2019 (7) TMI 904 - AT - Central Excise

Manufacture of Gutkha - duty discharged under the provisions of Pan Masala Packing Machines (Capacity Determination and collection of duty) Rules, 2008 as amended - Mis-declaration of the value of production - case of assessee is that In the present case the highest MRP Goods i.e. ₹ 3 MRP were not manufactured for whole month but only for a day - Section 3A and PMPM Rules, 2008 - imposition of penalties - HELD THAT - The Unit had filed declaration on 01.04.2011 in terms of Rule 6 of PMPM Rules wherein they declared the details of packing machines to be used for packing of Gutkha along with specific MRP of the pouches. However the unit was found to be engaged in packing pouches of higher MRP in contravention of declaration filed by them under Rule 6 of PMPM Rules, 2008 - Clearly the Appellant unit contravened the provisions of Rule 6 (6), 7 and 9 of the PMPM Rules, 2008 and since the notified goods were manufactured in contravention of their declaration, therefore as per the provisions of Rule 9 of the PMPM Rules, 2008 the rate of duty applicable to goods of Highest RSP, ₹ 3 in this case will be applicable in respect of all packing machines operated by the Appellant and they are liable to pay duty as per said RSP on all machines. Personal penalty imposed upon the Appellant Shri Dilipkumar Amrutlal Jani, director of the Appellant Unit and Shri Jagdishprasad Mohanlal Joshi and Shri Sachin Joshi - HELD THAT - The impugned goods were manufactured in violation of Rule 6 of PMPM Rules, 2008 and since Shri Dilipkumar Amrutlal Jani being involved in violation of subject rules being director of the unit is liable for penalty. However considering the amount of duty and imposition of penalty on the company, we are of the view that personal penalty imposed upon Shri Jani is on higher side, which requires reduction - penalty imposed upon Shri Dilipkumar Amritlal Jani is reduced from ₹ 5,00,00,000/- to ₹ 4,00,00,000/-. Penalty on Shri Jagdish M Joshi and Shri Sachin Joshi - Applicability of section 270 - HELD THAT - No involvement of above persons is on record. We do not find any act committed by both Appellants to evade payment of duty or to violate the Pan masala packaging Rules. Shri Dilipkumar Amrutlal Jani has not named any of these persons to be involved in any act of violation of law nor any of the persons whose statements has been relied upon i.e. production Manager or Supervisors has named the Appellants to be involved in any act of violation - In absence of any evidence of involvement of both of these persons in any act of violation of Pan masala Packing Machinery Rules, 2008 or central excise law, we do not find any reason to impose penalty upon them. We therefore set aside the impugned order only to the extent, it imposes penalty upon Shri J.M. Joshi and Shri Sachin Joshi, resultantly the penalty on both of these persons is set aside. Appeal allowed in part.

Summary

Issues Involved:
1. Misdeclaration of manufacturing details under PMPM Rules, 2008.
2. Demand for duty based on highest MRP.
3. Personal penalties on directors and individuals involved.
4. Violation of principles of natural justice regarding cross-examination of witnesses.

Issue-wise Detailed Analysis:

1. Misdeclaration of Manufacturing Details under PMPM Rules, 2008:
The appellants, M/s Shree Meenakshi Food Products Pvt. Ltd. (SMFPPL), had filed a declaration under Rule 6 of the PMPM Rules, 2008, specifying the details of their packing machines and the MRP of the Gutkha pouches they were manufacturing. However, during a surprise check, it was found that the actual MRP of the pouches being manufactured did not match the declared MRP. For example, machines declared to manufacture pouches of ?1/- MRP were found to be manufacturing pouches of ?1.5/- MRP. This constituted a violation of the PMPM Rules, 2008, specifically Rule 6 (6), 7, and 9.

2. Demand for Duty Based on Highest MRP:
Due to the misdeclaration, the authorities applied Rule 9 of the PMPM Rules, 2008, which mandates that if notified goods are manufactured in contravention of the declaration, the duty is to be calculated based on the highest MRP of the goods. In this case, the highest MRP was ?3/-. Consequently, a duty demand of ?22,32,00,000/- was raised against SMFPPL. The Tribunal upheld this demand, stating that the language of the rules was clear and that the duty must be paid based on the highest MRP of ?3/- for all machines.

3. Personal Penalties on Directors and Individuals Involved:
Penalties were imposed on the directors and individuals involved, including Shri Dilipkumar Amrutlal Jani, Shri Jagdishprasad Mohanlal Joshi, and Shri Sachin Joshi. The Tribunal found that Shri Dilipkumar Amrutlal Jani, being involved in the management of the unit, was responsible for the violations and upheld the penalty against him, though it reduced the amount from ?5,00,00,000/- to ?4,00,00,000/-. However, for Shri Jagdishprasad Mohanlal Joshi and Shri Sachin Joshi, the Tribunal found no evidence of their involvement in the violations. The statements of employees relied upon were not recorded in the context of the present case, and cross-examination of these witnesses was denied, violating principles of natural justice. Consequently, the penalties against Shri Jagdishprasad Mohanlal Joshi and Shri Sachin Joshi were set aside.

4. Violation of Principles of Natural Justice Regarding Cross-examination of Witnesses:
The Tribunal noted that the statements of employees used as evidence were recorded in relation to another case and not the present one. The appellants' request for cross-examination of these witnesses was denied, which was a violation of the principles of natural justice as outlined in Section 9D of the Central Excise Act, 1944. The Tribunal referred to the Supreme Court's decision in Andaman Timber Industries Vs CCE, Kolkata, which emphasizes the right to cross-examination. Therefore, the Tribunal ruled that these statements could not be relied upon to impose penalties on Shri Jagdishprasad Mohanlal Joshi and Shri Sachin Joshi.

Conclusion:
The appeal filed by M/s Shree Meenakshi Food Products Pvt. Ltd. was dismissed, upholding the duty demand and penalties based on the highest MRP. The appeal filed by Shri Dilipkumar Amrutlal Jani was partly allowed, reducing his penalty. The appeals filed by Shri Jagdishprasad Mohanlal Joshi and Shri Sachin Joshi were allowed, setting aside the penalties imposed on them due to lack of evidence and violation of natural justice principles.