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TMI Blog2022 (3) TMI 1253X X X X Extracts X X X X X X X X Extracts X X X X ..... k Bhogilal Kothari has in his appeal specifically raised a plea of failure of Adjudicating Authority to grant cross examination. It is seen that the relief granted by the Commissioner is solely based on the statement of persons recorded during investigation. It is a fact that the machines were found present in the premises and as per Rule 6 read with sub rule 2 of Rule 17 of Pan Masala Packing Machines (Capacity and Determination and Collection of Duty) Rules, 2008, in such case involving clandestine manufacture the duty needs to be demanded from 1st July, 2008 to the date of which the factory was sealed by the Central Excise officers - In the instant case, the relief has been granted by the Commissioner relying on the statements which are not proven relevant evidence in the current circumstances. For statement to be relevant the conditions prescribed in rule 9 D of Central Excise Act need to be followed. The Revenue too in its appeal has argued that Commissioner had not examined the evidence in the proper perspective and should have confirmed duty for the entire period in terms of sub rule 2 of Rule 17 of Pan Masala Packing Machines (Capacity and Determination and Collection of Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled Miscellaneous Applications no. 10088, 10179- 10183 of 2021 for incorporating the names of Kiransingh Pradhanji Thakor, Shafi Mohmmad Faiz Mohmmad Pathan, Himanshu Jasubhai Shukla and Dipak Bhogilal Kothari which was allowed by Miscellaneous Order no. M/10128-10133/2021 dated 08.06.2021. 2. The facts of the case are that Police authorities of Surendranagar detected a factory manufacturing gutkha at ginning place , Kherva Gam, Patdi Taluka, the officers of Central Excise, Ahmedabad-II visited the said premises on 05.02.2009, and it was found that the said premises was being used for manufacture of 'Goa 1000 gutkha clandestinely without obtaining Central Excise Registration. During the course of verification under panchnama proceedings dated 05/06.02.2009, 15 Gutkha Pouch Packing Machines, packing materials for packing gutkha and finished goods totally valued at ₹ 58,42,940/- were placed under seizure. A show cause notice was issued alleging that M/s Shree Raj Exports Pvt Ltd, Jodhpur who were engaged in manufacture of 'Goa-1000' Gutkha had closed down their manufacturing activity from 01.09.2008 and cleared 1500 kgs of lamination roll and 456000 pcs. of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rule 17 of the Pan Masala Packing Machines (Capacity Determination Collection of Duty) Rules, 2008 read with Section 11AC of the Central Excise Act 1944 and Rule 25 26 of Central Excise Rules, 2002. The notice also proposed to recover interest under Section 11AB of Central Excise Act 1944. The said SCN also proposed to impose penalty in terms of provisions of Rule 26 (1) of Central Excise Rules, 2002 and Rule 17 (1) of Pan Masala Packing Machines (Capacity Determination Collection of Duty) Rules, 2008 on the above mentioned five noticees. 2.2 The Commissioner decided the said SCN vide O1O No. 02/Commr/AKG/AHD-II/2013 dated 21.01.2013. Commissioner observed that in view of Section 2 (f) of Central Excise Act 1944, not only the person(s) who actually indulged in manufacturing of excisable goods, but the person(s) who employed the labourers is/are the manufacturer . He held that the contention of the noticees that they were not involved in the manufacturer of the seized Gutkha and that they were not the manufacturers' was not correct as they had engaged themselves in the clandestine manufacture of the seized Gutkha, which clearly comes out from the role played by eac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the proviso to Section 11A(1) [now Section 11A(4)] of CEA, 1944 read with Rule 7(2) and Rule 17 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. (iii) Imposed a penalty of ₹ 5,70,00,000/-, in terms of the provisions of Rule 17(1) of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, read with Section 11AC of CEA, 1944, and Rule 25 of CER, 2002, payable by all the five noticees in equal proportion i.e. ₹ 1,14,00,000/- each. (iv) Ordered to pay interest under Section 11AB [now Section 11AA] of CEA, 1944. (v) Imposed penalty of ₹ 1,14,00,000/- each on all the five noticees, in terms of the provisions of Rule 26(1) of CER, 2002 and Rule 17(1) of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. Seized goods valued at ₹ 68,42,940/-, which included packing materials (Packing Rolls, Outer Packing Materials with chain, used Pouch Packing Rolls) and machineries (15 Pouch Packing Machines and Generators etc.) apart from finished goods (217 HDPE bags containing 18000 Retail pouch of 'Goa 1000 brand Gutkha), were confisca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onth November, 2008 filed by M/s Shree Raj Exports Pvt. Ltd. He pointed out that the said unit M/s Shree Raj Exports Pvt. Ltd. had closed down their manufacturing activity with effect from 01.09.2008 as reported by the Assistant Commissioner, Central Excise, Division, Jodhpur vide letter dated 