TaxTMI 
TaxTMI 
2021 (1) TMI 340
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....0. Thus, both sides have filed Appeals against the same O-I-O No. AHM-EXCUS-002-COMMR-13-2019-20 dated 27-12-2019. Both Appeal No. E/10340 & 10341/2020 by the Assessee and its authorized signatory as well as Appeal No. E/10352/2020-DB by Revenue with CO No. E/Cross/10288/2020 therein have been taken up for hearing together on 02-12-2020 for final disposal of all these Appeals. 2. The brief facts of the case are that Assessee is engaged in manufacture of OM brand tobacco falling under CTH 24011090 of the Central Excise Tariff Act 1985 and they were holding Central Excise Registration ECC No. ACSPP9687QM001. Assessee was paying Central Excise duty on 1 Pouch Packing Machine (PPM) every month, on declared Retail Sale Price (RSP) of Rs. 3/- under Compounded Levy scheme under section 3A of the Central Excise Act 1944 and in terms of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. Based on some intelligence, officers from Central Excise (Preventive), Ahmedabad-II visited factory premises of the Assessee on 03.09.2014. Shri Hasmukhbhai Patel, authorized signatory, who was present at the time of search informed off....
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.... Kanaria @ Rajubhai Panchal, of M/S Vaibhav Packaging and stated that he delivered PPM in the last week of October, 2013 from M/s. Vaibhav Packaging to M/s. Hasmukh Tobacco Products, in his tempo and that PPM was unloaded there with help of 3-4 labourers working in that factory. 2.1 Thereafter, another statement of Shri Hasmukhbhai Patel was recorded on 12.09.2014, wherein he accepted that seized PPM was delivered at their factory during the last week of October 2013. Another Statement of Shri Hasmukhbhai Patel was recorded, perusing his statements dated 03-09-2014 and 12-09-2014 he stated that seized PPM was brought in their factory on 01-08-2014; that they have paid duty of Rs. 39,60,836/- after 03-09-2014. Statement of Shri Maheshbhai Ugarchand Patel, was recorded before arrest, wherein, perusing his statement recorded on 03-09-2014 and statement of Hasmukhbhai Patel recorded on 12-09-2014, he has stated that seized PPM was brought in factory on 01-08-2014. Statements of Shri Maheshbhai and Shri Hasmukhbhai were recorded on 02.01.2015 wherein they stated that pouch packing machine found undeclared was actually purchased from M/s. Vaibhav Packaging, for Rs. 90,000/- in the las....
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.... No. 80040 dated 11.10.2016. The Hon'ble Gujarat High Court passed Order dated 12.10.2017 in SCA No. 16871 of 2016, wherein the matter was remanded to the Settlement Commission for decision on the aspect of 'operating machine' and to ascertain that seized machine found undeclared in the factory on 03-09-2014 is operative or not for the purpose of charging duty in this case. 5. The Hon'ble Settlement Commission, Mumbai, then re-examined the matter and while passing the Final Order, observed that crucial question that needs to be determined is when was the seized machine actually installed in factory; that there are flip flop in statements of Shri Hasmukh Patel; that there are no documentary evidences available on record to show sale, purchase, transport, payment, installation etc. of additional PPM and that it was held that since case necessarily involves proper appreciation of facts & circumstances and records available with applicant and Revenue, correct interpretation of Tobacco Rules and Notification No. 16/2010-CE dated 27.02.2010 as amended, Bench was of the view that case should go through rigor of adjudication proceedings before authority, for determination of dispute....
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....ignatory shri Hasmukhbhai Patel under rule 26 of Central Excise Rules, 2002 and refrained from imposing any penalty on Shri Maheshbhai Patel, Proprietor of M/s. Hasmukh Tobacco under rule 26 of Central Excise Rules, 2002. Hence, Assessee and its Authorized signatory filed Appeal Nos. E/10340/2020 and E/10341/2020 respectively against confirmation of duty and penalty imposed. Revenue also filed Appeal No. E/10352/2020, against dropping of demand partly and Assessee filed cross objections No. E/Cross/10288/2020. These Appeals were taken up for hearing together on 02-12-2020 for final disposal of all these Appeals. 9. Shri P.P. Jadeja, learned Counsel appearing on behalf of Assessee and its authorized signatory while reiterating all grounds of their Appeals and submissions made in their cross objection to revenue appeal submits that O-I-O dated 27-12-2019 is objected mainly on the grounds that O-I-O has committed error in confirming duty against the Hon'ble Gujarat High Court's order dated 12-10-2017 in SCA No. 16871 of 2016. There is no finding on fact that PPM seized on 03-09-2014 was 'Operating Machine'. He submits that seized PPM found in the factory on 03.09.2014 was in fact b....
