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2024 (3) TMI 979 - AT - Central ExciseClandestine Removal - Manufacture of Tobacco taking place or not - FFS packing machine was found installed in the unregistered premises during the search on 24.01.2012. Whether the evidences available on record indicate that one FFS packing machine installed in the unregistered premises was in working condition and used for manufacturing of Chewing Tobacco? - HELD THAT:- There is no finding in the impugned order against the claim of the appellant that two vital parts namely, ‘Disc’ and ‘Suit’ were not fitted with the machine and it cannot be used to pack Chewing Tobacco. The investigation has not brought in any other evidence such as purchase of raw material, purchase of packing material, excess consumption of power during the period, buyers of the clandestinely cleared material, statements from transporters, etc., to prove clandestine manufacture and clearance of Chewing Tobacco - Mere presence of the packing machine alone is not sufficient to establish manufacture and clandestine clearance of chewing tobacco. In the absence of any other evidence, we hold that the investigation has not established that the packing machine was in operating condition and used for clandestine manufacture and clearance of Chewing Tobacco - question is answered in negative. Whether evidences available indicate that Rule 18(2) of the CTPM Rules is applicable in this case to demand duty in respect of one FFS packing machine, from 08th March, 2010 onwards, as provided in the said Rules? - HELD THAT:- The investigation has not brought in any other evidence such as purchase of raw material, purchase of packing material, excess consumption of power during the period, buyers of the clandestinely cleared material, statements from transporters, etc., to establish clandestine manufacture and clearance of Chewing Tobacco from the unregistered premises - the one FFS packing machine found in the unregistered premises has not been fixed with two vital parts, without which the machine cannot be operationalized. In such circumstances, the investigation must have probed further to establish the manufacture and clandestine clearance of Chewing Tobacco by means of other evidences. Instead, the investigation has relied solely on the mere presence of the machine in the unregistered premises to demand duty. There is no evidence available on record to disprove the claim of the Appellant that the machine was non-operational and not used for manufacture of Chewing Tobacco. Mere presence of the packing machine alone is not sufficient to establish manufacture and clandestine clearance of chewing tobacco - the provisions of Rule 18(2) cannot be invoked in this case to demand duty for the period from 08th March, 2010 to 31st January, 2012 - question answered in negative. Whether penalty under Section 11AC of the Central Excise Act, 1944, is imposable in this case? - HELD THAT:- Penalty is imposable under Rule 18 of the CTPM Rules read with Section 11AC of the Central Excise Act, 1944, only when it is established that Chewing Tobacco was produced and clandestinely removed. In view of the above findings, it is held that the investigation has not established manufacture and clandestine clearance of Chewing Tobacco. Hence, the penalty provisions are not applicable in this case. Accordingly, the penalty imposed on the Appellant is liable to be set aside. Thus, the demand of Central Excise Duty confirmed in the impugned order is not sustainable. As the duty demand of duty is not sustainable, the demands of interest and penalty are also not sustainable - appeal allowed.
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