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TMI Blog2021 (1) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the same O-I-O No. AHM-EXCUS-002-COMMR-13-2019-20 dated 27-12-2019. Both Appeal No. E/10340 & 10341/2020 by the Assessee and its authorized signatory as well as Appeal No. E/10352/2020-DB by Revenue with CO No. E/Cross/10288/2020 therein have been taken up for hearing together on 02-12-2020 for final disposal of all these Appeals. 2. The brief facts of the case are that Assessee is engaged in manufacture of OM brand tobacco falling under CTH 24011090 of the Central Excise Tariff Act 1985 and they were holding Central Excise Registration ECC No. ACSPP9687QM001. Assessee was paying Central Excise duty on 1 Pouch Packing Machine (PPM) every month, on declared Retail Sale Price (RSP) of Rs. 3/- under Compounded Levy scheme under section 3A of the Central Excise Act 1944 and in terms of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. Based on some intelligence, officers from Central Excise (Preventive), Ahmedabad-II visited factory premises of the Assessee on 03.09.2014. Shri Hasmukhbhai Patel, authorized signatory, who was present at the time of search informed officers that there were two separate Premise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v Packaging and stated that he delivered PPM in the last week of October, 2013 from M/s. Vaibhav Packaging to M/s. Hasmukh Tobacco Products, in his tempo and that PPM was unloaded there with help of 3-4 labourers working in that factory. 2.1 Thereafter, another statement of Shri Hasmukhbhai Patel was recorded on 12.09.2014, wherein he accepted that seized PPM was delivered at their factory during the last week of October 2013. Another Statement of Shri Hasmukhbhai Patel was recorded, perusing his statements dated 03-09-2014 and 12-09-2014 he stated that seized PPM was brought in their factory on 01-08-2014; that they have paid duty of Rs. 39,60,836/- after 03-09-2014. Statement of Shri Maheshbhai Ugarchand Patel, was recorded before arrest, wherein, perusing his statement recorded on 03-09-2014 and statement of Hasmukhbhai Patel recorded on 12-09-2014, he has stated that seized PPM was brought in factory on 01-08-2014. Statements of Shri Maheshbhai and Shri Hasmukhbhai were recorded on 02.01.2015 wherein they stated that pouch packing machine found undeclared was actually purchased from M/s. Vaibhav Packaging, for Rs. 90,000/- in the last week of October, 2013; that they kept this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arat High Court passed Order dated 12.10.2017 in SCA No. 16871 of 2016, wherein the matter was remanded to the Settlement Commission for decision on the aspect of 'operating machine' and to ascertain that seized machine found undeclared in the factory on 03-09-2014 is operative or not for the purpose of charging duty in this case. 5. The Hon'ble Settlement Commission, Mumbai, then re-examined the matter and while passing the Final Order, observed that crucial question that needs to be determined is when was the seized machine actually installed in factory; that there are flip flop in statements of Shri Hasmukh Patel; that there are no documentary evidences available on record to show sale, purchase, transport, payment, installation etc. of additional PPM and that it was held that since case necessarily involves proper appreciation of facts & circumstances and records available with applicant and Revenue, correct interpretation of Tobacco Rules and Notification No. 16/2010-CE dated 27.02.2010 as amended, Bench was of the view that case should go through rigor of adjudication proceedings before authority, for determination of disputed facts, and hence the case did not merit order fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Proprietor of M/s. Hasmukh Tobacco under rule 26 of Central Excise Rules, 2002. Hence, Assessee and its Authorized signatory filed Appeal Nos. E/10340/2020 and E/10341/2020 respectively against confirmation of duty and penalty imposed. Revenue also filed Appeal No. E/10352/2020, against dropping of demand partly and Assessee filed cross objections No. E/Cross/10288/2020. These Appeals were taken up for hearing together on 02-12-2020 for final disposal of all these Appeals. 9. Shri P.P. Jadeja, learned Counsel appearing on behalf of Assessee and its authorized signatory while reiterating all grounds of their Appeals and submissions made in their cross objection to revenue appeal submits that O-I-O dated 27-12-2019 is objected mainly on the grounds that O-I-O has committed error in confirming duty against the Hon'ble Gujarat High Court's order dated 12-10-2017 in SCA No. 16871 of 2016. There is no finding on fact that PPM seized on 03-09-2014 was 'Operating Machine'. He submits that seized PPM found in the factory on 03.09.2014 was in fact brought in the factory only on 01.08.2014. This fact is established during "cross examination" of witnesses before Commissioner in the adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine, transporter of machine, laborers who had unloaded machine have stated to be received on 01.08.2014. When it was brought in factory on 01-08-2014, it can not be assumed installed in factory before 01-08-2014 as per Rule 18(2) ibid, attracting duty for unregistered unit. He submits that "prime contention" is excise duty liability, can not start before 01-08-2014, in any case. He relied on decision in 2017 (348) E.L.T. 720 (Tri. - Del.) - GOYAL TOBACCO CO. PVT. LTD VS CCE, wherein it is held that in terms of Compounded Levy Scheme, presumptive duty liability envisaged in Compounded Levy Scheme cannot be extended to a level that duty liability arises automatically in all cases where packing machines found in premises. Manufacture of goods is a condition precedent for charging Excise duty without which no levy can be made, as held by Rajasthan High Court in the case of Jupiter Industries - 2006 (206) E.L.T. 1195 (Raj.). 