiwari to assist in the enquiry. Shri Tiwari also showed me that the Seven Gutkha Packing Machines which had been sealed by DGCEI and handed over under Superdaginama to the company. On being asked to furnish invoices pertaining to purchase of these machines, Shri Tiwari informed that all the documents had been seized & taken over by the DGCEI Officers, statement of Shri Narendra Tiwari is enclosed as per which only one machine was in operation before the....
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....gards complicity of these two officers. On being asked: as the probable area, where the purported seven Gutkha Packing Machines were operational, A. C. Shri Agrawal guided us to a tin-shed located immediately behind the Petrol Pump. This shed also has an exit gate in the backyard towards the Transport Nagar area. This premises consisting of two small sheds (rooms) of about 18 x15 (slanting roof 7 -8 ). There was another small shed of 10 x8. All these sheds were open to a small courtyard and which was interlinked to the Petrol Pump. These sheds consisted of brick wall, which appeared to be recently white washed and no major electrical power points were found present. These walls were virtually empty except for a few gunny bags (which appeared to be stored freshly) containing old bills pertaining to the Petrol Pump. In addition few utensils and a bed sheet spread on the ground was found present. A few photographs of these premises were also taken and enclosed herewith. Thereafter we proceeded to the divisional office for further enquiry on the following lines. "1. On perusal of the newspaper report, given by the Hindi local paper "Dainik Jagran" on 23rd August, 2008 a request lett....
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....subsequent report will be submitted in due course." Unquote The learned Commissioner also considered letters, notice and visit details of Jurisdictional Local Central Excise Officers, report on electricity consumption, connected load, sanctioned load etc, of the said unit. 4. Thereafter, when recording his findings the learned Commissioner observed as follows;- "7.3 On perusl of Para 2 of visit Note above, I find that on the day of visit of Joint commissioner Sh. Ranbir Singh On 04.10.2008, a total of 6 pouch machines were found working and producing Ronak brand Gutakha, which is the brand owned by the Proprietor - Sh. Amar Tulsiyan. These machines were reported to have been purchased after seizure dated 22.08.2010 by DGCEI. The hall was found to have the provision of seven power points for installing gutakha machine and two power points for machineries meant for mixing etc. The unit was reported to have 15 KW electric supply with power back up of 3 generators, one of 5 KVA and two other of 20 KVA each. It is worth to note here that M/s Wizard in their interim defence dated 04.08.2009 and also dated 14.11.2009, pleaded that they have only 15KW electricity connection and one 5 K....
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....at power load of 15 kva with backup available in the factory was sufficient to run eight machines at a time, has already been established during the visit of Joint Commissioner on 4th October, 2008, when 6 pouch packing machines and 2 mixing machines were found working and or producing gutkha. The learned Commissioner further observes that on the day of search seven undeclared machines were sealed and on conclusion of the search proceedings, were handed over for safekeeping to Mr. Amar Tulsiyan - Proprietor with the direction not to open the seal without permission from the proper officer. Thus, availability of 8 pouch packing machines in total is established. So far the availability of seven additional packing machines in the factory of Wizard and the allegation of the appellant that such machines were forcibly brought inside the factory by the inspection team, it is observed that Mr. Amar Tulsiyan - Proprietor in his statement dated 22nd August, 2008 admitted that at the time of visit eight pouch packing machines were engaged in the manufacturing of gutkha. Shri Sudhir Verma field officer of Wizard admitted the availability of eight machines, one declared and seven undeclared. Sh....
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....he factory premises of M/s Vinayak Ultra Flex Pvt. Ltd. and the same was admittedly supplied to M/s Wizard clandestinely. On such findings the penalty was imposed under Rule 26 of Central Excise Rules, 2002. 8. The learned counsel for the appellant - M/s Wizard have urged that the entire case is based on the visit and Panchnama dated 22nd August, 2008, wherein it is alleged that 8 pouch packing machines were found installed in the factory premises of the appellant and therefore, in the month of July & August, 2008 the duty liability is to be determined based on the 8 packing machines. The point for decision is whether there was only one pouch packing installed in the factory, during the period in question as is the case of the appellant or there were eight packing machines as alleged in the show cause notice and concluded by the learned Commissioner. The learned counsel takes us to the following documents in support of his contention that only one machine was available, installed and working there, in factory of the appellant. He first refers to the visit note by Joint Commissioner (Preventive). The said note have been taken note of, hereinabove. The said note exclusively shows th....
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....ned Counsel further urges that above table shows the details of visits by the Central Excise Officers both before and after the visit by DGCEI officers and drawing of the panchnama on 22nd August, 2008. All along no irregularity whatsoever was found. The learned counsel further have taken us through their application/declaration which was filed on 8th July, 2008, on implementation on the Pan Masala Packaging Rules, 2008 and the said application was enquired into and the duty was determined at Rs,12.50 lakhs for one machine per month. Subsequently he referred to the application of Wizard dated 1st September, 2008 wherein they applied for installation of 3 new pouch packing machines, in addition to the existing one, wherein in the, accompanying form, proper declarations have been made regarding, the packing machines, as to make and model, name of the supplier, their bill number, etc., as well as the make of the motor and its number. In response thereto by order dated 4th September 2008. The Assistant Commissioner, after verification have determined, that there are four single track packing machines in the factory and taking into account other factors determined the monthly duty liabi....
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.... DG Set was added and with effect from 8th October, 2008, they have installed another 15 KVA generator. From such facts it is evident that in the month of August, with the available generator capacity of 5 KVA DG Set and the sanctioned load of 15 KVA, the appellant, by no stretch of imagination could have operated 8 packing machines. 10. Further the learned counsel refers to the letter of the Assistant Commissioner who has indicated that he procured newspaper cuttings which carried different version than the version of DGCEI Officers and had issued letter dated 27th August, 2008 to the Subordinate Officers calling for report on this issue. Thereafter the said Assistant Commissioner received reports from various Subordinate Officers namely Shri Satya Premi, Shri N.D. Singh and Shri Vindhyachal and on the basis of the report the authenticity of the panchnama proceedings dated 22nd August, 2008 were doubtful and appear to be illusory and unbelievable. The report categorically refers to the visits by the Departmental Officer of the Range and Officers of Preventive section, on various dates and states that nothing adverse came to their notice at any point of time nor they had any intel....
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....together and an assessee opting for the scheme is bound by the terms of that particular scheme. It is settled matter now that Section 11A of the Act has no application for recovery under different or special schemes. Accordingly, the impugned order passed by the learned Commissioner under Section 11A of the Act, is wholly without jurisdiction and fit to be set aside. The learned counsel further urged that as the orders for determination of duty payable under the compounded levy scheme and Pan Masala Packaging Machines Rules, 2008 and the same have not been varied and not challenged by the department in any appropriate proceedings, accordingly the show cause notice is not sustainable and on this score also the impugned order is fit to be set aside. 12. The learned AR for Revenue have relied on the impugned order. 13. Having considered the rival contentions we find that impugned order is bad and unsustainable on the following scores/grounds:- (i) The order is wholly without jurisdiction being under Section 11 A of the Act in view of the ruling of Hon'ble Supreme Court in the case of Hans Steel Rerolling Mills (supra). (ii) There is no redetermination and or challenge by Reven....