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....PM was brought in factory from 01-08-2014. It is crystal clear that Additional PPM after cross-examination of witnesses including supplier of machine, transporter of machine, laborers who had unloaded machine have stated to be received on 01.08.2014. When it was brought in factory on 01-08-2014, it can not be assumed installed in factory before 01-08-2014 as per Rule 18(2) ibid, attracting duty for unregistered unit. He submits that "prime contention" is excise duty liability, can not start before 01-08-2014, in any case. He relied on decision in 2017 (348) E.L.T. 720 (Tri. - Del.) - GOYAL TOBACCO CO. PVT. LTD VS CCE, wherein it is held that in terms of Compounded Levy Scheme, presumptive duty liability envisaged in Compounded Levy Scheme cannot be extended to a level that duty liability arises automatically in all cases where packing machines found in premises. Manufacture of goods is a condition precedent for charging Excise duty without which no levy can be made, as held by Rajasthan High Court in the case of Jupiter Industries - 2006 (206) E.L.T. 1195 (Raj.). 9.2 He submits that in proceedings before the Hon'ble Settlement Commission and Gujarat High Court, assessee had made....
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....nubhai Thakore, who unloaded the machine on 01.08.2014 in the factory during their cross examination to support that the said machine was brought in the factory on 01.08.2014. (f) Records of Production and clearance for the period from 2012-13 to 2014-15. (g) Electricity consumption Bills from May 2012 to November 2014 along with certificate issued by Torrent Power Ltd., Ahmedabad which clearly shows that electricity consumption was high in September 2014 as compared to previous months, as two PPM operated in Sept. 2014. (h) Records of raw materials consumption i.e. loose tobacco and packing materials (Plastic Bags) for the period from April 2012 to March 2015. (i) Final Audit Report No. 45/204-15 dated 11.08.2014 issued from F.No.VI/1(b)/45/IA/AP-VII/2014-15/3292 for excise audit conducted on 10.06.2014 for the period from June 13 to May 2014 to support that the said machine was not in existence in the month of June 2014 and the contention of the appellant that the said machine was brought in the factory on 01.08.2014 and not October, 2013. (j) Intimation letter dated 11.09.2014 in Form 1 & 2 for month of September 2014 & payment of Rs.....
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....ting with first day after due date till date of actual payment of outstanding amount. Assessee submitted that confirmation of duty of Rs. 36.82 lakhs has increased undue consequential liability of interest and penalty. O-I-O confirming duty with interest & penalty for September 2014 which was deposited in September 2014, is not justified in facts of case. Shri Jadeja submits that Assessee not being literate, administrative work of filing intimations, Returns and payment of duty etc. was assigned to their accountant. However, inadvertently accountant paid duty on RSP of Rs. 4/- for PPM on 01-09-2014 for September 2014, but inadvertently, intimation for change of RSP and addition of PPM remained to be submitted to department unintentionally. He submits that Assessee paid duty for September 2014 for two PPM on RSP of Rs. 4/- and vide letter dt. 11.09.2014 they filed Form 1 and Form 2 for September, 2014 as pointed out by officers. Such intimation has been acknowledged by department on 12.09.2014. 10. Similarly, for Appeal No. E/10341/2020 which has been filed against a separate penalty imposed on Shri Hasmukhbhai Patel who is authorized signatory of Assessee. Shri Jadeja reiterated....
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....ourt in case of Sakeen Alloys Pvt. Ltd. [2013 (296) ELT-392(Tri - Ahmd)] observed that confessional statement in absence of any cogent evidence cannot make the foundation for levying the excise duty on the ground of evasion of tax. It is also well settled by the Hon'ble Tribunal and other higher forums that in cases of alleged clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following: (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw materials, in excess of that contained as per the statutory records ; (b) Instances of actual removal of unaccounted finished goods(not inferential or assumed) from the factory without payment of duty; (c) Discovery of such finished goods outside the factory; (d) Instances of sales of such goods to identified parties; (e) Receipt of sale proceeds, whether by cheque of by cash, of such goods by the manufacturers or persons authorized by him ; (f) Use of electricity for in....
