TMI Blog1999 (10) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... e being disposed of by this common order. 2. Under show cause notice dated 19-6-1997 issued by the Commissioner of Central Excise, Delhi, it was alleged that M/s. Dharampal Satyapal and others had manufactured excisable and dutiable kimam , which was classifiable under sub-heading No. 2404.49 of the Central Excise Tariff during the period 1-3-1994 to 22-7-1996, and under sub-heading No. 2404.40 from 23-7-1996 onwards. The said goods have been described by the appellants by different names and hereinafter are referred to as Chewing Tobacco Kimam . The said goods were manufactured by the appellants by mixing raw kimam/ sada kimam with various ingredients such as menthol, aromatic spices, perfumes, saffron, musk, distilled water, etc. The said goods were excisable. No duty had been paid thereon and the goods had been removed clandestinely from the place of manufacture. No prescribed procedure had been followed. No central excise registration was obtained in respect of the premises where the said goods were manufactured. Demand of central excise duty amounting to Rs. 16,91,79,394.29 was demanded and extended period of limitation was invoked. Penal provisions were also invoked aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice dated 25-3-1997 issued to M/s. Gopal Industries Others was similarly adjudicated by the Commissioner of Central Excise, Delhi under Order-in-Original dated 20-5-1998 and duties as proposed in the show cause notice were confirmed. Penalties of Rs. 16, Rs. 18 lakhs and Rs. 17 lakhs were imposed on M/s. Gopal Zarda Udyog, Gopal Industries and M/s. Harichand Shri Gopal. A redemption fine of Rs. 5 lakhs and Rs. 3 lakhs was imposed in respect of the goods seized from Gopal Industries and Harichand Shri Gopal. 3. All the appeals were posted for hearing on 10-8-1999 when Shri V. Lakshmi Kumaran, Advocate appearing for M/s. Dharampal Satyapal and others submitted that the appellants were purchasing sada Kimam , which was a tobacco extract, and were mixing with such sada Kimam, various ingredients like perfumes, spices, saffron, etc. and as a result, a compound was formed which was sent to their other factories. It was his submission that there was no evidence that this compound was capable of being used as such. It was only after dilution that the compound was usable. He referred to the Tariff history and submitted that the compound was not a chewing tobacco. It could not also b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal s decision in the case of M/s. Hiranyakeshi Sahakari Sakkare Karkhane Niyamit v. C.C.E., Belgaum - 1989 (39) E.L.T. 658 (T) = 1989 (21) ECR 280 (CEGAT-SB-D) in support of his contention that substantive benefits admissible under law cannot be denied for not following the procedure. 4. In reply, Shri A.K. Prasad, SDR submitted that the goods in dispute were known as kimam and were dutiable as per the definition of chewing tobacco in the Tariff. As per common understanding, the goods were known as chewing tobacco kimam and similar products were marketed by the manufacturers at Lucknow and other places and referred to the various statements annexed to the show cause notices. He submitted that there was no doubt that the goods in question were marketable product and that the coverage of the tariff was wide enough to cover the chewing tobacco kimam. The appellants on their own had not disclosed the fact of manufacture and had not disclosed their activities relating thereto. But for the searches and seizure; a huge evasion of central excise duty could have gone undetected. The appellants had manipulated their records to suppress the facts and the extended period of limitation has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of chewing tobacco kimam which had been variously described by them as compound, additive mixture, kimam/K, manufactured kimam, etc. The base for the manufacture of chewing tobacco kimam was the raw kimam also called sada kimam. The sada kimam was produced after the tobacco leaves were boiled in water and the tobacco leaves wash was obtained. According to the information on record, for producing sada kimam, tobacco leaves were procured, the tobacco leaves were washed and placed in the tanks which were filled with water. Below the tanks were furnaces, which were then fired and the tobacco leaves were boiled in water. After boiling the tobacco leaves in water for sometime, tobacco leaves wash was obtained. This tobacco leaves wash after discarding away the spent tobacco leaves were transferred through a pipe to an open pan. The wash was further boiled till it attained the requisite concentration/consistency. It was then filtered and packed for sale. Shri Gopi Kishan Singh, Manager of M/s. Siraj Co., Sitapur in his statement recorded under Section 14 of the Act before the Superintendent of Central Excise (Preventive), Lucknow on 16-12-1996 had stated as under :- (File of Dharamp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the tobacco leaves and boil them. After this the water of tobacco is taken out of the tank through a pipe in another container and only tobacco leaves are left in the tank. This water of tobacco is boiled again, by us, to thicken it. After this the thick tobacco water is sieved filtered through markien cloth and this extract/es-sence/water of tobacco is filled into plastic cans