11.02.2009. The said unit M/s Shree Raj Exports Pvt. Ltd. vide letter 05.11.2008 had intimated that since their franchisee agreement with brand owners of Goa 1000 brand Guthka has been cancelled and their factory lying closed for 3 months, they were returning lamination roll to M/s Royal Marwar Tobacco Products Pvt. Ltd. He pointed out that from the Bilty no. 1802 dated 03.11.2008, it is seen that 35 drums Kimam, 40 CIR lamination and 40 bags PP bags, total weighing 6,935kgs were cleared to M/s Royal Marwar Tobacco Products Pvt. Ltd. Learned Counsel pointed out that impugned order relies upon the statement of Shri Ashok Bhanwarlal Gehlot, driver of truck no. RJ19 GA 1066, who in his statement dated 21.12.2009 has stated that he unloaded the goods as mentioned in the Bilty no. 1802 dated 03.11.2008 at M/s Royal Marwar Tobacco Products Pvt. Ltd. and for which he was paid ₹ 4,800/- from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence to prove the involvement of Shri Dilip Jani or M/s Royal Marwar Tobacco Products Pvt. Ltd. in the clandestine manufacture of Gutkha at Kherwa. Learned Counsel further pointed out that Shri Dilip Jani, Director of M/s Royal Marwar Tobacco Products Pvt. Ltd. had clearly stated that there was no inward entry in respect of the goods sent by Shree Raj Exports, Jodhpur in records of M/s Royal Marwar Tobacco Products Pvt. Ltd. He further argued that the impugned order without evidence holds that the said consignment cleared from Shree Raj Exports, Jodhpur was diverted to the said unit at Kherwa. 2.7 Learned Counsel further pointed out that there was news about duplicate factory of Goa 1000 brand Gutkha in the newspapers in the month of February, 2009. After perusing such news, the brand owners of Goa 1000 brand Gutkha had intimated to State Police and Central Excise department to take appropriate action in this regard. 2.8 Learned Counsel further argued that Rule 10 of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 is having a provision for Abatement of duty for non production of goods for over 15 days ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in these circumstances, demand of ₹ 15,83,333/- could have been confirmed against all the noticees and out of the said demand ₹ 3,16,667 could have been demanded from the M/s Royal Marwar Tobacco Products Pvt. Ltd. 2.9.1 Learned Counsel further pointed out that in para 37 of the Show cause notice has fixed a fair price of seized goods i.e. Goa 1000 brand Gutkha at as ₹ 0.64 paise per retail pouch. He argued that in these circumstances, the duty demand amount comes down to ₹ 10,41,667/- against all noticees and ₹ 2,08,333/- on M/s Royal Marwar Tobacco Products Pvt. Ltd. He further argued that the penalty imposed and demand of interest is unjust. 2.9.2 Shri Saurabh Rachch, learned counsel for the assessee Shri Dipak Bhogilal Kothari argued that the principle of natural justice has been violated in so far as the Revenue has relied on the statement of Shri Kiransingh Pradhanji Thakor for making a case against Shri Dipak Bhogilal Kothari. The said person was not made available for cross examination. Learned Counsel further argued that the statement of Shri Kiransingh P. Thakor could not have been relied upon for making a case against Shri Dipak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances, the demand of duty as well as penalty cannot be imposed on the appellant. 3. Learned Authorised Representatives relied on the grounds of review filed along with appeal of Revenue. He pointed out that Commissioner has simply relied on various statements. As discussed in para 36.1 of the Order in Original and arrived at subjective satisfaction that the production has started from 31.01.2009 and continued till the raid of police on 04.02.2009. Therefore, duty could have been demanded from January 2009 to Feb, 2009. He argued that no evidence was shown to the Commissioner that said machines were not operational i.e. they were either (i) lying sealed in some other factory/godown prior to January, 2009 or (ii) were operational elsewhere and duty was paid on those machines, or (iii) the machines were manufactured in January, 2009 itself, a presumptive tax liability as per sub rule 2 of rule 17 ibid is required to be fixed for the 15 machines found in the unit, deeming them to have been operational since July, 2008. He argued that the statements of the persons cannot be treated as conclusive evidence. He further argued that no independent corroborative evidence has been produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thakor was recommended by Shri Himanshu Jasubhai Shukla. He also stated that Shri Kiransingh Thakor had contacted him around 25 days prior to start of factory and the rent agreement was executed on 31.01.2009. He also stated that work of building walls had started before 31.09.2009 factory was ready and started production on 31.09.2009. The statements of workers found in the said premises was also recorded who stated that they were working in the said premises for the past 4 to 5 days and most of them had earlier worked for manufacturer of Gutka of Goa 1000 at Narela, Delhi and Gandhinagar. 