TMI Blog2011 (4) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeals filed by the assessee-company and individual and reject the appeal filed by the revenue - E/373/2009 - 253-255/2011, - Dated:- 5-4-2011 - S/Shri M.V. Ravindran, P. Karthikeyan, JJ. Shri A.K. Jain, Advocate, for the Assessee. Shri P.R.V. Ramanan, SC, for the Department. [Order per : M.V. Ravindran, Member (J)]. All these three appeals are directed against Order-in-Original No. 2/2009 (PVR) dated 3-2-2009. Appeal No. E/426 and 427/2009 are filed by the assessee-company and individual while appeal No. E/373/2009 is filed by the revenue. 2. Since all these appeals arise out of the very same Order-in-Original, they are being disposed off by common order. 3. The relevant facts that arise for consideration are the assessee-appellant are engaged in the manufacture of machine-made cigarettes falling under Chapter Heading No. 24.03 of Central Excise Tariff Act. The said assessee-appellant had taken on lease the factory of M/s. New Tobacco Company Limited. On the basis of intelligence that the assessee-appellant company was evading payment of duty through clandestine removal, officers attached to the Directorate General of Anti-Evasion (DGAE), Chennai visite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Adjudicating Authority to reconsider the issue with some directions. This impugned order today is de novo order in compliance with the directions given by the Tribunal. In the impugned order, the Adjudicating Authority has again confirmed the demands of the duty and has also imposed penalty of Rs. 75,00,000/- and penalty of Rs. 5,00,000/- lakh on the Managing Director, besides confiscating land, building, plant and machinery with an option to redeem the same on payment of redemption fine and he also ordered applicable interest under proviso to Section 11AB of Central Excise Act, 1944. 4. Aggrieved by such an order, the appellant-company and Shri S.L. Dugar, Managing Director are in appeal before us. Revenue is also aggrieved by the said order on the ground that the Adjudicating Authority has not imposed penalties under Rule 9(2), 52A, 226, 209(b) and 209A of Central Excise Rules, 1944 and he has not given any findings for not doing so. 5. The learned counsel appearing on behalf of the appellant-company and Shri S. L. Dugar would assail the order on the following grounds. 5.1 It is his submission that entire demand of duty is completely barred by time. He would submit that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allegation of clandestine removal by invoking the extended period of limitation cannot stand the test of law. For this point, he would submit that the following case laws are directly on the issue : 1. Godrej Soaps Ltd. v. CCE, Mumbai-II - 2000 (115) E.L.T. 473 (T) 2. Indian Petrochemicals Ltd. v. CCE - 1992 (61) E.L.T. 138 (T) 3. Abubakar M.Y. Shaikh v. CCE, Surat - 1999 (110) E.L.T. 917 (T) 4. Hilton Tobaccos v. CCE, Hyderabad - 2005 (183) E.L.T. 378 5. Lanyard Foods Ltd. v. CCE, Bangalore - 2009 (244) E.L.T. 445 5.3 It is his further submission that the demand on current assessee-appellant is also not sustainable on another ground, as the show cause notice demands duty from NTC and impugned order vide Para 22 confirms demand of duty on the assessee-appellant. It is also his submission that the question of jurisdiction has not been addressed by the adjudicating authority. It is his submission that the show cause notice was issued by the Commissioner when he was holding additional charge of Guntur Commissionerate. It is his submission that while holding additional charge of Guntur Commissionerate, the Commissioner has no jurisdiction to issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factory. He would submit that Shri S.L. Dugar s statement as regards the only one document of transfer of cigarettes transferred from factory to Kolkata was as isolated case shown to him and implicating statements were recorded. It is his submission that the entire case which has been built by the revenue is in respect of the consumption of raw materials and the packing materials and the cigarette filters is incorrect, as the assessee-appellant were not permitted to cross-examine the suppliers. It is also his submission that the reliance placed by the adjudicating authority on the mini vans account is misconceived inasmuch as the proprietor who had authored the rough scribbling said to have been recovered from the premises of M/s. Carryco Road Carriers are not offered for cross-examination and the account which has been relied upon is for a limited period of May 1995 to 3rd week of July 1995 and hence, cannot be applied for the entire period of demand. It is also his submission that rough scribbling also do not mention any cigarettes have been transported between the places of alleged loading and their destination and no document was found in the factory evidencing any paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises and M/s. Deepak Tobacco Company. He would submit that all these people have categorically admitted that they have supplied raw tobacco to Shri Deepak Kumar Shah. It is his submission that Shri Deepak Kumar Shah, Sr. Executive working with the assessee-appellant had never refuted this point. It is the submission of the learned special counsel that the filter rods were procured by the appellant company from M/s. Hitkari Hitech Filters (P) Ltd. and M/s. CIGFIL Ltd., Bangalore and also on stock transfer basis from Kolkata. The details of said receipts of filter rods have been enumerated in various statements and it is seen that they have not been properly accounted for. It is his submission that the transporter s i.e., M/s. Sree Kanaka Durga Lorry Services, Bangalore have admitted to have transported filter rods from M/s. Hitkari Hitech Filter (P) Ltd. to the appellant factory. It is his submission that identical evidences are available in respect of cigarette papers, cork tipping papers and cardboard boxes. He would submit that the Adjudicating Authority on the basis of various documents recovered in this case has rightly recorded the actual receipt of raw materials tallied as re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.3 It is his submission that as regards the revenue appeal, it is noted that the adjudicating authority has not imposed any penalties under the various rules, which have been invoked in the show cause notice. He would submit that from the evidence available, the activity of clandestine removal of the goods have been proved in this case and their preponderance of probability is clearly established from the fact that the revenue has been able to track the clearances of clandestinely removed cigarettes through M/s. Carryco Road Carriers and receipt of money from the said supplier. He would exhort us to look into the evidences like statements of the suppliers or the purchasers who had paid the consideration in cash to the representative of the assessee-appellant. It is his submission that the modus operandi was such that the responsible