and kept for sale. This whole process of making extract of tobacco takes about three days. The colour of this extract is like dark chocolate and it is slightly sticky and syrupy. This extract of tobacco we sell to M/s. Gopal Industries, Gagan Vihar, Delhi, M/s. Harichand Shrigopal and M/s. Gopal Zarda Udyog in these cans. Apart from these buyers we sell this tobacco extract to M/s. Dharampal Premchand Ltd., G.T. Karnal Road, Delhi. The product - sada kiman is a marketable commodity and is actually marketed. M/s. Siraj Tobacco Company, Sitapur were classifying the raw kimam manufactured by them under sub-heading No. 2404.49 of the Central Excise Tariff as was evident from the bills issued by them. It has been recorded in the show cause notice dated 19-6-1997 at page 16 as under :- M/s. Siraj Tobacco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e balti of special kimam and zero kimam are mixed with roughly in the ratio of 1:1with Lucknow kimam to obtain the final excisable goods i.e. special kimam and zero kimam. Silver in the form of shredded leaves are also added before its final packing. The silver is added to give the product a cosmetic look. The Lucknow kimam purchased from outside had been cleared on payment of central excise duty by the manufacturers at Lucknow under sub-heading No. 2404.49 till 22-7-1996 and under sub-heading No. 2404.40 on and after 23-7-1996. The appellants were well aware of such duty liability and the fact of payment of central excise duty by their suppliers of such chewing tobacco kimam. They however did not pay any central excise duty on the similar products manufactured by them and did not obtain any registration for the premises where the manufacturing activities were being undertaken and did not disclose the relevant facts to the central excise department. 8. It has been argued by M/s. Dharampal Satyapal that their kimam was used by them in the ratio of 1:5 with tobacco flakes to produce flake type branded chewing tobacco (zarda) while Lucknow kimam was used by them with their own ki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lol, aromatic spices, borneol, Gulab Jal, Oil germainium, Hina, etc. and mixed in the mixture with the aid of power; that as a result of mixing Kimam/K or Additive Mixture is produced; that this is their RESULTANT PRODUCT and known in the trade parlance as Kimam and sold as such; that this is an independent product and a preparation of chewing tobacco; that the mixing is only stage for transforming the raw material into final product; that they were not aware that mixing amounts to manufacture and that is why they did not obtain the Central Excise Registration certificate; that he admitted the mistake and was prepared to pay the Central Excise Duty; that the Market Value/Transfer Value of Additive Mixture was Rs. 900/- 1000/- per kg. and that of Kimam/K was Rs. 500/- a Kg. approx; that the resultant product Kimam/K or Additive Mixture manufactured by them is in the Thick Viscous Syrupy form wherein the Spices, Menthol Borneol, Sada Kimam, Gulab Jal, Oil Geranium, Hina and Sada Kimam/Raw Kimam are mixed and their ratio are so adjusted that resultant product attains the desired consistency. 10. Thus, the central excise duty at the applicable rate has been rightly confirmed on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssification lists approved with regard to their final product i.e. branded chewing tobacco from their jurisdictional Central Excise Offices not falling within the jurisdiction of this Commissionerate and keeping the Jurisdictional Central Excise Office in dark about the existence of the factories in respect of which the present demand was raised, it can not be said that the parties were keeping the department informed about their affairs or that the department was having knowledge of the activities of the parties from which the present demand has arisen. Moreover in the case of Jaishri Engineering Company (P) Ltd. v. C.C.E., Bombay - 1989 (21) ECR 177 (SC), the Hon ble Supreme Court has held that the fact that the department visited the factory of the appellant and they should have been aware of the production of goods in question, were no reason for the appellant not to truly and properly describe these goods - ...... the Tribunal was right ... in upholding the demand of the duty for a period beyond 6 months as contemplated by section 11A of the Act. Accordingly the demand for extended period is sustainable even if the department was in the knowledge of the use of additive mixtu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of legal alternatives cannot be used to justify an illegal act. In the facts and circumstances of the case, we agree with the adjudicating authority that the extended period of limitation was rightly applicable in both these cases. 