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TMI Blog2020 (1) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... llants has also disputed the manner and method of collection of samples of residues from alleged 11 Packing Machines and has disputed the test reports. Also, Betel Nuts are essential ingredients to classify any goods as Pan Masala containing Tobacco and that generally it contains more than 90% of Betel Nuts. Also, the officers did not find any Betel nuts in the factory of M/s. Paras Pan Products Pvt. Ltd. at the time of search. There is no evidence of any use of Betel Nuts in the factory of the Appellant or any evidence of purchase and use of Betel Nuts by the Appellant. Thus the revenue has failed to prove the manufacture and removal of Pan Masala containing Tobacco . It is the case of the Revenue that the department has made enquiry from 2 of the 3 suppliers of packaging material who have confirmed the supply of packaging material to the Appellant during April, 2008 to June, 2008 which was used by the Appellant for packing of Pan Masala containing Tobacco in their factory - in this regard that the documents relied upon by the Revenue nowhere mention the name of the Appellant in Challans being relied upon by the Revenue - the clandestine manufacture of goods cannot be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Products Pvt. Ltd. (Appellant No.2) are also engaged in the manufacture of Pan Masala Containing Tobacco/ Gutkha falling under Chapter Sub-heading 24039990 with the aid of packing machines and are registered from 05.10.2007 having Registration No. AAECP3714XM001. In case of Appellant No. 2, they were observing Central Excise formalities and discharging their duty. 3. On 29.08.2008, the officers of DGCEI Headquarters, New Delhi and DGCEI, Kolkata Zonal Unit conducted simultaneous search operations at the factory premises of Appellant No. 1 as well as Appellant No. 2. The search led to discovery of 24 Pouch Packing Machines at the factory premises of Appellant No.1. Out of 24 machines, 11 Pouch packing FFS were found in the right hand side hall of the factory and rest 13 Nos. of Pouch Packing FFS machines were found at the left hand side hall of the factory. It is contended before us by the revenue that residues of material present in 11 Nos. of machines were collected for Chemical examination for ascertaining the material present in such residues. Some inputs like Katechu, lime, packing material and some finished goods were also recovered and seized. A Panchnama stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no Test Memo or samples duly sealed was given to them by the DGCEI officials at the time of drawl of samples and that the same might be furnished to them. They also requested the Ld. Commissioner to inform as to whether copies of Test Memos and samples were sent to other departmental formations as per Para 8.3 of Chapter 11 of CBEC Manual of supplementary instructions. They also requested for retesting of samples. The Ld. Commissioner vide his letter dated 08.06.2011 intimated the Appellant that in the adjudication proceeding , the cases would strictly be decided on the basis of evidence adduced in the notice. 9. Aggrieved by the said decision of the Ld. Commissioner, the Appellant preferred an Appeal before the Tribunal, being Appeal No. Ex-568/2011 alongwith stay Application. The Appellant also requested the Commissioner to keep the adjudication proceedings in abeyance till their Appeal is decided. However, the Ld. Commissioner proceeded in the matter and passed Order-in-Original bearing No. 01/Commr/CE/KOL-III/2012-13 dated 26.04.2012 ex parte wherein he confirmed the demand of ₹ 2,75,00,000/- alongwith interest and appropriated an amount of ₹ 60,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire investigation carried out by DGCEI could not bring out any evidence of presence of Betel Nuts or use of Betel Nuts. He submits that the factory of Appellant No.1 was not operating during the search conducted by the officers on 29.08.2008. None of these alleged 11 machines were found attached to power socket and were not capable of being used for manufacturing activity. He pointed out that even the test reports indicate the presence of Nicotine with remarks Presence of Nicotine indicates that the samples contain Tobacco . He further submits that Chapter Note 4 of Chapter 24 defines Pan Masala containing Tobacco commonly known as Gutkha included in Tariff Item 24039990 means any preparation containing Betel Nuts and Tobacco and lime; and Kattha whether containing any other ingredients or not. He contended that Pan Masala containing Tobacco generally contains more than 90% of Betel Nuts. The test reports do not support the presence of Betel Nuts in the sample. No Betel Nuts was found in the factory of Appellant. He also argued that procedure as set out in Chapter 11 of CBEC s Excise Manual of supplementary instructions have not been followed and therefore the drawl of sample ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternational V/s Union of India 2018 (361) ELT 90 (P H); (iv) M/s. A. B. Polymer, M/s. Lakhotia Matalizers v/s Commissioner, Kolkata-III 2018 (8) TMI 470- CESTAT Kolkata; (v) M/s. Amit Metaliks Ltd. V/s CCE ST, Durgapur 2019 (4) TMI 638- CESTAT Kolkata. 15. The learned Counsel for the Appellant further submits that the declaration of number other details of packing machines under Rule 6 of Pan Masala Packing Machines (Capacity Determination Collection of Duty) Rules, 2008 is applicable only to manufacturer of notified goods and is required to be submitted in respect of number of packing machines intended to be operated. Since the Appellant did not operate any packing machines for manufacture of notified goods, no such declaration was required. He also submits that Charge of clandestine removal is a serious charge and burden of proof is on Revenue to prove the charges beyond doubt. The department has not conducted any enquiry regarding purchase of excess material by M/s. Paras Surti Products, sale of goods of unaccounted material, sale proceeds. The allegations of clandestine removal based on uncorroborated statements of supplier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so submits that enquiry is conducted in the premises of M/s. Paras Surti Products Pvt. Ltd. (Appellant No.2) indicated that the Appellant No. 2 has excess capacity of mixing of Pan Masala than packing capacity and that such excess Pan Masala containing Tobacco is sent to the premises of Appellant No.1 through their own vehicles. He also submits that test memos were prepared and samples were sent to CRCL for testing. He also pointed out that cross examination of Shri Rajesh Dubey supplier of packing material was allowed who confessed the supply of packing material during April, 2008 to June, 2008. Since his cross examination was not completed, the Appellant chose not to insist for his cross examination any further. He also submits that Rule 17 (2) of Pan Masala Packing Machines (Capacity Determination Collection of Duty) Rules, 2008 is a penal rule and cannot restrict the levy. He further submitted that the case laws cited by the Ld. Advocate for the Appellants are not applicable in the facts and circumstances of the case. He relied upon the following judgements:- i. Surjeet Singh Chhabra v/s Union of India 1997 (89) E.L.T. 646 (S.C.); ii. Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Excise, Kolkata as referred by Ld. Authorized Representative also does not report the presence of Betel Nuts. Ld. Advocate for the Appellants has also disputed the manner and method of collection of samples of residues from alleged 11 Packing Machines and has disputed the test reports. We observed in this regard that Pan Masala containing Tobacco has been defined in Chapter Note 4 of Chapter 24 of the Schedule to the Central Excise Tariff Act, 1985 as under:- 4. In this Chapter, Pan masala containing tobacco , commonly known as 'gutkha' or by any other name, included in tariff item 2403 99 90, means any preparation containing betel-nuts and tobacco and any one or more of the following ingredients, namely:- (i) lime; and (ii) kattha (catechu), whether or not containing any other ingredients, such as cardamom, copra and menthol. 21. We also find force in the contention of the Ld. Advocate for the Appellants that Betel Nuts are essential ingredients to classify any goods as Pan Masala containing Tobacco and that generally it contains more than 90% of Betel Nuts. We also take note that the officers did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... status of the machines, the possibility of such machines having been put to use for clandestine manufacture, etc. The inference by the Commissioner that the machines were plugged in, the motor can be fitted at any time to run the machine, is fallacious. The Original Authority himself records that some of the essential parts in the machines were missing and in absence of recovery of these missing parts from the premises it can be actually argued that the said machines were not in working conditions on the date of visit by the officers. The Original Authority records that though the machines may not be in working condition on the date of visit by the officers (18-1-2011), there is no evidence to show that they were not in working condition since 8-3-2010. We find that such inference apart from being fallacious is legally untenable. The demand was made based on presumption that these machines were working from 8-3-2010 without interruption. The Original Authority emphasized that in terms of Compounded Levy Scheme, the goods shall be determined to have been manufactured with the help of installed packing machines irrespective of whether it is in use or not, or is in working condition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of M/s. Balaji Structurals India Ltd. J. P. Agarwal v/s CCE, Raipur reported in 2017 (11) TMI 1387- CESTAT, New Delhi held as under:- 8. The entire allegation of clandestine removal is based on the statements of the transporters as well as the details culled out from the ledgers of the transporters. These documents are evidently third party documents. The revenue has not produced any evidence from the assessee to support the charge of clandestine clearance. It is settled law that documents recovered from the third party cannot be used against the manufacturer to prove clandestine removal, unless they are supported by corroborative evidence. The revenue has alleged that huge quantity of finished goods have been cleared without payment of duty after manufacture. For clearance of such huge quantities of goods, corresponding quantity of raw materials ought to have been procured by the appellant. However, the revenue has not brought any evidence on record on this issue. Further, none of the customers to whom such huge quantity of finished products have been identified or questioned. From the records of the factory, no evidence has been brought on record either reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation is required to be admissible as evidence only when the person is examined by the Adjudicating Authority as per the procedure prescribed as per Section 9D of the Central Excise Act. Having not done so, the statements recorded from the various persons have no evidentiary value. 25. It has also been alleged by the revenue that the Appellant has failed to file a declaration with the Central Excise Department in terms of Rule 6 of Pan Masala Packing Machines (Capacity Determination Collection of Duty) Rules, 2008 mentioning therein the No. and description of packing machines and the goods which are intended to be manufactured with the aid of such packing machines. We find that it is the case of the Appellant that they did not manufacture Pan Masala containing Tobacco during the relevant period; and as such they were not required to file any declaration in as much as the said declaration was required to be filed by a manufacturer of the notified goods and not otherwise and that too in respect of machines intended to be used for manufacture of notified goods. It was also an alternate argument by the Appellant that there is a clear estoppel under Rule 17 (2) of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned in the statutory records. (c) Quantity of the manufacturing with reference to the capacity of production by the noticee unit. (d) Quantity of the packing material used. (e) The total number of the employees employed and the payment made to them. In this case, statements of the labourers ought to have been reduced in writing, by the department which ought to refer that over and above of the salary paid by the noticee, some other type of remunerations, in cash or kind have been paid by the noticee, such statements are must. (f) Ostensible discrepancy in the stock of raw materials and the finished product. (g) Clandestine removal of goods with reference to entry/exit of vehicles like Trucks, etc. in the factory premises. (h) If there is any proof about the loading of the goods in the Truck, like weight of truck, etc. at the weighbridge, security gate records, transporter documents such as lorry receipts, statements of the truck drivers, entries of the trucks/vehicles at different check-posts, different types of forms which are supplied by the Commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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