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TMI Blog2019 (6) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... s SEPL that they were purchasing Culcutti tobacco / raw tobacco from farmers and undertook during, cutting, crushing and grinding of tobacco and convert the same into Gadia Powder , which was packed in 50 kg bags. No evidence has been adduced by the Department to show that the appellants purchased any katha, calcium oxide or flavouring agents. Even the chemical examiner in his report never stated that the goods were fermented and subsistence like calcium oxide, katha were added to the goods in order to hold the goods as chewing tobacco; the process of chewing tobacco is not complete unless it is fermented and liquored. Whereas the report of the chemical examiner says that the same is a coarse brown powder and if the same would have been chewing tobacco, it would not have been coarse brown powder as after mixing of katha and calcium oxide, the product may not remain so. The appellants had requested for cross examination of the chemical examiner as well as the cross examination of persons, under the provisions of Section 9D of the Central Excises Act, whose statements were relied upon. However, no such opportunity was granted to them - When the appellants since the very first day its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. M/s Sopariwala Exports Pvt Ltd (SEPL), another group company is also engaged in processing of tobacco for exports. The Appellant were issued show cause notice alleging that the Appellant factory was visited by the preventive officers and it was found that the Appellant are engaged in manufacture and clearance of excisable goods, viz. "Afzal" brand Snuff tobacco products falling under Chapter 24 of CETA, 1985 without Central excise registration and without payment of duty. That during search Machines namely Trombler Machine, Feeder Netware Machine, Grad well machine (Charotar Machine), Y Bro Screen (Rava Machine), Hath Channa, Umity Fire Tank, Vibrator Machine (Rava), Vinovar Fan and Blower Machine (Fan) were found. 1152 bags of Afzal Brand Snuff Tobacco and certain raw materials i.e raw tobacco, tobacco "Dakhra", colol, Katha, empty bags bearing "Afzal (Reg.) & Best Quality Snuff Tobacco" were allegedly found in unit. The 1152 bags of Afzal Brand Snuff Tobacco contained the following inscription : AFZAL (REGD.) BEST QUALITY SNUFF TOBACCO SOPARIWALA EXPORTS PVT LTD POST BAG NO. 9992, 'NIRMAL'. 21ST FLOOR NARIMAN POINT, MUMBAI-400 021 (INDIA) TEL : 91-22-66396666, FAX : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The samples of Afzal brand Snuff Tobacco and Tobacco powder were sent to the Chemical examiner at Vadodara on 25.1.08 for testing, who vide his letter No.RCL/AH/Prev./49/1173 dated 28.3.2008 reported that "The sample is in the form of coarse brown powder. It is other than snuff. The sample U/R may be considered as manufactured Tobacco". Vide letter No. RCL/AH/Prev./48/117 dated 28.03.2008, the Chemical Examiner reported that "the sample is in the form of brown powder. It is other than Snuff. The sample U/R may be considered as manufactured Tobacco". Further, the Chemical Examiner, CECL, Vadodara vide his letter F.No. RCL/AH/Prev./48-49/08-09 dated 22.04.2009 communicated the ingredients in both samples of manufactured products. He reported, as under :- 1. Afzal brand snuff Tobacco : The sample mainly contains tobacco powder and in smaller quantities of Calcium Oxide (CaO), Katha, Flavouring agents. 2. Tobacco powder : The sample mainly contains tobacco powder and in small quantities of Calcium Oxide (CaO), Katha, Flavouring agents. The samples u/r are not showing the presence of any foreign substances in the observations and tests conducted. 1.4 It was alleged that in view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant has rented a portion of their unit to M/s BTCPL. However, there was nothing to indicate that part or entire premises was occupied by some other firm or company. That the appellant has all the machines, which were used in manufacture of "other manufactured tobacco and manufactured tobacco substitutes - other "falling under chapter sub-heading 2403.99 of the CETA, 1985. The seized goods were Snuff and Appellant are actually manufacturers of the seized goods. No account of procurement of raw material and the production of the said 1152 bags of manufactured tobacco was maintained by the appellant. It appears that the appellant is purchasing Tobacco from farmers, the leaves of tobacco is dried and then cut to pieces by machines and then crushed / grinded in the grinding machines. Through these processes, the leaves of tobacco are converted into powder form, which is known as " Gadia Powder". The said Gadia Powder is manufactured tobacco packed in pre-printed HDPE bags bearing printed brand name "Afzal (Regd) " best quality snuff tobacco and cleared in the domestic market without following the central excise procedure. That the Chemical Examiner vide communication dated 22.4.