2014 (4) TMI 332 - AT - Central Excise

Waiver of pre deposit - Packing of pouches of unmanufactured chewing tobacco bearing brand name Laxmi Chhap falling under chapter 24 of Central Excise Tariff Act, 1985 - Machines not working - Held that - Difference of opinion - Matter referred to larger bench with following questions - Whether as per findings of learned Member (Judicial), full waiver of pre-deposit is to be granted in view of the facts that machines were not in working condition based on commissioner s observation in para 99 in his adjudication order and provisions of deeming fiction was not attracted as per Chewing Tobacco & Unmanufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules, 2010. Or Whether as per findings of Member (Technical), partial pre-deposit of Rs.One crore is to be ordered based on the findings that there was clear admittance by Shri Rajesh Goyal, director, his wife and other key personnel such as manager and accountant of manufacture and running of machines. Further it is also a fact on record that these machines were earlier working under old premises and later shifted to present premises. Furthermore, premises were not registered thus inviting deeming provisions of Chewing Tobacco & Unmanufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules, 2010.

Issues Involved:
1. Condition and operational status of the packing machines.
2. Applicability of the deeming fiction under the Chewing Tobacco and Unmanufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules, 2010.
3. Admissibility of statements and evidence regarding the manufacturing activities.
4. Requirement for pre-deposit for the stay of the duty and penalty.

Detailed Analysis:

1. Condition and Operational Status of the Packing Machines:

The central excise officers found three packing machines at the premises of M/s. Rajesh Tobacco Co. The appellants claimed these machines were obsolete, scrapped, and not in working condition. The Commissioner noted in para 99 of the adjudication order that the panchnama dated 18.1.2011 did not detail the condition of the machines, but observed that one machine was plugged in, with lights glowing, although it lacked a motor. The Commissioner concluded that the missing parts could be attached to make the machines operational, suggesting that the machines were not out of order since 8.3.2010.

2. Applicability of the Deeming Fiction:

The Commissioner invoked the deeming fiction under the Chewing Tobacco and Unmanufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules, 2010, which assumes that goods are manufactured if a packing machine is installed, regardless of its operational status. However, the Tribunal found that the premises where the machines were found were neither registered nor adjacent to the factory engaged in manufacturing. Therefore, the deeming fiction could not be applied merely because the machines were present in a non-working condition in an unregistered location.

3. Admissibility of Statements and Evidence:

The statements of Shri Rajesh Goyal, his wife Smt. Pratibha Goyal, and other personnel like Harish Chandra and Pramod Sharma were considered. Rajesh Goyal admitted that the machines could produce pouches and were seized from unregistered premises. His statement was corroborated by other personnel, who confirmed the manufacturing activities. The Tribunal noted that self-convicting statements are strong evidence, but also observed that the machines were found in a dumped condition, which contradicted the operational status suggested by the Commissioner.

4. Requirement for Pre-deposit:

The Judicial Member (J) found that the appellants had a strong prima facie case, given that the machines were in a non-working condition in an unregistered premise, and thus granted a full waiver of pre-deposit. However, the Technical Member (T) disagreed, emphasizing the admissions by Rajesh Goyal and other evidence indicating manufacturing activities. The Technical Member ordered a partial pre-deposit of Rs. One crore, considering the balance of convenience in favor of the Revenue.

Conclusion:

The Tribunal was divided on the issue of pre-deposit. The Judicial Member granted a full waiver based on the non-working condition of the machines and the inapplicability of the deeming fiction. The Technical Member, however, ordered a partial pre-deposit, citing clear admissions of manufacturing activities and the applicability of the deeming fiction due to the unregistered premises. This difference of opinion highlighted the complexity of the case, balancing the evidence of non-operation against the legal presumptions under the relevant rules.

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