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....quantification of demand of duty, confiscation and penalties are attached separately with chronology of dates and events for reference. The submissions on behalf of Assessee and its authorized signatory are summerised as under with the following prayers : (a) The seized PPM was brought in the factory only on 01-08-2014 (b) The said PPM was brought for use as alternative PPM and it was not installed or used in August 2014. Hence there will be no liability for August 2014. (c) For September 2014, both the PPM were used and duty for both the PPM were paid in September 2014 by 11-09-2014. Hence, there was no further duty liability for September 2014. (d) Set aside the O-I-O No. AHM-EXCUS-002-COMMR-13-2019-20 dated 27-12-2019 which has confirmed duty demand from April 2014 to September 2014. (e) Set aside confiscation and penalty imposed on Assessee and its authorized signatory. (f) Reject Revenue Appeal No. E/10352/2020 and allow Cross Objection No.CO/10288/2020 filed by the Assessee. (g) Allow all consequential benefits under this proceeding. (h) Allow appeals filed by assessee and its authorized signatory by sett....
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....vits have been filed late without giving reason for delay and any sort of evidence that they were also pressurized. He pointed out that Shri Hasmukhbhai and Maheshbhai both were arrested on 21-10-2014. Their bail applications were initially rejected by Metropolitan Magistrate and by the Hon'ble Ahmedabad City Session Judge. He submits that before the Hon'ble settlement Commission appellant had been making different claims on "duty accepted", initially they accepted a duty of Rs. 66.41 lakhs, which later on accepted from April, 2014 works out to Rs. 176.47 Lakhs. He stated that u/s 3A of the said Act, if the factory has an installed machine, it is deemed to be operational and deemed to have been used for manufacture of deemed qty of notified goods. Adjudicating authority has given his findings in detail as to why plea of appellant that said machine was installed in August, 2014 cannot be accepted. SDR stated that duty for September 2014 is liable to be paid, it is discussed in Para 77 of O-I-O. Regarding visit of Audit officers, it has been discussed in Para 68 of O-I-O. Regarding consumption of electricity, which has increased during August and September 2014, he submits th....
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....cation of PPM is sustainable when it is not manufactured and removed by M/s Hasmukh Tobacco Products. Consequential Redemption Fine imposed on M/s Hasmukh Tobacco Products is justified or not. (g) In absence of seizure of goods manufactured or cleared by Assessee, whether Penalty imposed on Assessee and its authorized signatory under section 11AC of the Central Excise Act would be justified or not. 14.1 We find that M/s Hasmukh Tobacco Products engaged in manufacture of OM brand unmanufactured tobacco falling under CTH 24011090 of Central Excise Tariff Act 1985 with Registered Central Excise ECC No. ACSPP9687QM001. Assessee had filed their last declaration on 27-12-2012 and had declared RSP of Rs. 3/- on pouch and they were paying duty for one PPM, under section 3A of Central Excise Act, 1944 and Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. Central Excise officers, visited factory premises of Assessee on 03.09.2014 and found one undeclared Pouch Packing Machine [PPM] having packing material roll on with printed RSP Rs. 4/-, which was seized. 14.2 We find that issue regarding duty in respect o....
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....3 In the present case, the SCN dated 19-02-2015 has demanded total duty of Rs. 300.02 lakhs from November 2013 to September 2014, based on statements. The O-I-O dated 27-12-2019 has confirmed duty of Rs. 1,76,47,000/- from 01-04-2014 to 30-09-2014. Rest of demand of duty of totally Rs. 1,23,55,000/- has been dropped. O-I-O has given just and fair findings in O-I-O Para 54 to 57 for his conclusion that seized PPM was not operating Machine w.e.f. 01-11-2013. We upheld the same as correct view. 14.4 We find that there is no dispute about detection and seizure of extra PPM from factory of Assessee on 03-09-2014. Both the side have agreed to this fact. Therefore, it remains to be ascertained as to from which date it was brought in the factory and installed or not installed. Statements of 03-09-2014, 21-10-2014 by Hasmukhbhai Patel, and Maheshbhai Patel, shows date of receipt of seized PPM as 01-08-2014. The entire case is based on statements. Hence, critical analysis of statements would be very relevant. From cross examination of the following persons, it has also come on record very useful information relevant for this purpose :- (i) Shri Patel SantoshbhaiIshwarbhai, ....
