9911796707
TMI Blog2005 (9) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... ) was excisable and classifiable under Chapter sub-heading 2404.49/2404.40 of 1985 Tariff Act, as held in the case of Dharampal Satyapal (2005 (4) TMI 66 - SUPREME COURT OF INDIA), however, on the facts and circumstances of this case, the department was not entitled to invoke the extended period of limitation under the proviso to Section 11A(1) of the said Act. Accordingly, these civil appeals are partly allowed, - 5747-5749 of 2000 - - - Dated:- 30-9-2005 - S.N. Variava, Dr. A.R. Lakshmanan and S.H. Kapadia, JJ. [Judgment per : S.H. Kapadia, J.]. - Whether, in the facts and circumstances of the case, the Tribunal was justified in holding that the 'additive mixture' processed by the three appellants herein was excisable and classifiable under Chapter sub-heading 2404.49 of Central Excise Tariff Act, 1985 and that the Department was right in invoking the extended period of limitation under the proviso to Section 11A(1) of Central Excise Act, 1944 (hereinafter referred to as "the Act"). 2.Briefly, the facts of the case are that M/s. Hari Chand Shri Gopal, M/s. Gopal Industries and M/s. Gopal Zarda Udyog were the three assessees engaged in the manufacture of Chewing Tobac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16-6-1995 to 26-9-1996. 3.On dated 21-11-1997, replies were given to the three show cause notices. The appellants submitted that they were engaged in the activity of manufacturing chewing tobacco, which was an excisable product on which they have been paying duty. In the reply, the appellants explained at length the process by which the additive mixture came to be produced in the three factories in Delhi. According to the appellants, the additive mixture was not a final product; that it was a transient product; it was not noticeable to the naked eye and that it was unsaleable and useless for any other purpose. According to the appellants, the composition of additive mixture was known only to the blender. According to the appellants, the entire process was shrouded in secrecy and was known only to the blender. In the said reply, the appellants alleged that the details of the process of manufacturing the final product as well as the formulation of the additive mixture at the intermediate stage was known to the Department since 1992-93; that their records and registers stood verified by the Department since 1992-93; that the said records indicated the receipt and utilisation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. That, the evidence brought forth by the appellants regarding inspection of their factories pertained to the years 1992 and 1993, during which period the said mixture was not chargeable to duty. That, the appellants were in the business of manufacturing and marketing of chewing tobacco and, therefore, the fact that kimam was chargeable to duty must have been in their knowledge and that by bringing the above facts on record, the Department had discharged its initial burden of proving the conditions mentioned in the proviso to Section 11A(1) of the Act. 5.Aggrieved by the decision of the Commissioner dated 20-5-1998, the matter was carried in appeal by the assessees to the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi (hereinafter referred to as "the Tribunal"). The appeals filed by the appellants herein were heard along with the appeals filed by M/s. Dharampal Satyapal. 6.By judgment dated 1-10-1999, the Tribunal held that the said additive mixture was a kimam; that it was excisable under Chapter sub-heading 2404.49/2404.40 of 1985 Tariff Act and that the appellants had failed to disclose their activities in their Delhi Units. In this connection, the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L.T. 241, this Court held that the compound manufactured by M/s. Dharampal Satyapal was a kimam which was moved in balties on stock transfer basis to their branded chewing tobacco factories located in UP and HP constituted independent, distinct and identifiable product known to the market as such and, therefore, the said kimam was excisable and classifiable under sub-heading 2404.49/2404.40. On the question of limitation, this Court on examination of facts found that M/s. Dharampal Satyapal used to buy from the market a compound, similar to the compound which it used to manufacture in its own units, and such similar compound was used in the manufacture of Tulsi Zafrani Zarda (final product). This Court further found that M/s. Dharampal Satyapal had failed to disclose the existence of their units, they did not maintain any records under the excise law, they clandestinely manufactured their compound without informing the Department, and in the circumstances, the Department was right in invoking the extended period of limitation. It was argued on behalf of the assessee in that case that there was no intent to evade duty as the entire quantity of kimam was captively consumed; that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liable to duty or he was required to take out a licence, there is no scope to invoke the proviso to Section 11A(1). For invoking the extended period of limitation, duty should not have been paid or short-levied or short-paid or erroneously refunded on account of fraud, collusion or wilful suppression or misstatement of facts or wilful contravention of the Act or the Rules with the intention to evade payment of duty. These ingredients postulate a positive act, therefore, failure to pay duty or to take out a licence is not necessary due to fraud, collusion etc. Likewise, suppression of facts is not a failure to disclose the legal consequences of a certain provision. 13.In case of M/s. Dharampal Satyapal (supra), the assessee used to buy Lucknowi Kimam from the market from time to time and used the same in the manufacture of branded chewing tobacco (final product). In the case of M/s. Dharampal Satyapal, apart from compound prepared in its unit, it used to buy Lucknowi Kimam from the market which was similar to the compound produced by the assessee and the same was cleared to the licensed factories in UP and HP, where it was diluted and used in the manufacture of Tulsi Zafrani Zar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the part of the appellants in failing to get their units registered under Section 6 read with Rule 174 of the 1944 Rules. However, we find from the facts that on 14-7-1992, stock verification was carried out by the Department inside the premises of the appellants by anti-evasion department as also by the jurisdictional Central Excise officer. On 20-10-1992, the partner of the appellant was required to remain present before the Superintendent, Central Excise, New Delhi. His statement was recorded under Section 14. In that statement, he has stated that in their units in New Delhi, there were three rooms in which raw material was stored. In the said statement, he has further stated that the appellants were blending and mixing the additive mixture which was then transferred to their factories at UP and HP for manufacture of branded chewing tobacco. In the panchnama dated 20-10-1992, under which the premises of the appellants in Delhi were searched, the manufacturing process of additive mixture was specifically indicated. Even at that time, there was stock verification of the various raw materials used in the manufacture of chewing tobacco. Under Item 59 of that panchnama, the stock o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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