9.2 He submits that in proceedings before the Hon'ble Settlement Commission and Gujarat High Court, assessee had made "alternative submission" to charge duty from 01-04-2014, but it cannot be sole basis to ignore prime contention raised. The alternative submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecords of Production and clearance for the period from 2012-13 to 2014-15. (g) Electricity consumption Bills from May 2012 to November 2014 along with certificate issued by Torrent Power Ltd., Ahmedabad which clearly shows that electricity consumption was high in September 2014 as compared to previous months, as two PPM operated in Sept. 2014. (h) Records of raw materials consumption i.e. loose tobacco and packing materials (Plastic Bags) for the period from April 2012 to March 2015. (i) Final Audit Report No. 45/204-15 dated 11.08.2014 issued from F.No.VI/1(b)/45/IA/AP-VII/2014-15/3292 for excise audit conducted on 10.06.2014 for the period from June 13 to May 2014 to support that the said machine was not in existence in the month of June 2014 and the contention of the appellant that the said machine was brought in the factory on 01.08.2014 and not October, 2013. (j) Intimation letter dated 11.09.2014 in Form 1 & 2 for month of September 2014 & payment of Rs. 76,42,836/- for two machines to support that duty for September 2014 was paid in normal course. (k) ER 1 return for September, 2014 filed on 01.10.2014 under which duty for September 2014 was paid for two machines o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirming duty with interest & penalty for September 2014 which was deposited in September 2014, is not justified in facts of case. Shri Jadeja submits that Assessee not being literate, administrative work of filing intimations, Returns and payment of duty etc. was assigned to their accountant. However, inadvertently accountant paid duty on RSP of Rs. 4/- for PPM on 01-09-2014 for September 2014, but inadvertently, intimation for change of RSP and addition of PPM remained to be submitted to department unintentionally. He submits that Assessee paid duty for September 2014 for two PPM on RSP of Rs. 4/- and vide letter dt. 11.09.2014 they filed Form 1 and Form 2 for September, 2014 as pointed out by officers. Such intimation has been acknowledged by department on 12.09.2014. 10. Similarly, for Appeal No. E/10341/2020 which has been filed against a separate penalty imposed on Shri Hasmukhbhai Patel who is authorized signatory of Assessee. Shri Jadeja reiterated grounds of Appeal and submitted that authorized signatory has not acted to achieve personal benefits in this case. When assessee is not liable to penalty, consequently, authorized signatory too is not liable to penalty. The cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is also well settled by the Hon'ble Tribunal and other higher forums that in cases of alleged clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following: (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw materials, in excess of that contained as per the statutory records ; (b) Instances of actual removal of unaccounted finished goods(not inferential or assumed) from the factory without payment of duty; (c) Discovery of such finished goods outside the factory; (d) Instances of sales of such goods to identified parties; (e) Receipt of sale proceeds, whether by cheque of by cash, of such goods by the manufacturers or persons authorized by him ; (f) Use of electricity for in excess of what is necessary for manufacture of goods otherwise manufactured and validity cleared on payment of duty; (g) Statements of buyers with some details of illicit manufacture and clearance; (h) Proof of actual transportation of goods, cleared without payment of duty; (i) Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01-08-2014 (b) The said PPM was brought for use as alternative PPM and it was not installed or used in August 2014. Hence there will be no liability for August 2014. (c) For September 2014, both the PPM were used and duty for both the PPM were paid in September 2014 by 11-09-2014. Hence, there was no further duty liability for September 2014. (d) Set aside the O-I-O No. AHM-EXCUS-002-COMMR-13-2019-20 dated 27-12-2019 which has confirmed duty demand from April 2014 to September 2014. (e) Set aside confiscation and penalty imposed on Assessee and its authorized signatory. (f) Reject Revenue Appeal No. E/10352/2020 and allow Cross Objection No.CO/10288/2020 filed by the Assessee. (g) Allow all consequential benefits under this proceeding. (h) Allow appeals filed by assessee and its authorized signatory by setting aside O-I-O dt. 27-12-2019 where it has confirmed the duty demand and imposed penalty. 