2019 (6) TMI 193 - AT - Central Excise

Clandestine removal - Pan Masala, Mouth Freshner and Chewing Tobacco - Compounded Levy Scheme - case of appellant is that SCN is issued on the basis of assumptions and surmises - HELD THAT - The goods found in possession of the Appellant were manufactured by the said company and even if the Appellant had obtained the goods from somewhere else and not from the company, the duty on the said goods had been received by the Revenue under the compounded levy scheme. In any case, Central Excise duty is required to be paid by the manufacturer and since the Appellant is not the manufacturer of the said goods, duty cannot be recovered from the Appellant. Further, it has been recorded by the Commissioner (Appeals) that there is no evidence on record to show that the Appellant had manufactured the said goods. Department is of the view that the Appellant had gotten the impugned goods manufactured from somewhere else and was operating under the guise of being a simple trader. However, since the Department has failed to bring any evidence on record to establish that the Appellant was indeed manufacturing the said goods or getting the same manufactured from some other manufacturing unit, the burden of discharging Central Excise duty cannot be harnessed on the Appellant - I disagree with the findings of the Commissioner (Appeals) that since the Appellant (not being the manufacturer) was unable to submit documentary evidence of purchase of the impugned goods, the onus of proving the duty payment of the said goods shifted onto the Appellant. The investigating authority has neither proven that the goods were being manufactured by the Appellant nor established that the goods could not have been procured from the open market. Since, there is no evidence to the contrary, I accept the contention of the Appellant that the goods had been procured before the ban on sale of Chewing Tobacco and since the Appellant could not trade in the impugned goods pursuant to the ban, the goods were simply lying at the Appellant s premises. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Recovery of Central Excise duty on seized goods
2. Confiscation of seized goods
3. Imposition of penalty under Section 11AC of the Act
4. Appeal against the Adjudication order

Analysis:

Issue 1: Recovery of Central Excise duty on seized goods
The Department issued a Show Cause Notice proposing the recovery of Central Excise duty on the seized goods, alleging clandestine removal. The Appellant failed to produce documentary evidence regarding the purchase of the goods. The Adjudicating Authority confirmed the demand along with interest, leading to the imposition of a substantial amount as duty. However, the Appellant argued that as a mere peddler, he was not aware of the duty payment obligations, as it should have been the responsibility of the manufacturer. The investigating authorities failed to establish that the Appellant was the manufacturer or had procured the goods from an unauthorized source. The Tribunal noted that the duty payment was under the compounded levy scheme, and since the Appellant was not the manufacturer, the duty recovery from him was unjustified.

Issue 2: Confiscation of seized goods
The Adjudicating Authority ordered the confiscation of the seized goods under Rule 25 of the Central Excise Rules, 2002. The Commissioner (Appeals) upheld this decision. However, the Tribunal found that since there was no evidence linking the Appellant to the manufacturing of the goods, the confiscation order was not sustainable. The Tribunal set aside the confiscation order in favor of the Appellant.

Issue 3: Imposition of penalty under Section 11AC of the Act
In addition to the duty recovery and confiscation, penalties were imposed on the Appellant under Section 11AC of the Act along with Rules 25 and 26 of the Central Excise Rules, 2002. The Appellant contended that the Show Cause Notice was based on assumptions and surmises, emphasizing his role as a peddler rather than a manufacturer. The Tribunal observed that without concrete evidence linking the Appellant to the duty payment obligations, the imposition of penalties was unwarranted. Consequently, the Tribunal set aside the penalties imposed on the Appellant.

Issue 4: Appeal against the Adjudication order
The Appellant appealed against the Adjudication order, challenging the demand, confiscation, and penalties imposed. The Tribunal, after considering the arguments from both sides and examining the investigative reports, concluded that the Department failed to establish the Appellant's liability for duty payment or involvement in manufacturing activities. Therefore, the Tribunal allowed the appeal, setting aside the impugned orders and granting consequential benefits to the Appellant.

In conclusion, the Tribunal ruled in favor of the Appellant, emphasizing the lack of evidence linking the Appellant to duty payment obligations or manufacturing activities. The decision highlighted the importance of establishing clear liability before imposing duty recovery, confiscation, or penalties on the concerned party.