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2017 (3) TMI 987 - AT - Central ExciseClandestine removal - The allegation against the main appellant, M/s. Praveen Tobacco Company Ltd. is that 74988 kgs. of unmanufactured hookah tobacco and 725 kgs. of leaves tobacco (Orchha) was found short in the premises of M/s. Praveen Tobacco and 66,045 kgs. of unmanufactured hookah tobacco found short in the premises of Mittal Trading - total shortage being 1,41,758 kgs., has been used in the manufacture of 6 gm. pouches of Praveen Chhap spit, whose MRP is ₹ 1.8 per pouch and that these spit tobacco pouches have been cleared clandestinely without payment of duty - the stand of the appellant in course of proceedings before the Commissioner has been that unmanufactured hookah tobacco consists of dust, leaf, stems, nus, rawa, etc. and the same is fit only for making hookah tobacco and cannot be used for making chewing tobacco and that for making chewing tobacco, the leaf of tobacco (Orcha) is required and accordingly, the appellant s contention is that no duty demand can be made on the basis of the shortage of 141033 kgs. of unmanufactured hookah tobacco and the duty demand based on the shortage of 725 kgs. of Orcha tobacco would be only about around ₹ 15,000/-. Held that - We find that the demand for excise duty stands confirmed on the basis of allegation that the shortage of unmanufactured Hookah Tobacco has been diverted for manufacture of spit tobacco. Contradictory claims have been made by both sides before us, as to whether spit tobacco can be made using Hookah tobacco. The entire demand hinges on this fact. On going through the impugned order, we find that the ld. Adjudicating Authority have not dealt with this plea made by the appellant in detail. We are of the view that unless this fact is settled either by means of documentary evidence or by means of expert or by technical literature opinion, the demand becomes questionable. During the course of search on 8/6/2009 at the premises of M/s Mittal Trading company and godown of M/s Praveen Tobacco at Sonipat on 12.06.2009, samples of unmanufactured Hookah Tobacco were drawn for testing. The relevant test reports have not been made available to the appellant. We are of the view if such test reports are available, the same may throw light on the question, whether such unmanufactured Hookah Tobacco can be used for making spit Tobacco. The impugned order has not discussed, some of the serious arguments raised by the appellant, even though these were made before the adjudicating authority. We also note that these arguments are central to the demand of Central Excise duty raised in the SCN. The case is remanded to the Original Authority for denovo decision, after giving specific findings on the above points raised by the appellant - appeal allowed by way of remand.
Issues Involved:
1. Alleged shortage of unmanufactured hookah tobacco and leaf tobacco (Orchha) in the premises of M/s. Praveen Tobacco Company and M/s. Mittal Trading Company. 2. Alleged clandestine clearance of Praveen Chhap spit tobacco without payment of duty. 3. Validity of the duty demand and penalties imposed based on the alleged shortage. 4. Whether unmanufactured hookah tobacco can be used for manufacturing spit tobacco. 5. Procedural lapses in the investigation and adjudication process. Detailed Analysis: Issue 1: Alleged Shortage of Unmanufactured Hookah Tobacco and Leaf Tobacco (Orchha) The main appellant, M/s. Praveen Tobacco Company, was found to have a shortage of 74,988 kgs. of unmanufactured hookah tobacco and 725 kgs. of Orchha leaves in their premises. Additionally, M/s. Mittal Trading Company had a shortage of 66,045 kgs. of unmanufactured hookah tobacco. The total shortage amounted to 1,41,758 kgs. The appellants argued that the stock-taking reports and test reports of the samples taken during the search were not provided to them, which could have clarified the actual stock levels. Issue 2: Alleged Clandestine Clearance of Praveen Chhap Spit Tobacco The Department alleged that the total shortage of 1,41,758 kgs. of tobacco was used to manufacture 6 gm. pouches of Praveen Chhap spit tobacco, which were cleared without payment of duty. This led to a duty demand of ?1,44,55,063/- along with interest and penalties under Section 11AC and Rule 26 of the Central Excise Rules, 2002. The appellants contended that unmanufactured hookah tobacco, which is of inferior quality, cannot be used to manufacture spit tobacco, and only Orchha leaves are suitable for this purpose. Issue 3: Validity of the Duty Demand and Penalties Imposed The duty demand was based on the assumption that the entire shortage of unmanufactured hookah tobacco was used for manufacturing spit tobacco. The appellants argued that the duty demand should be limited to the shortage of 725 kgs. of Orchha leaves, which would amount to only about ?15,000/-. The Commissioner confirmed the duty demand based on the shortage of "raw cut tobacco" as recorded in the stock register, but did not address the appellants' contention that separate registers were maintained for Orchha leaves and unmanufactured hookah tobacco. Issue 4: Whether Unmanufactured Hookah Tobacco Can Be Used for Manufacturing Spit Tobacco The appellants argued that unmanufactured hookah tobacco, consisting of dust, rawa, stems, nus, etc., cannot be used for making spit tobacco. The Department countered this by citing a statement from Shri Krishna Kumar Agarwal, who stated that unmanufactured hookah tobacco can be used for manufacturing spit tobacco. The Tribunal noted that this issue is central to the demand and needs to be settled either through documentary evidence or expert opinion. Issue 5: Procedural Lapses in the Investigation and Adjudication Process The appellants pointed out several procedural lapses, including the non-provision of stock-taking and test reports, and the rapid issuance of the Commissioner's order without proper consideration of their arguments. The Tribunal observed that the Commissioner did not address some of the serious arguments raised by the appellants, which are crucial to the demand of Central Excise duty. Conclusion: The Tribunal remanded the case to the Original Authority for a de novo decision, directing the adjudicating authority to provide specific findings on the points raised by the appellants. The adjudicating authority is also instructed to give an effective opportunity of hearing to the appellants and admit additional evidence if necessary, as per law.
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