13. On the other hand, Shri H.K. Jain, Learned Assistant Commissioner (Authorized Representative) appearing on behalf of revenue reiterates grounds of Revenue's Appeal No. E/10352/2020 with a prayer to confirm duty from 01-11-2013 to 31-03-2014 and he also reiterated the find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettlement Commission appellant had been making different claims on "duty accepted", initially they accepted a duty of Rs. 66.41 lakhs, which later on accepted from April, 2014 works out to Rs. 176.47 Lakhs. He stated that u/s 3A of the said Act, if the factory has an installed machine, it is deemed to be operational and deemed to have been used for manufacture of deemed qty of notified goods. Adjudicating authority has given his findings in detail as to why plea of appellant that said machine was installed in August, 2014 cannot be accepted. SDR stated that duty for September 2014 is liable to be paid, it is discussed in Para 77 of O-I-O. Regarding visit of Audit officers, it has been discussed in Para 68 of O-I-O. Regarding consumption of electricity, which has increased during August and September 2014, he submits that the same is also not a concrete evidence and there could be so many reasons for increase in units consumed and issue is dealt in detail at Para No.67 of O-I-O. Further, use of both machines simultaneously is not required by law. If they use alternatively, even though duty on both machines are required to be paid. He reiterated the grounds of their Appeal No. E/1035 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that M/s Hasmukh Tobacco Products engaged in manufacture of OM brand unmanufactured tobacco falling under CTH 24011090 of Central Excise Tariff Act 1985 with Registered Central Excise ECC No. ACSPP9687QM001. Assessee had filed their last declaration on 27-12-2012 and had declared RSP of Rs. 3/- on pouch and they were paying duty for one PPM, under section 3A of Central Excise Act, 1944 and Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. Central Excise officers, visited factory premises of Assessee on 03.09.2014 and found one undeclared Pouch Packing Machine [PPM] having packing material roll on with printed RSP Rs. 4/-, which was seized. 14.2 We find that issue regarding duty in respect of seized PPM, is required to be determined under section 3A ibid by considering existence and admissibility of evidences in support of demand of duty under subject SCN as directed by both the Hon'ble Gujarat High Court and observations of the Hon'ble Settlement Commission in their respective orders. Compounded levy under section 3A is on "deemed production" and excise duty is leviable as notified on number of packing mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rating Machine w.e.f. 01-11-2013. We upheld the same as correct view. 14.4 We find that there is no dispute about detection and seizure of extra PPM from factory of Assessee on 03-09-2014. Both the side have agreed to this fact. Therefore, it remains to be ascertained as to from which date it was brought in the factory and installed or not installed. Statements of 03-09-2014, 21-10-2014 by Hasmukhbhai Patel, and Maheshbhai Patel, shows date of receipt of seized PPM as 01-08-2014. The entire case is based on statements. Hence, critical analysis of statements would be very relevant. From cross examination of the following persons, it has also come on record very useful information relevant for this purpose :- (i) Shri Patel SantoshbhaiIshwarbhai, [Driver of Tempo No. GJ-01-BX-9106 (ii) Shri Haresh PravinbhaiKanadia, [Proprietor of M/s Vaibhav Packaging (iii) Shri Hasmukhbhai U. Patel, Authorized signatory of M/s Hasmukh Tobacco Products (i) It is seen from cross-examination dt 09-10-2019 that Shri Patel Santoshbhai was shown his statement dated 10.09.2014 and after reading, he has stated that it was given as per directions from Shri Rajubhai; that the said statement dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Rs. 40,000/- and it was brought to factory by loading tempo on 01.08.2014. He stated that seized PPM was made operational from 2nd week of September, 2014; that they had already advised their accountant to file necessary declarations in the department for starting the said additional PPM and for increasing their MRP from Rs. 3 to Rs. 4 per pouch, but he forgot to file the same; that he had reiterated these facts again on 21.10.2014; and that they had no intention to evade central excise duty. He was shown his own statements dated 12.09.2014 and 02.01.2015, Panchnama dated 09.09.2014 recorded at M/s Vaibhav Packaging and statement of Shri Harish Kanadia recorded on 09.09.2014 and a statement of Shri Santosh Patel, Tempo Driver recorded on 10.09.2014, and in this regard, he stated that he was shown Statement of Shri Harish Kanadia dt. 09.09.2014 and not shown diaries seized from him; that Shri Harish Kanadia