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TMI Blog2022 (9) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... which is not permissible under the scheme of compounded levy on the product manufactured by the appellant. The appellant have regularly filed declarations for capacity determination under Rule 6(1) of the Chewing Tobacco Rules, and the said declarations were adjudicated upon and duty payable determined (assessment order) by the Adjudicating Authority. Such adjudication orders have attained finality, as these have not been appealed against by the Department - the factory of the appellant was regularly visited from time to time by the Officers of the Department and they have never found any undeclared packing machine being operated by the appellant. In the facts and circumstances (Compounded Levy Scheme), undisclosed income declared before the Income Tax Department has no bearing on the duty payable under Central Excise Act. Further, it is undisputed that the amount of Rs.92,14,154/-, which was voluntarily offered to Income Tax and was confirmed in the Assessment order as undisclosed income, on appeal by the appellant, the ld. Commissioner of Income Tax (Appeals) vide Appellate Order dated 05.10.2016 have set aside the said amount - the appellant has given a cogent explanation wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncludes drying, grading and coating and selling of entire processed tobacco to Unit-I. The appellant company regularly deposits the duty in advance at the beginning of each assessment period (which is month to month) and also filed periodical return regularly. 4. The present appeal pertains to Unit-I, as mentioned above. The Appellant is operating under the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 (Chewing Tobacco Rules) notified by virtue of Section 3A of the Central Excise Act, 1944 and was paying duty on the aforesaid final products based on the periodic capacity determination orders passed by the jurisdictional Central Excise authority determining the annual capacity of production of the Appellant (Determination Orders) under Rule 6(2) of the Chewing Tobacco Rules. The appellant regularly deposits the duty returns. 5. The officers of Income Tax Department (IT Department) conducted search proceedings in September 2013 at various premises of Miraj group and its personnel. During the such search on 25.9.2013 at the residential premises of Sh. Purohit under Panchnama dated 25/26.09.2013, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties provided the reports regarding the investigation, the details of which are mentioned below: 1) Letter dated 28.3.2017 by Ld. Superintendent, Varanasi, regarding M/s Mala Zarda Industries; 2) Letter dated 28.3.2017 by Ld. Superintendent, New Delhi, regarding M/s Golden Tobacco Manufacturing Co. Pvt. Ltd., 3) Letter dated 25.3.2017 by Ld. Assistant Commissioner, Ghaziabad, regarding M/s Kay Pee Khaini Pvt. Ltd., 4) Letter dated 24.3.2017 by Ld. Superintendent, Sonipat, regarding M/s Vaneet Sales Corporation; 5) Letter dated 16.3.2017 by Ld. Assistant Commissioner, Anand, regarding M/s Patel Products. 6) Letter dated 10.3.2017 by Ld. Assistant Commissioner, Jaipur, regarding M/s Goyal Tobacco Co.; 7) Letter dated 14.3.2017 by M/s Malpani Group. 8) Letter dated 9.3.2017 by Ld. Superintendent, Howrah, regarding M/s Angel Products; 9) Letter dated 6.3.2017 by Ld. Deputy Commissioner, Ambala, regarding M/s SMC Products; 10) Letter dated 15.3.2017 by M/s Anas Enterprises; 11) Letter dated 24.3.2017 by M/s Praveen Kumar Sons; 12) Letter dated 28.3.2017 by M/s Lok Nath Prasad Gupta; and 13) Letter dated 5.4.2017 by Ld. Deputy Commissioner, Ambala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leading. For example, as per the report of Range Superintendent having jurisdiction over M/s Golden Tobacco Manufacturing Co. Pvt. Limited, it was informed that they are engaged in manufacture of branded chewing tobacco under the brand name Bengali Spit Tobacco . However, in the survey report the appellant has claimed the brand name of the said manufacturer as Golden , which is actually not their brand name. Similar discrepancy, mis-matching with respect to report received from other Range Superintendents with respect to some other manufacturing unit, the names which are appearing in the said report. 9.3 Thus, it appeared to Revenue that Sh. Purohit is trying to mislead the Revenue and the said survey report resumed from his premises during search by the IT Department, is not a survey report but also contains the data of clandestine clearance by the appellant company. It further appeared that the data appearing in the green column in the said report matches with the returns filed with the Department, whereas the data appearing in the red column (claimed to be the data of other manufacturers) is actually the clandestine clearance of the appellant. 