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....-2019 of Shri Hasmukhbhai Patel, that the officers of Central Excise had conducted search at their factory on 03.09.2014 and had recorded his statements on 03.09.2014,_12.09.2014, 21.10.2014 and 02.01.2015. He stated that only one PPM was functional and another PPM was not functional; and that he had given his statement on 03.09.2014 that said non-functional PPM was purchased by them for Rs. 50,000/- and got the same repaired by Shri Rajubhai (Shri Harish Kanadia) on payment of Rs. 40,000/- and it was brought to factory by loading tempo on 01.08.2014. He stated that seized PPM was made operational from 2nd week of September, 2014; that they had already advised their accountant to file necessary declarations in the department for starting the said additional PPM and for increasing their MRP from Rs. 3 to Rs. 4 per pouch, but he forgot to file the same; that he had reiterated these facts again on 21.10.2014; and that they had no intention to evade central excise duty. He was shown his own statements dated 12.09.2014 and 02.01.2015, Panchnama dated 09.09.2014 recorded at M/s Vaibhav Packaging and statement of Shri Harish Kanadia recorded on 09.09.2014 and a statement of Shri Santosh P....
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....sitions in cross examination are retractions and after thoughts only without having any basis to give date of receipt of PPM on 01-08-2014. We approve Assessee's contention that depositions under section 9D ibid before learned Commissioner are original evidences and they can not be considered as any type of retractions or after thought. We agree with contentions made on behalf of Assessee on this point. We hold that it is settled law that in cases of such clandestine manufacture and clearance, heavy burden is on the Revenue to prove charges with reliable, clinching, positive evidences and independent corroborative evidences. Revenue has reiterated allegations in SCN, but not produced independent corroborative evidence to prove their case that seized PPM was an operative machine w.e.f. 01-11-2013. Deposition of witness u/s 9D ibid, can not be brushed aside on assumptions and presumptions. Section 9D of Central Excise Act reads as under:- "SECTION 9D. Relevancy of statements under certain circumstances. - (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be rele....
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....cross-examination. This is to ensure the Court or Tribunal or the authority conducting the proceeding arrives at the correct conclusion based on tested evidence before it. The issue also is no longer res integra in view of the large number of judgements of the Supreme Court." In case of 2016 (340) E.L.T. 67 (P & H) - JINDAL DRUGS PVT. LTD vs UOI, the Hon'ble P & H High Court has held as under in para 19 "19. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a Gazetted Central Excise Officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the Gazetted Central Excise Officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases....
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....Ltd. (supra) and Laxman Exports Limited (supra). Apart from this, the decision of this court in J&K Cigarettes Ltd. (supra) clinches the issue in favour of the appellant. In that case, the validity of Section 9D of the Central Excise Act, 1944 was in question. 14. The Division Bench also observed that though it cannot be denied that the right of cross-examination in any quasi judicial proceeding is a valuable right given to the accused/Noticee, as these proceedings may have adverse consequences to the accused, at the same time, under certain circumstances, this right of cross-examination can be taken away. The court also observed that such circumstances have to be exceptional and that those circumstances have been stipulated in Section 9D of the Central Excise Act, 1944. The circumstances referred to in Section 9D, as also in Section 138B, included circumstances where the person who had given a statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay and expense which, under the circumstances of the case, the Court considers unreasonable. It is c....
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....of statement in inquiry is not enough but it has to be with fully conscious application of mind by adjudicating authority that statement is required to be admitted allowing opportunity of cross examination of witness. This provision could not be done away with by the adjudicating authority, if he is inclined to take into consideration the statement recorded earlier during investigation by Investigation officers. 14.7 Without examination and cross examination of person as required under Section 9D for cross examination as mandated under CEA 1944, statement recorded by Investigation Officer would not constitute relevant and admissible evidence and has to be ignored when procedure u/s 9D ibid is not followed by adjudicating authority. We hold that adjudicating authority in this case committed gross error in not placing reliance upon depositions of witnesses recorded during their cross examination which was before him in proceedings in this Show Cause Notice. We are of the view that depositions made by concerned witness before learned Commissioner in cross examination are original evidences adduced on record during the adjudication proceedings. When depositions were made by concerne....
