2016 (7) TMI 987 - AT - Central Excise

Demand of duty - manufacture of gutkha - clandestine manufacture and clearance - Held that - admittedly the various machines required for manufacture of gutkha were installed in the appellants factory. Not only that the visiting officers also found the pouches of gutkha fully manufactured in the manufacturing premises. The statement of Supervisor recorded at the time of visit of the officers is clearly to the effect that they were engaged in the manufacture of Tufan brand gutkha without obtaining any registration from the department and without even intimating the Revenue. Further, the statements of Shri Abhay Kumar Jain, proprietor of the company clearly accepted the fact of manufacture and clearance of gutkha. We otherwise agree with the contention of the learned advocate that a case of clandestine manufacture and clearance cannot be made solely on the basis of a statement but in the present case, we find that the Revenue did not stop there and investigated the matter further. During investigations, the statement of raw material supplier, the transporters as also the buyers were recorded. The said statements clearly showed that the appellant was indulging in clandestine clearance of their final product. These facts further get corroborated from the fact that raw material as also the final product along with a fully manufacturing set up with power backup and employment of 12 persons including production Incharge and Supervisor was found at the time of visit of the officers. As such, we are of the view that there is sufficient material on record to establish beyond doubt that the appellant was indulging in clandestine activities. Regarding valuation, as such, Revenue has adopted MRP of one packet as ₹ 1/- and has calculated backwards. Further, if the appellant is been able to establish by production of evidence that the goods were sold at less than ₹ 1/- rate, we deem it fit to direct the lower authorities to recalculate the duty. - Decided against the assessee.

Issues Involved:
1. Allegations of clandestine manufacture and clearance.
2. Confirmation of duty demand.
3. Imposition of penalties.
4. Confiscation of goods.
5. Valuation of duty.
6. Reliability of statements and evidence.
7. Appeals by transporters against penalties.

Detailed Analysis:

1. Allegations of Clandestine Manufacture and Clearance:
The factory premises of M/s. Atishay Trading Company were searched, revealing machinery and materials for manufacturing Tufan brand gutkha. Statements from the supervisor and proprietor confirmed unregistered manufacture and clearance. Further investigations corroborated these findings through statements from raw material suppliers, transporters, and buyers, indicating a well-established clandestine operation.

2. Confirmation of Duty Demand:
The Commissioner confirmed a duty demand of ?35,64,114/- based on the findings of clandestine manufacture and clearance. The evidence included machinery, raw materials, finished goods, and incriminating documents. The proprietor's statements, which were never retracted, detailed the modus operandi and admitted to duty evasion.

3. Imposition of Penalties:
Penalties were imposed on M/s. Atishay Trading Company under Section 11 AC and Rule 25 of the Central Excise Rules, 2002. Additional penalties were imposed on transporters M/s. Delhi Gondia Road Lines and M/s. Lamba Door to Door / Godown services under Rule 26 of the Central Excise Rules.

4. Confiscation of Goods:
The final products and raw materials seized from the factory were confiscated, with an option for the appellants to redeem them on payment of redemption fines.

5. Valuation of Duty:
The appellants contended that the duty should not be based on the MRP as the pouches were less than 10 grams. The Revenue adopted an MRP of ?1/- per packet for calculation. The Tribunal directed the lower authorities to recalculate the duty if the appellants could provide evidence of a lower sale price.

6. Reliability of Statements and Evidence:
The appellants argued that the statements were obtained under duress and lacked corroborative evidence. However, the Tribunal found that the statements were supported by other evidence, including the presence of machinery, raw materials, and finished goods, as well as corroborative statements from suppliers, transporters, and buyers.

7. Appeals by Transporters Against Penalties:
The transporters argued that they were unaware of the legal nuances and believed the goods were tax-free. The Tribunal acknowledged this but upheld the penalties, reducing them to ?50,000/- for M/s. Delhi Gondia Road Lines and ?20,000/- for M/s. Lamba Door to Door / Godown services.

Conclusion:
The Tribunal upheld the findings of clandestine manufacture and clearance, confirming the duty demand and penalties while directing a recalculation of duty based on the actual sale price if evidence was provided. The penalties on transporters were reduced but not entirely set aside. The appeals were disposed of accordingly.

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