2013 (10) TMI 560 - AT - Central Excise

Clandestine Removal of Pan Masala - Held that - Deeming provision is applicable in those cases where there is no evidence of start of production is available - the Commissioner has accepted that the appellant was indulging in manufacture and clandestine clearance of pan masala since January, 2011 - There is also evidence on record to show that there was agreement between the appellant and their brand owner, Shri Sunil Kumar Agarwal, Director of M/s.Astha Fragrance Pvt. Ltd. which was executed with effect from 1.10.2010 and the present premises in which the machines were found to be installed were taken on rent by the appellant from January, 2011 as per the statement of the owner of premises - it is clear that the appellant was manufacturing the said goods from January, 2011. Waiver of Pre-deposit Penalty - The appellant has deposited the amount of ₹ 55.50 lakh, which is for the period January, 2011 - the deposit is sufficient for the purpose of section 35F of Central Excise Act, 1944 - as regard penalty, the appellant was indulging in the clandestine activity for manufacture of pan masala - They are prima facie, liable to penalty inasmuch as the demand of duty for the period to the extent of ₹ 55.50 lakhs has already been deposited, the appellant was directed to deposit further amount of ₹ 55 lakhs towards penalty - Partial stay granted.

Issues:
1. Confirmation of demand of Rs.2,40,50,000 against the proprietor of M/s. Taj Products and imposition of penalty under section 11AC of Central Excise Act, 1944.
2. Seizure of packing machines used for pan masala packing under the brand name 'Chandrakanta' due to non-registration and non-payment of duty.
3. Interpretation of Rule 17(2) of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 regarding duty liability determination.
4. Dispute over the period from which duty liability should be calculated based on the deeming clause of Rule 17(2).
5. Imposition of penalty on the appellant for clandestine manufacturing and clearance of pan masala.
6. Liability of the owner of the brand name 'Chandrakanta' for penalty due to agreement with the manufacturer.

Analysis:
1. The judgment pertains to multiple stay applications arising from the same impugned order confirming a demand of Rs.2,40,50,000 against the proprietor of M/s. Taj Products and imposing an identical penalty under section 11AC of the Central Excise Act, 1944. Additionally, a penalty of the same amount was imposed on another applicant, the owner of the brand name 'Chandrakanta.'

2. Central Excise officers visited the premises of the proprietor and found unauthorized manufacturing of pan masala under the brand name 'Chandrakanta,' leading to the seizure of packing machines due to non-registration and non-payment of duty.

3. The dispute revolves around the interpretation of Rule 17(2) of the Pan Masala Packing Machines Rules, 2008, concerning the determination of duty liability for units not registered with the Central Excise Office.

4. The appellant argued that duty liability should be calculated from January 2011 based on the deeming clause of Rule 17(2), while the Revenue contended that liability should be confirmed from April 2010, citing the unit's inactivity during the preceding financial year.

5. The judgment considered evidence of clandestine manufacturing and clearance of pan masala, leading to the confirmation of duty liability from January 2011. The appellant was directed to deposit the penalty amount within a specified timeline.

6. Regarding the penalty imposed on the owner of the brand name 'Chandrakanta,' it was determined that he could not be held liable prima facie due to an agreement with the manufacturer, which initially operated from a registered premises before moving to a new location clandestinely.

Overall, the judgment provides a detailed analysis of the duty liability determination, interpretation of relevant rules, and the imposition of penalties based on the evidence of clandestine activities related to pan masala manufacturing and clearance.

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