9.4 Revenue further worked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination is fair play, it being the most effective of all the means for extracting truth and exposing falsehood. It is clarified that above observations shall have no effect on the discretionary power of the adjudicating authority below exercised with reasonable care and caution but at the appropriate stage for the same. Appeal accordingly stands disposed of. 9.6 Thereafter, the appellant filed detailed reply to the show cause notice filed on 29.10.2018 disputing all the allegations and also filed additional submission dated 19.02.2019. However, the Adjudicating Authority rejecting the contention of the appellant was pleased to confirm the proposed demand with penalty against the appellant company, and also imposed penalty on the Managing Director Sh. Purohit. Being aggrieved, the appellants are in appeal before this Tribunal. 10. Being aggrieved with the impugned order, the Appellant has filed the present appeal on the following grounds. SUBMISSIONS ON BEHALF OF THE APPELLANT 11. COMPOUNDED LEVY SCHEME PRESCRIBED UNDER SECTION 3A READ WITH THE CHEWING TOBACCO CAPACITY DETERMINATION RULES IS A SELF-CONTAINED CODE, WHERE DUTY IS PAYABLE BASED ON NUMBER OF PACK ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules in exercise of the powers conferred under sub-sections (2) and (3) of Section 3A of the Excise Act. 12. In the present case, admittedly, the Appellant is engaged in the manufacture of chewing tobacco falling under Tariff Item 24039910 with the aid of packing machine (FFS) and packed in pouches. Thus, the Chewing Tobacco Rules are applicable in respect of final products manufactured by the Appellant, and there is no dispute in this regard. 12.1 Under the compounded levy scheme, excise duty is imposed on the factor relevant for production of the notified goods and in case of Chewing Tobacco Rules, the factor relevant for production of the notified goods is the number of packing machines in the factory of the manufacturer as provided in Rule 4 ibid. Whereas Rule 5 provides for the quantity which is deemed to have been produced by use of one operating packing machine. 12.2 The provisions of Rule 6(1) states that a manufacturer of notified goods shall file a declaration, providing the comprehensive details in respect of packing machines. Under sub-rule (2), on the basis of such declarations, jurisdictional Central Excise authority shall, after making necessary inquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said scheme is bound to pay a particular quantum of duty irrespective of actual production/ clearance of such goods. 15. The appellant relies on the following decisions: Hans Steel Rolling Mill v. Commissioner of C. Ex., Chandigarh, 2011 (265) E.L.T. 321 (S.C.). Commissioner of C. Ex. Customs v. Venus Castings (P) Ltd., 2000 (117) E.L.T. 273 (S.C.). Union of India v. Supreme Steels and General Mills, 2001 (133) E.L.T. 513 (S.C.). Goyal Tobacco Co. Pvt. Ltd. v. Commissioner of C. Ex. ST, Jaipur-I, 2017 (348) E.L.T. 720 (Tri. Del.), as affirmed by the Hon ble Rajasthan High Court in Commissioner of C.G. S.T., Jaipur v. Goyal Tobacco Co. Pvt. Ltd., 2018 (360) E.L.T. 477 (Raj.). Ram Shyam Prints v. Commissioner of C. Ex., Ahmedabad, 2008 (226) ELT 433 (Tri. Ahmd.). 16. Further urges in the present case, since the Appellant is engaged in the manufacture of notified goods, viz. chewing tobacco, it is submitted that the duty is payable on such goods only in terms of the provisions of the Chewing Tobacco Rules. For this reason only, Department had determined the Annual Capacity of Production and duty is payable on the basis of number of packing machines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of the Chewing Tobacco Rules only. As a corollary, it is submitted that no duty demand can be raised on the basis of presumed undeclared machines, as done by the Department in the present case, which is violative of the Chewing Tobacco Rules. 20. At this juncture, reliance is placed on the decision of Hon ble Tribunal in the case of Goyal Tobacco Co. Pvt. Ltd. v. Commissioner of C. Ex. ST, Jaipur-I, 2017 (348) E.L.T. 720 (Tri. Del.), where duty demand was confirmed against the assessee on the basis of availability of three machines in the rented godown premises. The Hon ble Tribunal, while setting aside such demand, held that under the compounded levy scheme, duty cannot be levied on machines which were not functional or installed during the relevant period. The said decision was further affirmed by the Hon ble Rajasthan High Court in the case of Commissioner of C.G. S.T., Jaipur v. Goyal Tobacco Co. Pvt. Ltd., 2018 (360) E.L.T. 477 (Raj.). 21. It is further submitted that the Appellant has sufficient positive evidences to establish that it was operating only the number of machines as declared before the CE Department. The same are mentioned below. 