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TMI Blog2011 (4) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... aken the credit or after receiving the same and availing the credit, the same stand removed by them in the open market - If there was no willful suppression, the clandestine activities which are nothing but malafide activities on the part of the assessee, cannot be upheld - Appeal is allowed - E/682/2010 - - - Dated:- 7-4-2011 - Mrs. Archana Wadhwa, Dr. P. Babu, JJ. Shri V.K. Agarwal, Adv. for the Assessee; Shri I. Ahmed, SDR for the Revenue. Per: Mrs. Archana Wadhwa: The appellant is engaged manufacture of Gutkha, which was assessable to duty on ad-valerom basis during the period in question i.e. prior to 1.7.08. Vide Circular No.854/12/2007-CX, dt.7.9.07 issued by CBE C in exercise of powers conferred under Rule 31 of Central Excise Rules, 2002, all manufacturers of Pan Masala, Gutkha and Chewing Tobacco were required to declare the details of the packing machines used by them for filling and packing of pouches or containers along with other particulars of the machines like make and model etc. The said circular also prescribed the procedure for non-working packing machines, requiring the assessee to file intimation with their jurisdictional Central Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty was not payable on number of machines in operation and/or on number of pouches produced/manufactured during the month, but the same was on the basis of ad-valerom value on the actual production; that the entire Show Cause Notice has been issued only on assumptions and presumptions, not supported by any evidence; that the allegations of clandestine removal cannot be upheld against them on the ground that the actual production reflected by them in their records was less than the average production declared by them; that the circular only required the manufacturer of Gutkha to file a declaration which they have filed and there is nothing in the said circular to show that an assessee must produce average production declared by them; that the average production of 3300 pouches per machine per hour could not be produced by them on various reasons such as machines being old, their maintenance, power failure, labour shortage, delay in receipt of raw material and its processing, changes in the size of pouches, etc., as also the market demand; that they had been intimating the department about the closure of production activity on account of festival, labour problem, market conditions et ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire facts were in the knowledge of the Revenue in which case the extended period of limitation cannot be invoked against them. 5. The Commissioner vide his impugned order did not find favour with the appellant s submission and confirmed the demand of duty as proposed in the notice along with confirmation of interest. However, he imposed penalty of Rs.1 Crore on the appellant in terms of provisions of Rule 25 (1) of Central Excise Rules, 2002. The said order is impugned before us. 6. Shri V.K. Agarwal, learned Advocate appearing for the appellant has mainly reiterated the same submissions which were made before the adjudicating authority. It stand contended by the learned advocate that the duty stand confirmed in respect of huge number of more than 23 crores pouches of Gutkha from the factory. The only basis for holding against the appellant is the comparison of actual production of pouches manufactured by the appellant and reflected in the returns with the declared production capacity of 3300 pouches per machine per hour. By drawing our attention to various decisions, he submitted that such calculative basis cannot be made the justifiable ground for holding that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as correct reflection of the facts and need not be proved by other evidences. 9. We find that the entire basis for raising and confirming the demand against the appellant is the declaration made by them in terms of Board s circular. We have gone through the said circular which requires the manufacturer of Gutkha, Pan Masala, Tobacco etc to give intimation about the number of machines installed in their factory and the working capacity of the same. There is nothing in the said circular laying down that the manufacturers are required to discharge the duty liabilities in accordance with the declaration made by them. In fact, any contravention of the procedure detailed in the circular invited penal action only, as mentioned therein. The charges against the appellant are that they have clandestinely manufactured and cleared the Gutkha without payment of duty inasmuch as the production shown by them is less than the production declared in the declaration. Such charges are required to be proved independent of average production declared by the appellant. Apart from the above reasons, there is virtually no other evidence on record to reflect upon the fact of clandestine manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mating the department about the closure of the production activities on account of festivals, labour charges, market conditions etc. Such intimations were duly acknowledged by the Revenue. Our attention was drawn to the correspondence exchanged between the appellant and their jurisdictional authority, in the month of December, 2007, wherein it was mentioned that there was difference in day to day production as they generally take production as per market demand and all machines do not run all the time of the day. Similarly, vide their letter dt.2.1.08, the appellant intimated the Deputy Commissioner that they would try to increase their sale to generate more revenue for the Government. In their subsequent letter dt.15.5.08, the appellant gave the reasons for low average production per month for the months February 2008 to April 2008, clarifying that as all the packing machines are not branded and are very old and require frequent maintenance, they cannot run at full capacity for 24 hours in a day. 13. The ld.Advocate has drawn our attention to various precedent decisions to support his argument that clandestine activities are required to be established beyond doubt before duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons adopted by the adjudicating authority for imposition of penalty upon the appellant. 14.14 I find that the assessee has furnished the declaration on 7.9.07 about the average production of the pouches. The assessee has been filing the ER-1 returns regularly and has been periodically intimating about change of shift, shutting down of plant, sealing or de-sealing of machines, closure of production activity, starting of production of new brand, extension of closure, sale of machines to the Range Superintendent. If there was a difference between actual production as shown in ER-1 with that of declaration filed, it was known to the department and available on record. So, in my opinion, there was no willful suppression of facts by the assessee attracting the mischief of Section 11AC of Central Excise Act, 1944. Therefore, mandatory penalty is not imposable on the assessee under Section 11AC ibid. However, the assessee has committed offence of the nature as described in Clause (b) of sub-rule (1) of Rule 25 inasmuch as they have not accounted for Gutkha manufactured by them. So, the assessee is liable for penal action under Rule 25 of Central Excise Rules, 2002. 16. As i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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