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TMI Blog2017 (10) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... of any machine, apparatus, appliances or vessels used for processing of raw un-manufactured tobacco or mixing it with any other material. Contention of Revenue as put forth in show cause notice, that packing of Unmanufactured tobacco in pouches converts it into manufactured chewing tobacco is totally misconceived and highly presumptive. Central Excise Tariff and the exemption notifications issued in relation to Unmanufactured tobacco and Chewing tobacco do not recognize any such proposition. It can be easily seen from 2010 Rules and Notifications issued thereunder that these prescribe the effective rates of duty per packing machine per month both in respect of Unmanufactured Tobacco bearing a brand name as well as for chewing tobacco, with and without lime tube/lime pouches. Thus, mere fact that raw un-manufactured tobacco is packed in pouches on FFS packing machines does not convert such unmanufactured tobacco into a manufactured product such as chewing tobacco - The provisions of 2010 Rules and N/N. 16/2010- C.E dated 27.02.2010 further make it amply clear that the Adjudicating Authority erred in taking the view that unmanufactured tobacco is transformed into manufactured chew ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the entire duration for which the show cause notice was issued any of the 14 machines were engaged in manufacture of Shiv Baba branded scented Zarda chewing tobacco of RSP of 50 Paise per pouch. The goods confiscated were not manufactured in the said raided premises. Hence the confiscation does not sustain - demand set aside - appeal allowed - decided in favor of appellant. - E/70374, 70375 & 70376/2017-EX [ DB ] - A/71190-71192/2017-EX[DB] - Dated:- 31-8-2017 - Mr. Anil Choudhary, Member (Judicial) And Mr. Anil G. Shakkarwar, Member (Technical) Shri H.O. Tiwari (Advocate) Shri Amit Awasthi (Advocate) for Appellant Shri Rajeev Ranjan (Joint Commissioner) AR for Respondent ORDER Per: Anil G. Shakkarwar Above stated three appeals are arising out of common impugned Order-in-Original No.LKO/EXCUS/000/COM/EX/042/2016 17 dated 01/03/ 2017 passed by Commissioner of Central Excise and Service Tax, Lucknow and therefore they are taken together for decision. 2. In the impugned Order-in-Original a demand of Central Excise duty of ₹ 35,55,54,387/- has been confirmed against Shri Suresh Kumar Verma and the other 2 appellants have been imposed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w cause notice contended that on 14.10.2014 in one premise they found that raw tobacco was being processed with scent and it was being sent to another room for packing purpose and that stock of raw material found available also contained loose manufactured chewing tobacco about 16 Kg in the drums, 15 Kg chewing tobacco in the machine hoppers and 3 bundles of printed packing roll each weighing 5.4 Kg having mentioned Shiv Baba Zarda, M/s Shiv Products, Shajadpur, Akbarpur, Ambedkar Nagar, U.P., C.Ex. No.ABWPV8565CEM001, MRP '50 Paise'. In Para 43 of the said show cause notice Revenue contended that Shri Gyanendra Verma stated that they packed unbranded and Shiv Baba Brand Zarda, chewing tobacco from the pouch packing machine of chewing tobacco and on the basis of said evidence it appeared to Revenue that appellant Shri Suresh Kumar Verma was manufacturing Shiv Baba Brand scented Zarda chewing tobacco of RSP of 50 Paise per pouch and the same was classifiable under Tariff Item No. 24039910 of first Schedule to Central Excise Tariff Act, 1985 and said product was manufactured chewing tobacco and the same was covered as notified goods under Clause (c) of the Rule 2 of Chewing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nesses as well as Shri Gyanendra Verma categorically stated that unmanufactured tobacco which was filled with dust, stems, veins and some portion of leave affixed was being packed in the unbranded wrappers and that by way of cross-examination it had come up that tobacco in question was unmanufactured which also found support from the ultimate report of CRCL and that the pouches in which tobacco was packed as found in the manufacturing premises at the time of conducting the raid the pouches were totally unbranded and retail