21.1 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to defective packing material supplied. No adverse inference can be drawn. In any case, there is no evidence to support the allegation that such packing material was used in clandestine manufacture of goods. 27.1. As mentioned above, packing material weighing 29,144.06 kg purchased from Uma Polymers was found to be defective by Appellant on inspection, and accordingly, the latter did not make the payment of Rs. 92,12,154/-. Uma Polymers also did not replace the material. It is submitted that the Appellant did not return the material because it contained the Appellant s brand name Miraj , thus, the same was prone to misuse of brand name. The material was made of multi-layered film containing plastic and metal foil, which cannot be re-melted and re-used. Accordingly, Appellant put to use part quantity in the production of such material and destroyed the remaining quantity with permission. 27.2. It is further submitted that the Appellant has duly recorded the details of the aforesaid purchase as well as the fact of destruction of part quantity, in its books of account, which further shows bona fide on the Appellant s part. Had the Appellant intended to use the material in cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the impugned order. 30.2. In this regard, it is submitted that the Tobacco Market Survey Report was an informal telephonic survey from dealers, and was prepared by the Appellant capturing the details of sales (and not clearances) of Appellant s competitors as informed by the dealers. Naturally, the survey report had only captured sales data of the Appellant s competitors as informed by the dealers located across the country and not clearance data of such competitors. Whereas, the reports/ letters were in respect of the other manufacturers showing only the clearances from their respective units. It is due to this difference in Department s verification process, it has been stated by some of the competitors that their clearance of tobacco products during the relevant period was Nil. 31. In the reports/ letters relating to the competitors, namely, Malpani Group and SMC Products, it is mentioned that they are not the manufacturers of tobacco products. In this regard, it is submitted that tobacco under the brand name Gai Chhap and Patta Chhap as mentioned in the Appellant s survey report, are available in the market. Sample copies of such tobacco pouches, together with pouch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or denial of such request: Youngman Indus. Ltd., v. Commissioner of Customs, Amritsar, 2004 (175) E.L.T. 663 (Tri. - Del.) Ultra Fine Fillers (P) Ltd. v. Commissioner of Central Excise, Jaipur-II, 2004 (167) E.L.T. 331 (Tri. - Del.). 34. EXTENDED PERIOD OF LIMITATION IS NOT INVOKABLE AND DEMAND IS ENTIRELY TIME-BARRED. 34.1. The demand proposed in the SCN issued on 03.05.2017 for the period April 2012 to April 2013, was raised by invoking the extended period of limitation. It is submitted that the extended period of limitation is not invokable in the present case, because the Appellant did not suppress any facts, thus there is no intention to evade the payment of Central Excise duty. Further, except a bald allegation, neither the SCN nor the impugned order demonstrates as to how Appellant has suppressed the facts. For this reason, extended period of limitation is not invokable and the entire demand is time-barred. 35. It is further submitted that once it is evident that the Appellant was regularly filing its returns and that the records of the Appellant were also routinely audited, there is no basis to allege that there was any suppression by the Appellant. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with consequential relief. 40. Learned Special Counsel Sh. S. K. Mathur appearing for the Revenue urges that the goods manufactured by the appellant are prone of evasion of Central Excise duty. Accordingly, he urges that the duty has been rightly demanded in the impugned order, which is based on assumption and presumption, on the basis of the survey report (private documents) recovered at the time of search from the residence of Sh. Purohit. Although Sh. Purohit has explained the said sheet as survey report, but it is actually data of clandestine manufacture and clearance by the appellant. He also relies on the Appraisal report written by the Deputy Commissioner of Income Tax, Udaipur to the Joint Commissioner (AE), Udaipur which gives the details of data and cash found and seized at different premises, including residence of the Director. Learned Counsel also stresses that Rs. 4 crore undisclosed income was declared by Sh. Madan Lal Paliwal to cover up their various transactions out of undisclosed income. Accordingly, he supports the impugned order and the demand of duty with penalty. 41. Having considered the rival contentions, we find that Section 3A of the Act read with t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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