12. A plea has been taken that had the appellants paid central excise duty on the chewing tobacco kimam then they would have been eligible to avail of the benefit of proforma credit/Modvat credit while paying duty on their final products - branded chewing tobacco. In these proceedings, we are not concerned with the duty demand on the final products of the appellants i.e. branded chewing tobacco or branded kimam. In any scheme of proforma scheme/Modvat credit, proper central excise duty was required to be paid on the inputs and then alone the question of either allowing or not allowing the credit of such duty depending upon the terms relevant to the schemes becomes relevant. Without paying appropriate central excise duty on the inputs, the operation of the proforma credit/Modvat credit scheme could not be thought of. As we have held above the appropriate central excise duty was payable on chewing tobacco kimam, the input. After such payment, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed under this proviso and invoke the exceptional power. Since the proviso extends the period of limitation from six months to five years it has to be construed strictly. The initial burden is on the department to prove that the situations visualised by the proviso existed. But once the department is able to bring on record material to show that the appellant was guilty of any of those situations which are visualised by the section, the burden shifts and then the applicability of proviso has to be construed liberally . As regards the availability of Modvat credit and exemption notification, the availability of legal alternatives cannot be used to justify an illegal act. Moreover, an attempt on the part of the party to tamper with the original records and prepare doctored documents to escape from the duty liability is also indicative of its wrongful intentions. Similar observations have been made by the adjudicating authority in the case of Gopal Industries and Others in Para 28 of the order, which is extracted below :- 28. The next question to be answered is whether in the light of the facts that Modvat credit is available in respect of Kimam used in the manufacture of chewing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. Reliance has been placed on the Tribunal s decisions in the case of (1) Mahindra Mahindra Ltd. v. Collector of Central Excise, Aurangabad - 1999 (31) RLT 257 (Tri.) and (2) Hiranya Keshi Sahakari Sakkare Karkhane Ltd. v. Collector of Central Excise, Belgaum - 1989 (39) E.L.T. 658 (T) = 1989 (21) ECR 280 (Tribunal). On the other hand, the SDR had referred to the Supreme Court s decision in the case of (1) Lal Woollen and Silk Mills Pvt. Ltd., Amritsar v. Collector of Central Excise, Chandigarh - 1999 (108) E.L.T. 7 (S.C.) = 1999 (32) RLT 227 (SC) and (2) Mihir Textile Ltd. v. Collector of Customs - 1997 (92) E.L.T. 9 (S.C.). In the case of Dharampal Satyapal Others, the adjudicating authority with regard to this plea of the appellants had referred to as under :- The fact that party could have availed Modvat credit in respect of the duty paid on the compound or could have availed exemption under Notification No. 121/94-C.E., dated 11-8-1994 is not relevant at this stage, moreover the party is contesting case on merits. Therefore, whether the modvat credit should be made available in respect of the duty on the compound or whether the party has complied substantially with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o establish his entitlement to such benefit. In the same Steel Authority of India Limited decision, the Tribunal also observed that AR 3A Form not bring statutorily prescribed removal on Gate Passes instead of AR 3A is not an irregularity of a serious nature for which another precedent decision in the case of Indian Oil Corporation v. Collector of Central Excise, Madras - 1985 (20) E.L.T. 171 was relied upon at the present case no mala fides are attributed to the appellants by the Department. Secondly, in the earlier order in appeal dated 28-8-1980 by the Collector (Appeals) while holding that Zinc Oxide was covered by Notification 21/55, the Collector (Appeals) had also observed It was wrong on the part of the Assistant Collector to have questioned the correctness of the issue of CT2 certificate issued by the Collector of Central Excise, Cochin. In case he had any doubts about the correctness and genuineness of the certificate, he could have taken up the matter separately with the concerned authorities in the Cochin Collectorate. Thirdly, it would also appear that when for certain consignments AR3A Forms were received from Cochin Collectorate on rewarehousing of Zinc Oxide, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ications that in respect of use of the material elsewhere than in the factory of manufacture, the procedure set out in Chapter X of the Central Excise Rules should be followed is condition relating to procedural requirement which obviously cannot be satisfied by the imported goods. In view of the above, it would not be correct to deny the benefit of exemption notification to imported goods only because the procedural condition in the notification is not satisfied by the imported goods. It has therefore, been decided that wherever the intended use of the material can be established by the importer who may be the manufacturer of chemicals or from other evidence, the benefit of exemption under the exemption notification should not be denied to imported goods only because the procedural condition of following Chapter X procedure is not complied with. It will be seen that this letter also proceeds on the same view as that of the Tribunal that Chapter X procedure cannot be satisfied in the case of imported goods. This is at variance with the interpretation which we have placed on Rule 192. We, however, agree with the observation of the Board that the benefit of exemption or conces ..... X X X X Extracts X X X X X X X X Extracts X X X X
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