2015 (9) TMI 36 - AT - Central Excise

Waiver of pre deposit - Imposition of penalty - Seizure of goods since goods not entered in statutory records - Manufacture of Pan masala - Presence of lime, katha, betel nut and tobacco - Held that - Apart from relied upon report of Shriram Institute, Revenue has not produced any evidence on record to support its finding that lime and katha was also being procured by the appellant from various raw materials and was being used in the manufacture of their final product. Apart from the fact of absence of evidences, we note that there is a contra report from U.P. Government Food Laboratories. - report fairly reveals that it was the sealed sample, which was sent to them. This makes it clear that the same very sample which was sent by the Revenue to Shriram Institute and which was available with the assessee, has been sent to U.P. Government Food Laboratory. The second objection of the Revenue that it was delayed sending of the sample can also not be appreciated for two reasons. First it was the Revenue itself, which after seizing the goods on 27-2-2010, treated a sample from the same after a gap of six months i.e. on 25-8-2010 and secondly on the ground that the said report of Shriram Institute was never intimated to the appellants before the issuance of the show cause notice and was supplied to them, for the first time, with the show cause notice itself dated 30-11-2011. In such scenario, sending of the samples on 2nd of February, 2012 by the appellant cannot be held to be a delayed action on their part. In any case even the delayed sending of the samples would not cause any aspersions on the outcome of the report given by U.P. Government Food Laboratory so as to dismiss the same on this sole ground. - appellants have a good prima facie case in their favour. We also note that the test report of Shriram Institute even if presumed to be correct, cannot be applied in respect of all the clearances made right from the beginning and at the most would apply only to the lot from which the samples were drawn. We accordingly dispense with the condition of pre-deposit of dues as also interest and penalties in all the cases - Stay granted.

Summary

Issues:
1. Disposal of stay petitions arising from an impugned order confirming duties and penalties against manufacturing units.
2. Allegation of manufacturing pan masala instead of branded chewing tobacco.
3. Contradictory reports from different laboratories regarding the composition of the final product.
4. Absence of evidence supporting Revenue's claim of using lime and katha in the manufacturing process.
5. Consideration of prima facie case in favor of the appellants based on expert reports and buyer statements.

Analysis:
1. The judgment addresses the disposal of stay petitions arising from an impugned order confirming duties and penalties against manufacturing units. The impugned order by the Commissioner confirmed duties against the manufacturing units and imposed penalties. The Tribunal noted that all the stay petitions were disposed of by a common order as they stemmed from the same impugned order.

2. The case involved an allegation that the manufacturing units were actually producing pan masala instead of branded chewing tobacco, leading to a higher rate of duty. The Revenue based this allegation on a report from the Shriram Institute of Industrial Research, which indicated the presence of lime and katha in the samples. A show cause notice was issued to the manufacturing units, alleging the incorrect classification of their product.

3. Contradictory reports from different laboratories added complexity to the case. While the Shriram Institute's report suggested the presence of additional ingredients in the final product, a report from the U.P. Government Food Laboratory contradicted this finding. The Tribunal highlighted the absence of concrete evidence supporting the Revenue's claim of using lime and katha in the manufacturing process.

4. The Tribunal observed that apart from the report of the Shriram Institute, the Revenue failed to produce any additional evidence to substantiate its claim. Moreover, the report from the U.P. Government Food Laboratory, obtained by the appellants, contradicted the findings of the Shriram Institute. The Tribunal emphasized that the delayed sending of samples by the appellants did not undermine the credibility of the U.P. Government Food Laboratory's report.

5. Considering the conflicting expert reports, lack of contrary evidence, and statements from buyers confirming the purchase of chewing tobacco, the Tribunal concluded that the appellants had a good prima facie case in their favor. The Tribunal dispensed with the condition of pre-deposit of dues, interest, and penalties, allowing all the stay petitions in favor of the manufacturing units.