2018 (3) TMI 1550 - AT - Central Excise

Compounded levy scheme - Rule 9 of the Chewing Tobacco & Unmanufactured Tobacco Packing Machines (Capacity Determination & Collection of Duty) Rules, 2010 - Held that - the appellant was a registered dealer under the Central Excise Department, manufacturing and packing unmanufactured tobacco from registered premises. The said registered premises, was admittedly washed away during the month of June, 2011 due to heavy rain. The rejection of documentary evidence regarding purchase of the FFS machine is erroneous, as firstly the statement of Shri Beni Prashad Sharma is vague and secondly he has admitted that the said receipt No.299 is out of his bill book. Further oral evidence of Shri Beni Prashad Sharma have got no evidentiary value, as he was neither examined in the adjudication proceedings and the same is hit by Section 9D of the Central Excise Act - the appellant is liable to pay Central Excise duty on pro-rata basis only for two days for having started production on the FPS machine from 29/06/2011 for the month of June, 2011. Penalty - Held that - the seized FFS Machine and finished products (BCT) have been destroyed in the custody of the Department and thus the appellant had already suffered substantial loss - penalty upheld. Confiscation - redemption fine - penalty - Held that - the confiscation of vehicle -Maruti Eco bearing Registration No.UP41 N0892, is upheld but in the interest of justice the redemption fine is reduced to ₹ 15,000/- - penalty imposed on Shri Mohammad Faheem under Rule 26 of the Central Excise Rules, 2002, is also reduced to ₹ 5,000/-. Appeal allowed in part.

Summary

Issues Involved:
1. Legitimacy of the demand for Central Excise duty for four months.
2. Validity of the purchase receipt for the FFS machine.
3. Confiscation of goods and vehicle.
4. Imposition of penalties on the appellant and Shri Mohammad Faheem.

Detailed Analysis:

1. Legitimacy of the Demand for Central Excise Duty for Four Months:
The appellant contended that the duty calculated for four months was based on assumptions and presumptions. The appellant argued that the manufacturing activity at the new premises started only after the original premises were washed away by heavy rain in June 2011. This was corroborated by a certificate from the Gram Pradhan and the statement of the landowner. The appellant also produced a purchase receipt dated 28/06/2011 for the FFS machine, indicating that it was installed and used only for two days before the search on 01/07/2011. The Tribunal found that the appellant's evidence was credible and held that the duty should be calculated on a pro-rata basis for two days in June 2011, as per the last proviso of Rule 9 of the Chewing Tobacco & Unmanufactured Tobacco Packing Machines (Capacity Determination & Collection of Duty) Rules, 2010.

2. Validity of the Purchase Receipt for the FFS Machine:
The Revenue had rejected the purchase receipt on the grounds that the proprietor of M/s Beni Engineering Works, Kanpur, denied issuing the bill. However, the Tribunal noted that the proprietor admitted the bill was from his firm and that copies of the bill were detached from his bill book. The Tribunal found the denial by the proprietor to be vague and unsupported by evidence. The Tribunal held that the documentary evidence of the purchase receipt should be relied upon, as the oral evidence was not examined during adjudication and was thus inadmissible under Section 9D of the Central Excise Act.

3. Confiscation of Goods and Vehicle:
The Tribunal upheld the confiscation of the vehicle but reduced the redemption fine to ?15,000. The Tribunal also noted that the seized FFS machine and finished products had been destroyed while in the custody of the Department, leading to substantial loss for the appellant. Therefore, the Tribunal did not find any reason to uphold the penalty related to the confiscated goods.

4. Imposition of Penalties on the Appellant and Shri Mohammad Faheem:
The Tribunal found that the appellant had already suffered a substantial loss due to the destruction of the seized goods and machine. Consequently, the Tribunal did not uphold the penalty on the appellant. However, the penalty imposed on Shri Mohammad Faheem under Rule 26 of the Central Excise Rules, 2002, was reduced to ?5,000.

Conclusion:
The Tribunal set aside the order of the Commissioner (Appeals) and allowed the appeal in part. The duty for two days along with interest was to be deducted from the pre-deposit amount, and the remaining amount was to be refunded to the appellant. The appeal filed by M/s Eagle Tobacco Co. was thus allowed in part.