price was not mentioned on the same. They also stated that Shri Gyanendra Verma and Panch witnesses had further stated that they were not aware of any words branded/unbranded chewing tobacco and that Panchnama was signed without making them to read the same and, therefore, they contended that Panchnama and initiation of proceedings were not just and fair. They further contended that Panch witnesses during cross-examination had stated that during the examination in the factory there was no machine or instrument like mixing machine or any other material like scent or paper mint available in the factory. They further contended that Panch witnesses did not have any k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edkar Nagar (whose Proprietor is Shri Sanjeev Kumar Verma) where six electrically operated pouch packing FFS machine were seized alongwith raw materials and finished products also belongs to Shri Ram Shiromani Verma (Noticee No.1) and his younger brother Shri Suresh Kumar Verma (Noticee No.2) and was on rent to Shri Sanjeev Kumar Verma (Noticee No.3). This well planned rolls as follows: Shri Sharavan Kumar Rajpal, partner M/s Krishna Petrochem,'S-13', Industrial Area Sarojini Nagar Lucknow in his statement dated 15/04/2015 informed that he supplied Printed Laminated Rolls of 'Shiv Baba Brand' on orders to Shri Sanjeev Kumar Verma, Proprietor of M/s Shankar Traders, Akbarpur, Ambedkar Nagar since April, '2014 and payments were received through R.T.G.S. He had accepted on record that five cylinders were used in printing those laminated rolls in bill No.2 dated 10/04/2014 and the said cylinders were supplied by Shri Sanjeev Kumar Verma and were returned back to him in October, 2014. Similarly, Shri Dinesh Nag, Director of M/s Dikun Pack Pvt. Ltd., 25-B-1, Dada Nagar, Kanpur in his statement on 03/06/2015 agreed to have supplied the packing laminated Ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the tax liability of his brother Shri Suresh Kumar Verma. Following deposits have been made by Shri Ram Shiromani Verma towards the duty liability of his brother Shri Suresh Kumar Verma which has since been deposited in the Government exchequer: i. Cash amounting ₹ 20,04,000/- seized at the residential premises of Shri Ram Shiromani Verma situated at Shanti Bhawan, Mohalla Shanti Nagar, Shahjadpur, Akbarpur, Ambedkar Nagar on 14/10/2014 as detailed in Panchanama dated 14/10/2014. ii. Two cheques of ₹ 5,00,000/- each (i.e. total amounting to ₹ 10 lakhs) iii. Four cheques of ₹ 10,00,000/- each (i.e. total amounting to ₹ 40 lakhs) 47. Shri Ram Shiromani Verma (Noticee No. 1) proprietor of M/s Shiv Products and Shri Suresh Kumar Verma (Noticee No. 2) belong to the same family and are related as brothers. It has been proved from the above that Shri Suresh Kumar Verma was engaged in the clandestine manufacturing of the branded Zarda of Shiv Baba Brand, a product manufactured by M/s Shiv Products, the firm of his elder brother, alongwith manufacturing of other branded/unbranded tobacco products with the aid of 14 FFS machines in full ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Verma to pay the same. The Original Authority further appropriated ₹ 70,04,000/- already deposited. The Original Authority imposed a penalty equal to the duty on Shri Suresh Kumar Verma under Rule 25 (1) of Central Excise Rule, 2002 read with 18(1) and 18(2) of said 2010 Rules. Further the Original Authority imposed a penalty of ₹ 1 crore each on Shri Ram Shiromani Verma, proprietor of M/s Shiv Products and Shri Sanjeev Kumar Verma, proprietor of M/s Shanker Traders under Rule 26 of Central Excise Rules, 2002. Aggrieved by the said order the appellants are before this Tribunal. 5. The grounds of appeal include the following grounds:- (i) The report on the test memo issued by CRCL, New Delhi indicated that samples did not contain any lime or flavouring material and therefore the product was unmanufactured tobacco classifiable under Chapter 2401 and the same was not included by Notification issued under Section 3A of Central Excise Act, 1944 and that the said material fact has been ignored by the Original Authority. (ii) Tobacco in question was unmanufactured tobacco as clarified by CBEC through Circular No.81/5/87-CX.3 through Para-3 and Para-5 of the said Ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing tobacco and alleged in Para-40 of said show cause notice that tobacco which is packed in the pouches with the aid of pouch packing FFS machines is only used for chewing purposes and is manufactured chewing tobacco . 