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice was adjudicated thereby ordering confiscation of seized goods and imposition of penalties. 1.6 M/s BTPL were also issued another show cause notice dt. 28.04.2010 proposing "Afzal brand Chewing Tobacco" to be classified as branded manufactured chewing Tobacco falling under Chapter sub-heading 24039910 of the CETA 1985 and thereby demanding Central Excise Duty of ₹ 1,90,38,063/- on 559650 kgs of goods manufactured and cleared by the Appellant, along with interest and to impose penalty u/s 11AC of CEA, 1944 read with Rule-25 of the CER, 2002. M/s SEPL were also proposed to impose penalty under Rule 26 of CER, 20002. It was also proposed to impose penalty under Rule- 26 on Shri Faisal YunusbhaiFazlani, Shri Arif Abdul Kadar Fazlani, Shri Raffique Bhai Sattar Kachhi, Shri SirajbhaiGulamnabiVekariya, and Shri SalimbhaiYakubbhai Momin. The said show cause notice was adjudicated by the Commissioner, Central Excise, Ahmedabad-I vide OIO No. AHM-CEX-003-COMMR-013-13 dated 7.3.2013, wherein he confirmed the proposal of the show cause notice and also imposed penalty upon M/s SEPL and other noticees. 1.7 Aggrieved by the orders dated 5.2.2009 and 7.3.2013, the Appellant fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002. A penalty of ₹ 5 lakh on M/s SEPL on the ground that they are also involved in above illegal activity as it tried to prove that the excisable goods cleared from the factory of the appellant were actually exported without any specific evidence, so as to help the appellant to wriggle out of the duty liability. Personal penalty was also imposed upon co - appellants. Being aggrieved, the Appellants have filed the present appeals. 2. Shri Prakash Shah ld. counsel appearing for the appellant submits that the demands is based totally upon assumption and presumption as no goods were found to have been removed in domestic market. There is no identified buyer in the domestic market of such goods. No evidence has been adduced by the Revenue that the goods manufactured were chewing tobacco. The goods are unmanufactured tobacco and the reliance placed by the Revenue on the opinion of the Chemical Examiner, Vadodara dated 22.4.2008 cannot be relied upon. Previously the Chemical Examiner in his report dated 28.3.2008 had only stated that the sample is in the form of coarse brown powder. It is other than snuff. The sample " U R " may be considered as manufactured tobacco. The report d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in case of Sree Biswas Vijaya Industries, 1999 (96) ELT 712 (Tri), as upheld by the Hon‟ble Supreme Court , as reported in 1998 (104) ELT A136 (SC). The reliance placed by the adjudicating authority on Circular No. 1/88 dated 21.3.1988, according to which powdering of tobacco leaves was a process of manufacture is erroneous. As the circular is not binding on the assessee and it is contrary to the orders of the Tribunal on the very same issue. He also relies upon the Tribunal judgment in case of Gudakhu Factory - 2003 (151) ELT 720 (T), as upheld by the Apex Court reported in 2003 (155) ELT 235 (SC) that they have been challenging the Chemical Examiner report from the very first statement and in spite of repeated requests by the appellant as well as by M/s SEPL, the adjudicating authority did not allow the re-test of the samples, which is against the law. He also submits that the Chemical Examiner, in his first report dated 28.3.2008, reported that " the sample is in the form of brown powder. It is other than snuff . The sample under reference may be considered as manufactured tobacco. However, in his report dated 22.4.2008, the Chemical Examiner has reported that "(1) Afza ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible to undertake the process of mixing of tobacco flakes with any material like katha, calcium oxide and flavouring agents. Without prejudice, it is submitted that the sample has been taken in October, 2007 and report of the same has been applied for the past period from 2005-06 to 2007-08. It is submitted that SEPL had taken a portion of the premises of the appellant on lease. For the purpose, a Lease Agreement has been duly entered into between the Appellant and SEPL and the copy of the said lease agreement was duly produced before the authorities. Shri Fakizal Yunus Fazlani, director of SEPL, had in his statement dated 30.11.2007 stated that SEPL have taken some portion of the factory premises on lease basis from BTCPL and SEPL are processing Gadia Powder known as snuff in the premises taken on lease. He also stated that M/s SEPL are procuring Calcutti from the farmers and bring into the leased premises, which are sieved and grinded. The tobacco leaves are converted into powder form, which is commonly known as a Powder in the market language. The Gadia tobacco packed in 50 kg bags are transferred to SEPL unit at Borsad from where it is exported. Sh. Rafique Sattar Kutchi