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TMI Blog2024 (12) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... atever the reasons the inspecting or audit authorities who are supposed to conduct periodical/regular audits and inspections could have raised the demand and also issued show cause notice on yearly basis but not acting upon for years together and to the surprise of the respondent, notices are issued and demand is raised before a concern to this Court and a huge amount of excise duty is important. This Court on the ground of technicalities and for certain laches committed by the department officials as pointed out by the respondent counsel is not inclined to decide the case in favour of the respondent. But keeping in mind, the quantum of excise duty and its ancillary duties which are in total of Rs. 98,03,22,312/- approx., this Court feels that the matter needs consideration as to where the things are properly attended or not. This Court feels that it is a case to remand back the matter to the Commissioner of Central Excise, Morellow Compound M.G. Road, Shillong-793001 in the respective cases for reconsidering the issue of purchase of the compound i.e. kimam and the records relating to the same and make an enquiry as to who is the supplier and in the event if the supplier has alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der notification No. 52/2002-CE, dated 17.10.2002 in respect of compound manufactured by them and captively consume. [4] Show cause notice dated 14.01.2009 was issued against the respondent and subsequently on 31.05.2012 the order in original was passed directing the respondent to pay the duty amount due. Subsequently, the respondent preferred an appeal before the CESTAT, Kolkata and accordingly, the appellate tribunal in excise appeal No.553 of 2012 dated 30.07.2015 remanded the matter back to the adjudicating authority. The adjudicating authority conducted a denovo adjudication in pursuance to the order dated 30.07.2015 and on 28.01.2016 passed an order demanding payment of the due amount from the respondent. [5] Aggrieved by the order dated 28.01.2016, the respondent in this case once again preferred an appeal before the Hon ble CESTAT, Kolkata and by a common order dated 03.08.2023 the Hon ble CESTAT set aside the order in original dated 28.01.2016 and rolled in favour of the respondent and therefore, the appellant herein challenged the said order by filing an appeal under Section 35G of the Central Excise Act, 1944. [6] Taking part in hearing, Mr. P. Datta, Learned counsel app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication No. 8/2004-CE dated 21.01.2004, as amended, in respect of final product, namely, branded Flavoured Chewing Tobacco/Jarda Scented Tobacco where in the said compound has been used as an input and they were not eligible for exemption from excise duty under Notification No. 52/2002-CE dated 17.10.2002 in respect of compound manufactured by them and captively consumed. 2. The thorough investigation lead by the investigating Officers of Central Excise, Shillong came to know that there are two goods manufactured at Agartala Unit viz., 1) Flavoured Chewing Tobacco and 2) Quiman Composition of Flavoured Chewing Tobacco: Compound, Silver Leaves and Raw Tobacco. Composition of Quimam: Compound, Lakhnoi Kuimam (Lakhnawi Kimam) and Silver Leaves. 3. The major raw materials used for manufacturing of Compound were Sandalwood Oil, Sada Kimam and Menthol. 4. The sample of compound which was sent to the Joint Director, Chemical Laboratory, Customs House, 15/1, Strand Road, Kolkata and the compound responded to the test for nicotine. 5. From the SCN it can be noted that the Baltis in which the Compound was kept were used as an item of Plant Machinery for manufacturing the final product. 6. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the department as per the provisions prescribed under Rule 9 of the Central Excise Rules, 2002, which was not done by the respondents. Instead, they have submitted that their units were audited by the department. Generally, the auditing is to examine the records and documents maintained by the respondents in a statutory manner. No activities of preventive nature including examination of manufacturing process can be carried out by auditing officers. Hence, auditing has no significance in relation to the question of knowing to the department. 10. As per provisions under Rule 173B of the Central Excise Rules, 1944, the list of raw materials, manufacturing process and flow chart of the process of chewing tobacco was not declared by the respondents. In the list of critical raw materials, the respondents have not shown whether a compound is also a raw material or an intermediary product. This does not indicate whether the compound was manufactured in their factory or purchased from outside. 11. It may also be noted that the respondents have never given the cost of production of compound nor have they given the details of the proportion of raw materials mixed for the production of com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vested in infrastructure or civil works or social projects in the States of North East and under the conditions laid down under point F of the notification No. 8/2004-CE there will be a loss to the respondents. 16. In order to avoid all this, the respondents with mala fide intentions shown the compound as intermediate product and have availed the benefits of notification No. 52/2002-CE and have cleared the same compound as final product by enjoying the benefits of notification No. 8/2004-CE which might be called as double bonanza for the same product. The CESTAT, Kolkata while passing the judgment has wrongly appreciated the said notifications and gave double bonanza to the tax evaders. 