4.1 The statement of Shri Nareshbhai Chaturbhai Patel, the owner of the said premises was recorded wherein he submitted that on 31.01.2009 his brother Shri Kantilal C Patel had given the premises to Shri Kiransingh Thakor on rent at ₹ 5,000 per month. He stated that the work of building wall started before 31/01/2009 and on 31/01/2009 the factory was ready and Shri Kiransingh had put up the machines and the production of gutka had started. He further stated that he did not know Shri Kiransingh. He further stated that gutka packing machines was run by generators which Shri Kiransin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring of Gutka and unloaded via tractor trolley. He also stated that while the gutka was made, a lot of vehicles used to come but he does not remember the vehicles. He also stated that in an expensive car, a person used to come who they said is their boss and his name is Rajeshbhai. 4.5 Shri Deepak Kothari in his statement dated 12.03.2009 stated that he knew Shri Kiransingh Thakor for 4 years as he was working under his brother Manoj Kothari. He stated that Shri Kiransingh Thakor and Shafi Mohd. Pathan was involved in busiess of liquor and in that reference he used to speak to them. He also stated at the end of January, 2009 Shri Kiransingh Thakor told him that he wanted to buy generator and requested him for source from where he can purchase. Shri Dipak Kothari referred him to Shri Jayantibhai Parekhdas Patel who was proprietor of Parekh Engineers, Mehsana. 4.6 Shri Shafi Mohd. Faiz Mohd. Pathan in his statement dated 19.03.2009 stated that in the end of January, 2009, Shri Kiransingh Thakor offered him a job of ₹ 25,000. He stated that he is a friend of Shri Kiransingh Thakor and they were doing business of liquor together. He further stated that Shri Kiransingh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Kantibhai Patel where they spoke and a deposit of ₹ 25,000 was given and a rent of ₹ 5,000 was fixed. Shri Kiransingh Thakor also agreed to give him ₹ 2.5 lakhs for preparation of shed. The work of construction lasted for one and a half month. He further stated that in the end of January, three machines came first and after 5-6 days 40-50 people came with 12 or 13 machines. He stated that the work of manufacture of Gutka lasted for 3 days and 2 nights only. He further pointed out that before machines came Shri Shafi Mohd. Pathan and Shri Kiransingh Thakor got a generator in an Eicher vehicle. 4.8 Statements of the main players namely Shri Kiransingh Pradhanji Thakor, Shri Shafi Mohd. Faiz Mohd. Pathan, Shri Himanshu Jasubhai Shukla, Shri Dipak Bhogilal Kothari and following were recorded: Statements dated 6.2.2009 of workers who worked at Ginning Place , Village Kherva, Tal Patdi, Dist Surendranagar. Statement dtd.6.2.09 of Shri Kantilal Chaturdas Patel, co-owner of the premises of Ginning Place', Village Kherva, Taluka Patdi, District Surendranagar. Statement dtd.19.2.09 of Shri Jayntibhai Parekhdas Patel, Cop oprietor of GIDC M/s. Parekh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king 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 since the 1st July, 2008 and shall be construed as operating packing machine for the purpose of Rule 7 and dealt with accordingly. The Commissioner further confirmed the duty of ₹ 5,70,00,000 (Rs. Five Crore Seventy Lakh) on the ground that as per the evidence presented before him the machines operated only from 29/01/2009-04.02.2009 and, therefore, he confirmed the demand only for the months of January and February relying on the statements given by various persons listed above. It is seen that the attempts of cross examinations the person whose statements were relied could not succeed. However, it is not stated in the order as to what efforts were made to bring the person whose statements have been relied for cross examinations. Section 9 D of Central Excise Act reads as follows: 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and as per Rule 6 read with sub rule 2 of Rule 17 of Pan Masala Packing Machines (Capacity and Determination and Collection of Duty) Rules, 2008, in such case involving clandestine manufacture the duty needs to be demanded from 1st July, 2008 to the date of which the factory was sealed by the Central Excise officers. In the instant case, the relief has been granted by the Commissioner relying on the statements which are not proven relevant evidence in the current circumstances. For statement to be relevant the conditions prescribed in rule 9 D of Central Excise Act need to be followed. The Revenue too in its appeal has argued that Commissioner had not examined the evidence in the proper perspective and should have confirmed duty for the entire period in terms of sub rule 2 of Rule 17 of Pan Masala Packing Machines (Capacity and Determination and Collection of Duty) Rules, 2008. We are in agreement of the observation of the Revenue for the reason that the relief granted by the Commissioner is based on the statements of various noticees and others, but Commissioner has not indicated as to how requirements of Rule 9D have been fulfilled for the purpose of statements to be relevant. W ..... X X X X Extracts X X X X X X X X Extracts X X X X
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