Manate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot get the sample re-tested. Shri Faisal Yunus Fazlani of the Appellant had also requested in his reply dated 14.7.2008 to get the samples re-tested as two different reports had given by the Chemical Examiner. Similarly, Shri Arif Abdul Kader, director of the appellant, in his reply had requested the Commissioner to get the samples re-tested from independent Chemical Examiner duly recognized by the Government. By relying on the test report and letter dated 22.4.2008 without getting the samples re-tested, principles of natural justice were contravened in the first round of adjudication and the first adjudication order was set aside by this with the direction to have the sample re-tested, which was declined by the CRCL in view of shelf life of the sample having been expired as the department had not preserved the samples properly. M/s SEPL had sent a sample of the impugned product to Tobacco Projects, Anand Agricultural University, Anand to test. Dr A.P. Patil, Unit officer has opined in his report dated 18.12.2007 as under : "The sample is of size from 5# to 30#. No additive seems to be added in it and it is purely unmanufactured tobacco." 2.3 The Commissioner in his order has ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound of proceedings, the matter was remanded back by the Tribunal for re-testing of samples. However, the Joint Director, CRCL, New Delhi vide communication dated 18.10.2016 has stated that " tobacco is a natural plant product and the shelf life is 2 years if the seal is left intact." That the samples under reference ,Nine years have been already passed from the date of drawl and hence the samples were returned. The adjudicating authority has held that since the testing is not possible, therefore, the test report given by the Chemical Examiner, CECL, Vadodara has attained finality, hence he decided the issue of classification. On the basis of the report of the Chemical Examiner, Vadora, he held that since the tobacco leaves were dried, cut and crushed / grinded in the machines installed in the factory and after mixing of ingredients like calcium oxide, katha, flavouring agents, the same was packed in printed plastic bags with brand name Afzal Snuff Tobacco, the said process has resulted into manufactured tobacco, which liable to central excise duty. He held that the chemical examiner can give only opinion on chemical analysis. He has relied upon the hon‟ble apex court judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve not followed any procedure of the export inasmuch as they have cleared the goods only for home consumption to M/s SEPL without any invoice and payment of duty. He relied upon the Tribunal order in case of Sheena Exports - 2012 (2) ECS (97) (Tri - Del). 5. We find that the investigation were initiated by visiting the premises of the appellant wherein the officers found 1152 bags of Afzal brand snuff tobacco, which contained the following description : AFZAL (REGD.) BEST QUALITY SNUFF TOBACCO SOPARIWALA EXPORTS PVT LTD POST BAG NO. 9992, 'NIRMAL'. 21ST FLOOR NARIMAN POINT, MUMBAI-400 021 (INDIA) TEL : 91-22-66396666, FAX : 91-22-66396677 E-MAIL :[email protected]. Web :www.sopariwala.com FOR EXPORT ONLY 50 KG, NET WHEN PACKED GROSS WT : 50.200 KGS 5.1 Further, the machines, viz. (1) 1-Trombler Machine, (2) 1 - Feeder machine, (3) 1- Grad well machine (Charotar Machine) , (4) 1-Y-Bro screen (Rava Machine), (5) 5-Hath Charna , (6) 1- Umity Fire Tank, (7) 1-Vibrator Machine (Rava), (8) 1-Vinovar Fan and (9) 1- Blower Machine (Hand), were found. Supervisor of the unit Shri Salimbhai Yakubhai Momin, who was present during the visit informed the officers that the machines were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is other than snuff. The sample U/R may be considered as manufactured tobacco." However, on 22.4.2008, the Chemical Examiner, CECL, Vadodara communicated the ingredients in both the samples of manufactured tobacco that the same are Tobacco powder mixed with calcium oxide (CaO), katha, flavouring agents etc. In respect of such reports, statements of Shri FaizalYunusbhai Fazlani, director of the appellant firm and Shri Salimbhai Yakubhai Momin, supervisor were recorded wherein they both disagreed with the report of the Chemical Examiner, Vadodara since it mentioned that the goods " may be considered" as manufactured tobacco. They also stated that the seized goods belonged to M/s SEPL. The Appellant M/s SEPL had also requested for re-testing of sample which was not acceded. We find that firstly during the visit of the officers , the machines which were found were only for cutting and sieving operations and no machines like mixture or any processing machine which can mix tobacco powder with katha, calcium oxide or flavouring agents were found to be available in the factory premises. It is coupled with the fact that when the machines were found to be in a running position, then pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into impugned. On