17. It may also be noted that the respondents have filed number of cases in this Hon ble Court. In one such case, they tried to nullify a notification which was issued to withdraw all the exemption notifications which they had enjoyed. The Hon ble Court may be observed how mala fide the intentions of the respondents are. M/s Dharampal Premchand another filed an appeal with WPC No. 144/2010 which was registered on 03.04.2010 in the Hon ble High Court of Tripura to strike down the notification no. 11/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actured by the respondent was an intermediate product and is eligible for availing the benefit under Notification No. 52/2002-CE dated 17.10.2002 which is not permissible as the compound is a marketable commodity and hence excisable ? (iv) Whether the order of the learned CESTAT suffers from perversity in the eye of law and on facts ? [8] It was further submitted that the Central Excise Act of 1944 had not exempted the said product namely chewing tobacco from whole of the duty of excise leviable thereon nor the said product was chargeable to Nil rate of duty. In fact, in the Notification No. 08/2004-CE dated 21.01.2004, there was no exemption from the levy of the excise duty and the same only provided for that the eligible industrial units manufacturing specified tobacco products instead of making payment of the Central Excise leviable to the chewing tobacco, could utilize the entire amount of duty benefit for investment in plant and machinery or in infrastructure or civil works or social projects in any of North-Eastern States. Subsequently, the said Scheme was further amended vide Notification No. 28/2004-CE dated 09.07.2004 providing for that the beneficiary was required to depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21.01.2004 read with amended Notification No.28/2004-CE dated 09.07.2004 further provided that if the investment made under the said Notification is withdrawn before the expiry of ten years and is not reinvested as mentioned above, the duty which is equal to the amount so withdrawn and not so reinvested, shall be paid by the manufacturer on the date on which the investment is withdrawn. As such, it is very clear from the Notification itself that the amount of the excise duty payable but for the exemption could be utilized for investment in the plant and machinery in a manufacturing unit which is located in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura. Excise Duty can become payable only when there is a levy. The industries availing the benefits under the Notification No. 8/2004-CE dated 21.01.2004 read with amended by Notification No. 28/2004-CE dated 09.07.2004 were required to charge the excise duty in the invoices while clearing the goods from the factory and only the said excise duty instead of paying to the Government could have been utilised in plant and machinery in a manufacturing unit which was located in the State of Arunachal P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heading No. 2106.00 and Chapter 24 of the First Schedule to the Central Excise Tariff Act, 1985 manufactured in a factory and used within the factory of production in or in relation to the manufacture of final products all goods falling under Chapter 24 of the first Schedule to the said Tariff Act, from the whole of the duty of excise and additional duty of excise and national calamity contingent duty leviable thereon, which was specified in the respective Schedules to the said Tariff Act and the said Special Importance Act and the said Finance Act. Nothing contained in the notification was to apply to inputs used in or in relation to the manufacture of final products (others than those cleared either to a unit in a Free Trade Zone or to a 100% Export Oriented Undertaking or to a unit in an Electronic Hardware technology Park or Software Technology Parks), which are exempt from the whole of the duty of excise leviable thereon or are chargeable to Nil rate of duty. [13] The Respondent further submit that the present Appeals are based on incorrect appreciation of the Notification No. 52/2002 Central Excise dated 07.10.2002) inasmuch as the Respondent s final product i.e. Chewing Toba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term assessment , on the other hand, is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount. The Division Bench appeared to equate levy with an assessment as well as with the collection of a tax when it. held that when the payment of tax is enforced, there is a levy . We think that, although the connotation of the term levy seems wider than that of assessment , which it includes, yet, it does not seem to us to extend to collection . Article 265 of the Constitution makes a distinction between levy and collection . [17] The Apex Court again in the case of Somaiya Organics (India) Ltd. Vs. State of U.P., reported in (2001)5 SCC 519 at paragraph 29 held as under: The words used in Article 265 are levy and collect . In taxing statute the words levy and collect are not synonymous terms while levy would mean the assessment or charging or imposing tax, collect in Article 265 would mean the physical realization of the tax which is levied or imposed. Collection of tax is normally a stage subsequent to the levy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the manufacture of cigarettes. In this context, the Court examined the scope of the term levy and made the following observations: (SCC p. 572, para 19) 19. The term levy appears to us to be wider in its import than the term assessment . It may include both imposition of a tax as well as assessment . The term imposition is generally used for the levy of a tax or duty by legislative provisions indicating the subject-matter of the tax and the rates at which it has to be taxed. The term assessment , on the other hand, is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount. The Division Bench appeared to equate levy with an assessment as well as with the collection of a tax when it held that when the payment of tax is enforced, there is a levy . We think that, although the connotation of the term levy seems wider than that of assessment , which it includes, yet, it does not seem to us to extend to collection . Article 265 of the Constitution makes a distinction between levy and collection . Referring the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the substantive condition for exemption under Notification specified amount should be invested in the North East for any of the notified purposes through the mechanism of Escrow Account deposit and withdrawal and this aspect of deposition of exempted duty amount into designated bank account, its withdrawal and investment is not disputed. Other conditions are purely procedural. It is also not disputed that the Respondent Company used the compound only for captive consumption and nothing was cleared from the factory as such, once the condition of deposit of an amount equal to the duty payable, but for exemption under Notification No. 8/2004-CE stands satisfied for chewing tobacco, the same condition gets automatically satisfied for compound captively consumed as well. This is for the reason that the amount of duty payable on compound, but for the exemption contained in Notification No. 8/2004-CE, is