2017 (5) TMI 1441 - AT - Central Excise

Clandestine manufacture - Pan Masala and Pan Samagri - the two machines found in the open premises of the factory no information was given to the range/division office of Central Excise - Held that - it is admitted fact that the factory comprises of covered space only. There is no open space in the approved factory premises. It is further admitted fact that the two additional machines were found lying in the open premises in uninstalled condition - the said machines had arrived in the last two days and they were lying in uninstalled condition and that one was defective and another yet to be installed and/or brought inside the factory, and these facts have not been found to be untrue and further corroborated by the supplier of the machines, in his statement u/s 14. The duty demanded from the appellant of ₹ 25 lakhs u/r 9 of the said Rules is not sustainable and further the order of confiscation is also not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Manufacture of Pan Masala and Pan Samagri, duty and penalty under Pan Masala Packing Machines Rules, 2008, confiscation of packing machines, non-declaration of additional machines, duty demand, penalty imposition, order of confiscation, appeal against rejection.

Analysis:
1. The appellant, a manufacturer of Pan Masala and Pan Samagri, appealed against the duty, penalty, and confiscation of packing machines under Pan Masala Packing Machines Rules, 2008. Central Excise Officers found unreported packing machines during a surprise check. The machines were intended for manufacturing excisable products, leading to a duty evasion suspicion.

2. The appellant failed to declare the additional machines to the department, triggering a show-cause notice for duty payment and penalty imposition. The duty demand of ?25 lakhs per machine was contested but confirmed, along with penalty and confiscation orders. The duty was demanded under the Pan Masala Packing Machines Rules, 2008, and penalties under relevant provisions.

3. The appeal before the Ld. Commissioner (Appeals) upheld the duty and penalty, stating the unreported machines could be used for manufacturing notified goods. The appellant then approached the Tribunal, arguing that the machines were found in open premises adjacent to the factory, not within the factory premises, and were not in operational condition during the inspection.

4. The Tribunal noted the machines were in uninstalled condition in open premises, not within the factory's covered area. The appellant's explanation, supported by the machine supplier's statement, indicated the machines were recently acquired and not operational. The Tribunal found the duty demand and confiscation orders unsustainable, setting them aside and allowing the appeal.

5. The Tribunal's decision revoked the duty demand of ?25 lakhs per machine and the confiscation order. The appellant was granted consequential benefits, including potential tax refunds or adjustments and provisional release of the machines. The judgment favored the appellant based on the circumstances surrounding the unreported machines and their non-operational status during inspection.