the other hand, if any communication was made by the Department after 28.03.2008 with the Chemical Examiner, it was necessary for them to bring such communication on record since such communication only led to Chemical examiner to change his views on composition and to state that the goods in question are mixed with calcium oxide, katha, flavouring agents etc. In such case, the impugned order passed on the basis of chemical examiners communication dated 22.4.2008 is not correct. It is coupled with the fact that the Appellant M/s SEPL had produced the test examination report of product which was done by the Tobacco projects, Anand Agricultural University, Anand for test. DR. A.P. Patil, Unit officer in his report dt. 18.12.2007 has informed that the "The sample is of size from 5 # to 30#. No addictive seems to be added in it added in it and is purely un - manufactured tobacco". Thus the opinion clearly states that the goods are unmanufactured tobacco. Further the chemical examiner report cannot be relied upon in the light of the fact that when M/s SEPL had applied for retest of the samples by an independent entity, the department did not accept such request. We al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the officers did not find any mixtures or machines in which the process of mixing the tobacco flakes with katha, calcium oxide and flavouring agents takes place. Since the goods has remained un manufactured tobacco, the same cannot be classified under impugned classification. Our views are based upon following judgments : In case of SREE BISWA VIJAYA INDUSTRIES 1997 (96) E.L.T. 712 (Tribunal), it was held : "We agree with the appellants' learned Counsel that it is merely a change from one form of unmanufactured tobacco to another form. This is also clear from the definition of manufacture in relation to tobacco. None of the processes mentioned in Section 2(f) of the Central Excise Act, 1944 which sets out the various processes of manufacture in relation to tobacco, are carried out in the present case. No other evidence has also been brought on record by the Revenue that tobacco powder so produced by appellants is known in the market as a manufactured tobacco. This burden squarely rests on the Revenue if they want to levy duty under Tariff Heading: 24.04 on the said product under consideration. We also observe that there is a Judgment of the Tribunal in the case of Shree Chand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the present case inasmuch as the same involve a question relating to crushing/grinding of lime-stone to obtain chips of powder and not powdering or crushing of tobacco leaves. Accordingly, following the ratio of the earlier decisions which are directly on the issue, we hold that the tobacco powder fell under Heading 24.01 as unmanufactured tobacco and attracted nil rate of duty. A demand of duty and penalty on the first appellants, M/s. Shree Prasad Grinding Mills is thus set aside." 6. It has been held in the various judgments that crushing/grinding of tobacco results into unmanufactured tobacco classifiable under Heading 24.01 attracting nil rate of duty. Accordingly, following the ratio of the above decisions, the appeal of M/s. Iswar Grinding Mills is allowed. 7. As the appeal of the main appellants has been allowed, there is no justification for imposition of penalty either on the appellant company or on the other appellants under the provisions of Rule 209A. Resultantly, we set aside the impugned Order and allow all the appeals. 8. Since all the appeals are disposed of, all the Stay Petitions stand automatically allowed." In case of SHRIKANT PRASAD 2000 (117) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a part of the factory premises on lease. We also find that the seized goods itself were ordered to be released to M/s SEPL by the Joint Director (Preventive) , Central Excise, Ahmedabad - III. This clearly shows that even the Department had accepted the fact that M/s SEPL are the owner of that goods. It is also not in doubt that the goods were ultimately for exports for which the relevant Bond / LUT were filed by M/s SEPL and evidence of exports was produced duly certified by the jurisdictional Superintendent of M/s SEPL before the adjudicating authority, which shows that otherwise also the goods were for export purpose and not liable for duty. Since the chemical examiner report being inconclusive and the appellants were not granted re-test of the samples, therefore the goods cannot be considered as chewing tobacco. It is coupled with the fact that no machines used for mixing of katha, calcium oxide or flavouring agents were found to be installed in the factory of the appellant, even though the factory was in running condition. We also find that the Appellant are merely getting the raw leaves and grinding them and after making powder putting them into 50 Kgs pack which is a bulk p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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