2019 (2) TMI 938 - AT - Central Excise

Clandestine manufacture - seal of machinery found to be broken - closure of factory - demand on the ground that the seal having been broken accidently during the period of closure, it is assumed that the said machine was used for production activities - N/N. 42/2008-CE dated 01.07.2008 - Held that - Revenue in their memo of appeal, apart from reiterating the same allegation as were made in the show cause notice, has not further adduced any evidence to show that the broken seal of the machine has led to the use of the machine and the machine has produced Gutkha pouches on the same. The Commissioner has given a detailed finding and has also taken into account the report of the Deputy Commissioner indicating absence of any mala fide on the part of the assessee. Such report of the Deputy Commissioner is also based upon the scrutiny of various relevant documents and has not been controverted and rebutted by the Revenue. Appeal dismissed - decided against Revenue.

Summary

Issues: Alleged contravention of Central Excise Rules and Pan Masala Packing Machines Rules leading to non-payment of duty, penalty, and interest.

Analysis:

1. Issue of Seal Removal and Duty Evasion: The case revolved around the removal of seals from packing machines by the assessee, leading to a contravention of Central Excise Rules. The Revenue contended that the assessee failed to pay Central Excise Duty amounting to ?49,16,667 due to the unauthorized removal of seals, as per Section 11A of the Central Excise Act, 1944 and related rules. The breach was identified from June 16, 2011, to July 10, 2011, resulting in the duty liability. The Revenue sought recovery of the unpaid duty, interest, and penalty from the assessee.

2. Adjudication and Commissioner's Order: During the adjudication process, the assessee explained that the seal was detached accidentally while cleaning the factory during a period of closure, and no manufacturing activity took place. The Deputy Commissioner's investigation found no mala fide intention on the assessee's part and recommended closure of the case. The Commissioner, considering the Deputy Commissioner's report, concluded that there was no evidence of unauthorized manufacturing activities. The Revenue failed to provide substantial evidence to prove the allegations, and the broken seal alone did not establish production activities. Consequently, the Commissioner dropped the proceedings against the assessee.

3. Appellate Tribunal Decision: The Revenue appealed the Commissioner's order, reiterating the initial allegations but failed to present additional evidence supporting their claims. The Tribunal noted the lack of substantial evidence from the Revenue to counter the Deputy Commissioner's findings, which indicated no mala fide intentions on the part of the assessee. As the Revenue could not establish unauthorized manufacturing activities based on the broken seal alone, the Tribunal upheld the Commissioner's decision and rejected the Revenue's appeal, emphasizing the absence of solid evidence to substantiate the allegations.

In conclusion, the Tribunal upheld the Commissioner's decision, emphasizing the importance of substantial evidence to prove allegations of duty evasion and unauthorized manufacturing activities. The case highlighted the significance of thorough investigations and the burden of proof on the Revenue to establish violations conclusively.