6.3. Two different varying stands have been taken by Revenue with regard to processes applied for manufacturing of chewing tobacco 6.4. There was absolutely no factual and evidentiary basis whatsoever to substantiate and prove the observation as recorded in the said Panchnama that chewing tobacco, scented zarda was being manufactured by mixing raw tobacco with scent etc. 6.5. No evidence has adduced or relied upon in the show cause notice to show that the Appellant ever purchased any kind of spices, perfumes, lime or any other kind of material that could be used for mixing with raw un-manufactured tobacco to render its transformation into manufactured chewing tobacco . 6.6. The investigating officers have nowhere recorded in the Panchnama discovery of any machine, apparatus, appliances or vessels used for processing of raw un-manufactured tobacco or mixing it with any other material. 6.7. Even though the said Panchnama dated 14.10.2014 states th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tally misconceived and highly presumptive. Central Excise Tariff and the exemption notifications issued in relation to Unmanufactured tobacco and Chewing tobacco do not recognize any such proposition. It can be easily seen from 2010 Rules and Notifications issued thereunder that these prescribe the effective rates of duty per packing machine per month both in respect of Unmanufactured Tobacco bearing a brand name as well as for chewing tobacco, with and without lime tube/lime pouches. Thus, mere fact that raw un-manufactured tobacco is packed in pouches on FFS packing machines does not convert such unmanufactured tobacco into a manufactured product such as chewing tobacco. 6.12. The provisions of 2010 Rules and Notification No.16/2010- C.E dated 27.02.2010 further make it amply clear that the Adjudicating Authority erred in taking the view that unmanufactured tobacco is transformed into manufactured chewing tobacco simply on account of packing in pouches of FFS Machines, irrespective of the nature of tobacco packed in pouches. 6.13. The show cause notice as well as the impugned Order-in-Original have complete disregard for the Test Reports received from 'CRCL', Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f said Test Reports and relying solely upon the contents of the Panchnamas drawn at the said two factory premises and statements of few persons which did not even stand to the test of veracity during the course of cross examination allowed by the Learned Respondent himself. 6.16. The Original Authority did not discuss and record any findings on the contention put forth by the Appellant that the Panchnamas drawn at the said two raided premises do not constitute any piece of reliable, relevant and admissible evidence to arrive at a conclusive finding with regard to the process of manufacture and the nature and kind of tobacco, whether unmanufactured or manufactured chewing tobacco, being packed in unbranded pouches on pouch packing machines at the said factory premises. Neither the said two Panchnamas nor the statement of various persons recorded during the course of investigations provide any explanation as to on what physical or chemical examination basis the investigating officers recorded the tobacco packed in jute bags as unmanufactured (Kachhi) tobacco whereas the tobacco recovered from drums or hoppers of the packing machines was recorded as Chewing Tobacco. Under afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in pouches bearing no brand name. 6.18. It was contended that the Original Authority did not appreciate the significance and outcome of the cross examination of Panchas and witnesses conducted before him and has recorded a totally untenable finding that From the cross examination nothing came out regarding the Panchnama which was challenged by the Noticee as well as nothing came out regarding their claim that the goods were unmanufactured unbranded tobacco as claimed by the Noticee . On the contrary, it can be easily seen from the record of cross examination proceedings , available at pages from 97 to page 110 of the