2002 (9) TMI 603 - AT - Central Excise

Issues Involved:
1. Lack of personal hearing by the adjudicating authority.
2. Duty demand based on the shortage of essence without evidence of other raw materials.
3. Seizure of pan masala in loose form.
4. Penalty imposition on the proprietor of the firm.
5. Penalty imposition on the trading firm for storing non-excisable supari.

Detailed Analysis:

1. Lack of Personal Hearing by the Adjudicating Authority:
The appellants contended that the adjudicating authority did not afford them a personal hearing before passing the impugned order. However, this ground was not elaborated upon in the judgment.

2. Duty Demand Based on Shortage of Essence:
The appellants argued that the duty demand was based solely on the shortage of essence, without evidence of other raw materials such as supari, katha, and lime, which are used in the manufacture of pan masala. They contended that clandestine manufacture and removal of the final product could not be inferred from the mere shortage of one raw material. However, the Tribunal found that the shortage of essence, along with the presence of other raw materials in unregistered premises, was sufficient to infer clandestine manufacture and removal. The Tribunal noted that 4300 kgs of supari, capable of producing 6143 kgs of pan masala, was found in unregistered premises, and other ingredients were also found. The duty demand was calculated based on the statement of the proprietor regarding the raw materials required for manufacturing pan masala, leading to a confirmed duty demand of Rs. 1,72,36,731.60.

3. Seizure of Pan Masala in Loose Form:
The appellants challenged the seizure of 1882 kgs of pan masala in loose form, arguing that it had not reached the RG-1 stage. The Tribunal upheld the seizure, noting that the pan masala contained all essential ingredients and was marketable. The plea that 507 kgs of pan masala was either waiting for packing or damaged during packing was rejected as the firm failed to account for it in the statutory records.

4. Penalty Imposition on the Proprietor of the Firm:
The Tribunal found that the penalty of Rs. 1,00,000 on the proprietor, appellant No. 2, was not legally maintainable. In the earlier adjudication order, the penalty was only Rs. 25,000, and the enhancement was deemed illegal. Additionally, the Tribunal held that a penalty on the proprietor could not be imposed when the firm had already been penalized. Therefore, the penalty on the proprietor was set aside.

5. Penalty Imposition on the Trading Firm for Storing Non-Excisable Supari:
The appellants argued that no penalty could be imposed on appellant No. 3 as the stored supari was non-excisable. The Tribunal rejected this argument, stating that supari is a raw material for pan masala, and storing it with knowledge of its use in manufacturing pan masala justified the penalty. However, the Tribunal reduced the penalty on appellant No. 3 from Rs. 5,00,000 to Rs. 50,000, aligning it with the penalty in the earlier adjudication order.

Conclusion:
The Tribunal upheld the Commissioner's order with modifications. The penalty on the proprietor was set aside, and the penalty on the trading firm was reduced. The duty demand based on the shortage of essence and the seizure of pan masala were affirmed, and the penalties imposed on the firm and the trading firm were largely upheld.

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