had wrongly stated that he had supplied one PPM to our factory during month of October, 2013; that his own statement dated 12.09.2014 was recorded under threat of arrest and was not correct; that subsequent statements given by him and Shri Mahesh Patel on 21.10.2014 were co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture and clearance, heavy burden is on the Revenue to prove charges with reliable, clinching, positive evidences and independent corroborative evidences. Revenue has reiterated allegations in SCN, but not produced independent corroborative evidence to prove their case that seized PPM was an operative machine w.e.f. 01-11-2013. Deposition of witness u/s 9D ibid, can not be brushed aside on assumptions and presumptions. Section 9D of Central Excise Act reads as under:- "SECTION 9D. Relevancy of statements under certain circumstances. - (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, - (a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or (b) when the person who made the statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore a Gazetted Central Excise Officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the Gazetted Central Excise Officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for proving the truth of the contents thereof, he has to first admit the statement in evidence in accordance with clause (b) of Section 9D(1). For this, he has to summon the person who had made the statement, examine him as witness before him in the adjudication proceeding, and arrive at an opinion that, having regard to the circumstances of the case, the statement should be admitted in the interests of justice." In case of 2016 (339) E.L.T. 209 (P & H) - G-TECH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances, this right of cross-examination can be taken away. The court also observed that such circumstances have to be exceptional and that those circumstances have been stipulated in Section 9D of the Central Excise Act, 1944. The circumstances referred to in Section 9D, as also in Section 138B, included circumstances where the person who had given a statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay and expense which, under the circumstances of the case, the Court considers unreasonable. It is clear that unless such circumstances exist, the Noticee would have a right to cross-examine the persons whose statements are being relied upon even in quasi judicial proceedings" In case of 2015 (324) E.L.T. 641 (S.C.) - ANDAMAN TIMBER INDUSTRIES vs CCE, KOLKATA-II, the Hon'ble Supreme Court has set aside duty demand holding that the appellant in that case had contested the truthfulness of the statements of two witnesses and wanted to avail of cross-examination, which was denied and Hon'ble Apex Court discredited these two witnesses. 14.6 Thus, in vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t recorded by Investigation Officer would not constitute relevant and admissible evidence and has to be ignored when procedure u/s 9D ibid is not followed by adjudicating authority. We hold that adjudicating authority in this case committed gross error in not placing reliance upon depositions of witnesses recorded during their cross examination which was before him in proceedings in this Show Cause Notice. We are of the view that depositions made by concerned witness before learned Commissioner in cross examination are original evidences adduced on record during the adjudication proceedings. When depositions were made by concerned witness in cross examination, learned Commissioner or revenue had not raised objection during their deposition. Therefore, such depositions before Commissioner during cross examination of witnesses have become the original evidence, which can not be objected merely on assumptions and presumptions or pointing out the unsustainable infirmities related to such depositions. These evidences are also given by the concerned witness after perusing their own earlier statements and in support of depositions they have given their affidavits. These evidences are orig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty not exceeding the duty leviable on the notified goods in respect of which aforesaid contravention has been committed. (2) If it is found that goods have been manufactured in or cleared from a unit which is not registered with the jurisdictional Central Excise Office, then, the duty liability of such unit shall be determined on the basis of number of packing machines found available in the premises of the unit and the retail sale price of the pouches manufactured with the aid of such packing machines and unless evidence to the contrary is provided to the satisfaction of the Central Excise Officer, such machines shall be deemed to have been in operation, in case of financial year 2009-10, since the 8th March, 2010, and for subsequent financial years, since the 1st day of April of respective financial year, and shall be construed as operating packing machines for the purposes of rule 7 and dealt with accordingly." The above Rule 18(2) shows that it would apply to the unit which is not registered with Central Excise authorities. It provides that unless evidence