paperbook, that all the Panch witnesses as well as Mr. Gyanendra Verma have categorically stated during the course of cross examination that tobacco as received in jute bags is first taken out of the jute bags and then put into drums and from the drums it is poured into hoppers of packing machines for packing in pouches of green colour bearing no brand name. They also confirmed that there exist no mixing machines and no material such as Scent or Menthol is mixed in the tobacco which is packed in pouches. The Panch witnesses as well as Mr. Gyanendra Verma fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pouches is unmanufactured tobacco or manufactured chewing tobacco. The Appellant also placed reliance upon judgments wherein it has been held that unmanufactured tobacco merely broken by beating, crushing and sieving and packed in retail packets without adding any ingredients like perfume, menthol, lime, katha, cardamom, spices, silver foil etc. is appropriately classifiable under heading 24.01 of the CETA. The learned counsel for the appellants further relied upon following case laws:- (i) Damodar J Malpani vs. CCE reported in 2002 (146) ELT 483 (SC) (ii) Yogesh Associates vs. CCE, Surat-II reported in 2006 (195) ELT 196 (Trib.-Mum) Affirmed by SC (iii) Suresh Enterprises Vs. CCE, Pune reported in 2006(203) ELT 432 (Trib.-Mum) (iv) CCE, Kanpur Vs. Ravindra Co. reported in 2000(120) ELT 699 (Trib.) (v) TPNS Chettiar Parvathi Vilas Tobacco and Cigars Co. vs. CCE reported in 1989 (41) ELT 79 (Trib.) (vi) Ishwar Grinding Mills vs. CCE, Calcutta-I reported in 2000(117) ELT 743 (Trib.) (vii) Shrikant Prasad vs. CCE, Calcutta-I reported in 2000(117) ELT 345 (Trib.) 6.21. To conclude the Appellant submitted that apart from the said two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Original Authority also in his impugned order in original has completely ignored the following submissions put forth before him; (a) Shri Sanjeev Kumar Verma, in charge of the premises of M/s Shankar Traders in his statement dated 14.10.2014 nowhere admitted that pouch packing machines in the said premises were being used for packing and clearance of Shiv Baba Brand Scented Jarda Tobacco. Further in his letter dated 06/04/2015 he categorically stated that only unbranded tobacco has been packed on the machines installed in the premises and branded tobacco has never been packed. (b) With regard to the recovery of printed packing rolls from the factory premises at Yahiya Kamalpur, Shri Sanjeev Kumar Verma in his statement dated 26/06/2015 stated that printing of packing material for packing of Shiv Baba Brand Scented Supari/ Pan Samigri belonging to his factory is carried out at the same place where the printing of rolls of Shiv Baba Brand for packing of Scented Zarda Tobacco belonging to the factory of Shri Ram Shiromani Verma is carried out and it is only by mistake that packing rolls for packing of Shiv Brand Zarda were off loaded at Yahiya Kamalpur along with pack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... othing but RAW UNMANUFACTURED TOBACCOO. In view of such categorical Test Reports there exists no factual and logical basis whatsoever to even allege that the Appellant was engaged in manufacture and clearance of Shiv Baba Brand Scented Zarda Chewing Tobacco. 7. Learned DR has submitted that as reported by CRCL the samples did not contain any flavouring compound but since the goods manufactured by the appellant were branded goods they were branded unmanufactured tobacco and therefore as per as per the said Notification issued under said Section 3A they were subjected to levy under Section 3A of Central Excise Act, 1944. 8. Having considered the rival contentions and on perusal of record at the outset we do not agree with the contention of learned DR for the reason that it has been very clearly stated in the whole proceedings that Panch witnesses of Panchnamas dated 14.10.2014 and others concerned have stated in their statements and during cross examination that tobacco was being packed on machines in green colour paper on which no brand was mentioned and no MRP was mentioned and therefore we do not find contention of learned DR that goods were branded to be tenable in law. We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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