2017 (12) TMI 208 - AT - Central Excise

Clandestine manufacture and removal - pan masala - alleged cracking or tempering of the seal put on the machine on 31.08.2014 by the officers as per the request of the respondent - Held that - the Jurisdictional Assistant Commissioner made a physical inspection of the premises and the machine involved in the present proceedings. His report of inspection was produced in full in the impugned order. It is clear that based on that report, the original authority categorically recorded that possibility of the machine having been operated without removing the bottle seal and metal strip is remote. The Revenue also alleged that the case for un-accounted clearance being supported by the availability of certain packing materials and finished goods - Held that - Even if there were certain discrepancies in the recital of evidence, a case for clandestine removal of pan masala with the duty liability of ₹ 59.60,000/- can not be made without any basic evidence of actual manufacture and clearance of the impugned goods - the incidental stock, circumstantial evidence of availability of small quantity of raw material/goods was the only evidence on which such substantial demand was sought to be confirmed by the Revenue - the original authority has correctly examined the evidences and concluded that no case against the respondent could be established. Appeal dismissed - decided against Revenue.

Issues:
1. Alleged unauthorized manufacture and clearance of pan masala without payment of duty.
2. Examination of evidences gathered by officers.
3. Dropping of proceedings against respondents by the original authority.
4. Discrepancies in recital of evidence.
5. Alleged unaccounted clearance supported by availability of packing materials and finished goods.
6. Confirmation of substantial demand by Revenue.
7. Adequacy of evidence for establishing duty liability.

Analysis:
1. The appeals by Revenue were against the order of the Commissioner, CE, Jaipur-I regarding alleged unauthorized manufacture and clearance of pan masala by the main respondent without payment of duty. The main respondent had filed a declaration for installation of a packing machine and later requested sealing of the machine. Subsequent investigation raised concerns of unaccounted manufacture, leading to proceedings initiated by the Revenue proposing confiscation of seized goods and demanding central excise duty along with penalties.

2. The Revenue contended that despite the sealing of the machine, evidence suggested tampering and unauthorized activities by the respondent. The original authority was criticized for not thoroughly examining the evidence, including discrepancies in labeling and statements indicating unaccounted activities. The respondent's explanation regarding labeling discrepancies was challenged, emphasizing the importance of considering all gathered evidence.

3. The respondent's defense centered on the lack of substantial evidence supporting the Revenue's claims. The dispute primarily revolved around the integrity of the seal on the packing machine. The original authority's analysis, backed by a report from the Jurisdictional Assistant Commissioner, supported the respondent's position, highlighting the absence of concrete evidence for clandestine activities.

4. The original authority's decision to drop proceedings against the respondents was based on a detailed examination of the evidence, including the physical inspection report and explanations provided by the respondent. Despite minor discrepancies, the authority concluded that the Revenue failed to establish a case against the respondent, leading to the dismissal of the appeals.

5. The Revenue's argument of unaccounted clearance based on the availability of packing materials and finished goods was scrutinized by the original authority, who found the evidence insufficient to confirm substantial duty liability. The authority's assessment of the evidence and lack of concrete proof of unauthorized activities led to the rejection of the Revenue's claims.

6. In summary, the judgment upheld the original authority's decision, emphasizing the importance of substantial evidence to establish duty liability. The lack of concrete proof and the thorough examination of evidence by the original authority supported the dismissal of the Revenue's appeals, highlighting the necessity of robust evidence in such cases to substantiate claims of unauthorized activities and duty evasion.

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