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....d not agreed for this type of theory for confirmation of the duty demand. Therefore, it is very relevant to refer to the said provision of Rule 18(2) and it would be necessary to go through the said Rule 18(2) ibid which is reproduced as under :- "18. Penalty for contraventions, etc. - (1) Subject to the provisions of rule 16 and section 11AC of the Act, if any manufacturer produces or removes notified goods in contravention of any provision of these rules, then, all such goods shall be liable to confiscation, and the manufacturer shall be liable to a penalty not exceeding the duty leviable on the notified goods in respect of which aforesaid contravention has been committed. (2) If it is found that goods have been manufactured in or cleared from a unit which is not registered with the jurisdictional Central Excise Office, then, the duty liability of such unit shall be determined on the basis of number of packing machines found available in the premises of the unit and the retail sale price of the pouches manufactured with the aid of such packing machines and unless evidence to the contrary is provided to the satisfaction of the Central Excise Officer, such machine....
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....native use, in case main PPM fails working and that seized PPM was not used in August 2014 and that both PPM were also not used together. Assessee's contentions are not acceptable that seized PPM was not in working condition and officers have not conducted any technical inspection of machine to establish its exact condition as "operating Machine" can not be acceptable as Assessee has not produced evidence to prove their contention. Assessee's contention that seizure Panchnama and photographs from videography shows that the said PPM had no power connection attached to it or it was having other attachments required for productions and that it was merely dumped in heap of bags of raw materials and surrounded by such bags and merely having packing material roll on with printed RSP of Rs. 4/-would not make it "Operating Machine" attracting duty etc are not acceptable being devoid of any merit. These type of submissions about the PPM can not be acceptable without considering facts and relevant circumstances of the case. The contention by Assessee that seized PPM was not used by the assessee in August 2014 and started in second week of September 2014 is based on the depositions in the cro....
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....n Compounded levy u/s 3A and Tobacco Rules and Notification No. 16/2010-CE dated 27.02.2010 as amended. 14.11 In view of the above, we find that since the Assessee confirm the receipt of seized PPM in factory on 01-08-2014, contention of Assessee that duty is not payable for August 2014 is not sustainable. Therefore, we hold that duty of Rs. 29,56,000/- for August 2014 is required to be recovered under Section 11A(10) of Central Excise Act, 1944 read with Rule 7 of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 towards duty leviable on one undeclared packing machine which was found in their factory on 03.09.2014. When any specific date of its installation is not ascertainable, it can not be said that it was in operation from 01-08-2014. However, when the said PPM was brought in factory on 01-08-2014, but since there is no clear evidence as to when it was installed & used in August 2014, this becomes a case of addition or installation of a packing machine in the said factory in August 2014, in terms of Rule 8, and third proviso to Rule 9 ibid would be applicable in this case providing for manner of payment o....
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....ee that Rule 25 of Central Excise Rules, 2002 is not applicable, when a specific provision has been made under Rule 18(1) of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 for confiscation and penalty. The Rule 18(1) ibid provides that notified goods produced or removed shall only be liable to confiscation. We agree with the contention of the Assessee that the seized PPM is brought in their factory and it has not been manufactured by Assessee or removed from factory by Assessee. Therefore, we find that seized PPM is not at all liable to confiscation under Rule 18(1) ibid. The confiscation of PPM and fine of Rs. 10,000/- deserves to be vacated and set aside. We vacate confiscation of seized PPM and set aside Redemption fine of Rs. 10,000/- imposed by the impugned order. 14.14 As regards, imposition & quantification of Penalty, Assessee has submitted that mens rea is required u/s 11AC of Central Excise Act 1944 and that they had no intention to evade duty and they had no intention to operate two PPM at a time without paying duty or following Chewing Tobacco Rules of 2010. The seized PPM was brought in factory....
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....20-DB filed by Revenue deserves to be rejected. Department in their Appeal No. E/10352/2020-DB have stressed on point that statements given by witnesses in investigation have been retracted in cross examination. We have already held that incorrect view is entertained by Revenue. We have noted that this entire case is based on statements without clinching, corroborative independent positive evidences on record produced by the Revenue officers. Depositions by witnesses in cross-examination before Commissioner u/s 9D ibid in adjudication proceedings are original evidences and have passed test of correctness of statement given in investigation. Therefore, depositions u/s 9D ibid are original evidence and can never be considered as a retraction from statement given in investigation. We have given detailed finding on the above points in foregoing paragraphs and we do not wish to repeat them. We have also perused decisions relied upon by the revenue in their Appeal and submissions filed at the time of hearing. Most of decisions relied upon in Revenue's Appeal are objected by Assessee as not applicable in this case. Assessee have given their due comments against almost all such decisions. ....