nothing but ZERO. When the amount to be invested for availing of exemption under Notification No. 8/2004-CE, is calculated, the amount is to be calculated as if compound and chewing tobacco are both taxable in a regime where Notification No. 8/2004-CE is not in existence. This fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamining Rule 2(d) of the CENVAT Credit Rules which defined that exempted goods to mean excisable form of duty of excise leviable thereon or the goods which are chargeable nil rate of duty. The exact expression as utilized in Rule 2(d) of the CENVAT Credit Rules have been used in the Notification No. 52/2002 Central Excise dated 07.10.2002. [23] The issues involved in the present Appeals centre around the question as to whether the Notification No. 8/2004-CE dated 21.01.2004 and the amended Notification, No. 28/2004-CE dated 09.07.2004, the whole of the duty of excise leviable on the finished product was exempt or the same was chargeable Nil rate of duty and thereby the Judgment of this Hon ble Court is squarely applicable in the present case. The Respondent submits that since the issue has already been settled by this Hon ble Court, no substantial question of law can be said to have been arisen on the same issue and thereby the present Appeal is liable to be dismissed. [24] The Respondent further submit that as per the Notification, though the excise duty, additional duty of excise leviable under the said Central Excise Tariff Act, were exempted but the educational cess, which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es that the expression duty of excise is used in CENVAT Credit Rules, which itself includes the various duties and cesses referred to therein, including the education cess and auto cess, etc. as part of CENVAT , which is an equivalent expression to duty of excise after the Act was amended by introducing Section 2A therein. The expression duty of excise used in CENVAT Credit Rules, thus, does not, by its own force or on its own logic, lend to a distinction between basic duty of excise under the Act and special excise duties or cesses or other duties leviable under other enactments. In this regard, it is pertinent to note the observation of the Hon ble High Court of Punjab and Haryana in the case of Commissioner, Central Excise Commissionerate Vs. M/s Malwa Industries, Etc. (2010)2 GSTR 413 (P H) decided on 30.04.2009 wherein the High Court observed as under: We are further of the view that the amendment, which has been made in Rule 57 (AB) of the Rules by using the expression of any duty of excise is significant and intentional. IN the earlier Notification No. 5/94-CE(NT), dated 1.3.1994, it was specifically provided that credit can be utilized only for payment of duty of excise lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts for the manufacture of Compound which was consumed captively and Audit was conducted in 2001, 2003, 2004, 2005 and 2007 and no objections were raised so all the facts were in the knowledge of the Department and thereby the extended period of limitation cannot be invoked on the ground that there was a suppression of facts with the intention to evade duty. The Respondent states that neither in the show cause notice nor in the order of original was stated as to how there was a suppression of facts with an intention to evade duty and the authority merely sated that there was a suppression of facts involved in the case, which cannot empower the authorities to invoke the extended period of limitation as provided under Section 11A of the Act of 1944. The Respondents state that as per proviso to Section 11A, for invoking extended period of limitation, the Department has necessarily to allege and prove that there was fraud, suppression etc. on the part of the assessee with an intention to evade payment of duty. The Respondent further submit that it is settled legal position that for the Excise Department to invoke extended period of limitation, the Department has to allege and prove tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing tobacco. It is further submitted that exemption granted in Notification No. 8/2004-CE dated 21.01.2004 was a conditional exemption and the same has not exempted finished product of the Respondent Company, from whole of the duty of excise leviable thereon or are chargeable to Nil rate of duty and thereby applicability of Notification 52/2002 in instant case is not attracted and Appellants were legally entitled to exemption under Notification No. 52/2002-CE dated 07.10.2002. The Respondent denies the statements contrary to the above, maid in paragraph 9 of the Memorandum of Appeal. The statements and contentions made by the Appellant on the basis of the pleadings of the Respondent Companies at the time of adjudication has no relevance in the Appeal filed under Section 35G of the Act of 1944 inasmuch as the Appeal has to be decided on the basis of the substantial question of law arising out of the order of the Tribunal. The pleading and submissions made before the adjudicating authority has no relevance in deciding the proposed substantial question of law inasmuch as the Tribunal is the final authority finding a fact and the fact as found by the Tribunal are final. The Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds to be examined and accordingly, the duty has to be levied. [28] For the reasons stated above, this Court feels that it is a case to remand back the matter to the Commissioner of Central Excise, Morellow Compound M.G. Road, Shillong-793001 in the respective cases for reconsidering the issue of purchase of the compound i.e. kimam and the records relating to the same and make an enquiry as to who is the supplier and in the event if the supplier has already paid the sufficient excess due, the same need not be collected earlier from the respondent herein. The respondent is at liberty to place relevant records, if not already placed to the satisfaction of the Officers and the consequential duties raised in the show cause notice needs to be dropped in the light of payment, if already paid for the compound i.e. kimam failing which the respondent herein is accountable for the excess duty payable in accordance with law. [29] In view of the above, this Court is of the opinion that the issue of levy of excise duty and considering the exemption is concerned for the discussions made above, an opportunity needs to be given for ascertaining whether any due has been already paid by the supplier ..... 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