to contrary is provided to satisfaction of Central Excise Officer, such machines shall be deemed to have been in operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s having other attachments required for productions and that it was merely dumped in heap of bags of raw materials and surrounded by such bags and merely having packing material roll on with printed RSP of Rs. 4/-would not make it "Operating Machine" attracting duty etc are not acceptable being devoid of any merit. These type of submissions about the PPM can not be acceptable without considering facts and relevant circumstances of the case. The contention by Assessee that seized PPM was not used by the assessee in August 2014 and started in second week of September 2014 is based on the depositions in the cross examination by (1) Jayantibhai Manaji Khat, (2) Bhikhaji Poonaji Thakore, (3) Shaileshbhai Manubhai Thakore, all 3 are the Labourer of M/sHasmukh Tobacco Products. However, we find that the above three witnesses were allowed for cross examination by ld Commissioner and in their cross examination, all of them have deposed that said PPM was used in second week of September 2014. We have considered this but noted that Department had not recorded statements of these three labourers during investigation. They were not required to be cross examined by Commissioner. We do not consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red packing machine which was found in their factory on 03.09.2014. When any specific date of its installation is not ascertainable, it can not be said that it was in operation from 01-08-2014. However, when the said PPM was brought in factory on 01-08-2014, but since there is no clear evidence as to when it was installed & used in August 2014, this becomes a case of addition or installation of a packing machine in the said factory in August 2014, in terms of Rule 8, and third proviso to Rule 9 ibid would be applicable in this case providing for manner of payment of duty which has stipulated that in case of increase in the number of operating packing machines in the factory during the month on account of addition or installation of packing machines, differential duty amount, if any, shall be paid by 5th day of the following month. Duty for month of August, 2014 becomes payable by 05-09-2014 and interest liability on duty amount of Rs. 29,56,000/- may be calculated by Central Excise Officers as per proviso two to said Rule 9 ibid. 14.12 The duty liability for the month of September 2014 is not disputed for 2 PPM by the Assessee. We hold that duty of one PPM for RSP of Rs. 4/-, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Rule 18(1) ibid. The confiscation of PPM and fine of Rs. 10,000/- deserves to be vacated and set aside. We vacate confiscation of seized PPM and set aside Redemption fine of Rs. 10,000/- imposed by the impugned order. 14.14 As regards, imposition & quantification of Penalty, Assessee has submitted that mens rea is required u/s 11AC of Central Excise Act 1944 and that they had no intention to evade duty and they had no intention to operate two PPM at a time without paying duty or following Chewing Tobacco Rules of 2010. The seized PPM was brought in factory on 01-08-2014 for its use alternatively, in case main PPM fails working, it was not used and that PPMs were not used together. Judgment in the case of UOI v/s Rajasthan Spinning and Weaving Mills - 2009(238)ELT-3(SC) is relied upon for not imposing penalty u/s 11AC, being case of either no penalty or lenient penalty u/s 11AC, pleading to allow benefits of reduced penalty u/s 11AC ibid as are available to Assessee. 14.15 We have considered submissions and we are of the view that Penalty is imposed if violation is intentional. The provisions in Central Excise Act 1944 provides that even if short payment or non-payment of excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation. Therefore, depositions u/s 9D ibid are original evidence and can never be considered as a retraction from statement given in investigation. We have given detailed finding on the above points in foregoing paragraphs and we do not wish to repeat them. We have also perused decisions relied upon by the revenue in their Appeal and submissions filed at the time of hearing. Most of decisions relied upon in Revenue's Appeal are objected by Assessee as not applicable in this case. Assessee have given their due comments against almost all such decisions. We find that the said decisions are not related to the facts of this case and hence they are not applicable in this case. Accordingly, we hold that Revenue's Appeal deserves to be rejected and we do so. 14.18 Accordingly, the impugned order where it has confirmed duty demand is set aside and it is modified to the following extent. (a) We confirm demand of Central Excise duty of Rs. 29,56,000/- [Rupees Twenty Nine Lakhs and fifty six Thousands only] against M/s. Hasmukh Tobacco Products, towards duty leviable for the month of August, 2014; (b) M/s. Hasmukh Tobacco Products, Ahmedabad shall pay interest under Section 11AA of Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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