1998 (3) TMI 253 - AT - Central Excise

Summary

Issues: Alleged suppression of actual production of Branded Chewing Tobacco and clandestine removal by the appellants.

In this case, the dispute revolved around the alleged suppression of actual production of Branded Chewing Tobacco falling under Chapter sub-heading 2404.41 and their clandestine removal by the appellants during the period from November 1987 to October 1992. The Department alleged that the appellants had suppressed the actual quantity of production by adding other ingredients like Musk Bhola, Pondry, Glycerine, Spices, Menthol, etc., resulting in an increase in weight of the final product. The Collector found that the appellants had not entered the actual quantity of ingredients in the required register, leading to suppression of vital facts with the intention to evade duty.

The appellants argued that the weight gain on account of mixing ingredients was temporary and would return to its original weight once the liquid part dried during the manufacturing process. They highlighted that the Tribunal had previously ruled in their favor in a similar case, where it was found that the increase in weight due to the addition of chemicals and perfumes was temporary. The appellants also contended that the Collector's observation regarding the pilot experiments conducted by the officers was factually incorrect, as the experiments were conducted on different dates. They emphasized that the duty demand should not be based on a general formula of other units' manufacturing processes, as ingredients and processes varied among manufacturers.

The Tribunal considered the previous ruling in a related case, which concluded that the weight gain due to added substances was temporary and settled down to the weight of the colored leaves. The Tribunal found that the Collector had disregarded this finding and had based the duty demand on a hypothetical assumption. The Tribunal agreed with the appellants that the weight gain or loss in the final product depended on the ingredients used and the manufacturing processes, which varied among manufacturers. Therefore, the Tribunal held that the impugned order was unsustainable both on facts and law, ultimately allowing the appeal and setting aside the Collector's order.