person always used to travel with the truck to the C F agent or the purchaser or the dealer and deliver the goods and collect the consideration in cash and hand it over to Shri S. L. Dugar and Shri Deepak Kumar Shah. It is his submission that initially Shri S. L. Dugar and Shri Deepak Kumar Shah have retracted the statements made by them. Subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure, clearance and entire operation of the appellant factory was supervised round the clock by the Central Excise officers. It is also undisputed that the officers posted at the factory premises of a cigarette manufacturing unit have to follow the mandated instructions as given in the Cigarette Manual and Supplementary Instructions. It is to be noted that the show cause notice dated 12-12-1996 includes statement of allegation of clandestine manufacture and removal as has been made for the period September 1994 to October 1995 by invoking extended period of limitation. From the bare reading of the show cause notice, it is seen that the said show cause notice is issued only to M/s. New Tobacco Company Limited (Sales), RDB one of the appellant herein, Shri Deepak Kumar Shah, Senior Executive, Shri S.L. Dugar, Chairman and Managing Director and Shri B.N. Kedia, Director. Apart from these people, the said show cause notice has not been issued to anyone i.e., departmental officers. The entire show cause notice has only invoked the proviso to Section 11A(1) of Central Excise Act, 1944 as regards suppression, misstatement, with intention to evade the Central Excise duty. 8.3 It is seen f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctories should devote their attention to the following areas of operation. (a) Supervision over manufacture and accounting of cut tobacco; (b) Supervision over manufacture of cigarettes; (c) Supervision over packing of cigarettes; (d) Physical control over stocks deposited in the room of the factory; and (e) Check of goods leaving the factory to prevent clandestine removals. It is also indicated in the said Standing Order that the Superintendent will be the officer overall in-charge of the factory and he will be assisted by inspector/s posted to each factory. On perusal of the Standing Order, we find that the said Standing Order clearly instructs that the officers must be present to supervise the operation of the cut tobacco, storage, manufacturing room or manufacturing hall, finishing and packing department and shipping department. The said Standing Order also requires the officers posted in cigarette factory to maintain Survey Books, XT-I returns, and XT-I diaries and they should religiously record the same as and when they do the certification and should not be filled from memory. It is also seen that the Cigarette Manual specifically mandates the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollected daily, and ensure that those are packed and stored according to the instructions laid down and that the entries of such waste are correctly recorded in the manufacturers account. 33. Check on removals : The Superintendent personally check at least 10% or one whichever is greater, of daily deliveries under A.R.1 or gate passes by surprise examination of the cases prior to removal. 34. Check of Accounts : The Superintendent shall be wholly responsible for the correct maintenance of all accounts and records relating to unmanufactured tobacco as laid down in the tobacco Excise Manual and for performing daily checks of the manufacturer s accounts in accordance with the instructions in Section 8 of chapter IV. 8.5 As against the above strict instructions mandated in the Cigarette Manual and Standing Instructions, the revenue has to prove their case that the officers manning the factory of the assessee-appellant herein did not do their duty or did not discharge the duty as indicated in the above manual or were in collusion with the assessee to defraud revenue. It is undisputed in this case that the officer i.e., two Superintendents and one Inspector of Central Excise were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed goods i.e., cigarettes were accounted properly cannot per say summarily be dismissed by the Adjudicating Authority, is the ratio. 8.7 We also find strong force in the submission made by the counsel for appellant-assessee that the ratio laid down by this Tribunal in the case of Godrej Soaps Ltd. (supra) would be applicable. We respectfully reproduce the same. 17. The show cause notice dated 1-7-1994 states the manufacturer as ASPL of the product DYNO synthetic detergent powder. It does not say anything about the appellant as the manufacturer. If that were to be told, how could the duty be claimed from the appellant. No doubt in the show cause notice the only charge is suppression of facts and mis-declaration to defraud the Government. Even if there is suppression regarding what could be suppression. If there is a suppression, it has been seen by the Custom Officer in 1989 when the export had taken place. If there is negligence of the officers, there could be charge of collusion, which is envisages under proviso to Section 11A of the Central Excise Act. The show cause notice is silent on this. In the absence of a specific charge of collusion, we cannot accept the argument of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficials and daily checking of records and hence the demands are also time barred. The ratio of the ruling rendered by Hon ble Supreme Court in the case of Padmini Product and Chemphar Drugs and Liniments cited by the learned advocate is applicable to the facts of this case. 41. In view of our findings given above, the appellants succeed and the impugned Order is set aside. 8.9 In the case of Abubakar M.Y. Shaikh v. CCE, Surat (supra) in an identical issue, the Tribunal held as under : 3. The assessee at the material time were operating under the physical control system where the clearance of any goods on payment of duty could be effected only under counter signature of the jurisdictional officer. When such counter signature was made, the consignment was assessed to duty. The gate pass was accompanied by an application for removal in the proper format. In this situation, it has to be held that the goods were cleared with the knowledge of the Department. Rule 9(2) speaks of a situation where goods are removed in a clandestine manner. In the cited judgment, it has been held that where goods have been removed with prior permission of the Central Excise authorities, Rule 9(2) wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sustainable as the source of procurement of raw material has not been established, buyers of finished goods had not been contacted and the receipt of sale proceeds has not been proved. This is a case where investigation has miserably failed to get any corroborative evidence to strengthen the Revenue s case. The adjudicating authority, in his zeal to decide the issue in favour of Revenue, has not displayed a judicious approach and concluded that there has been clandestine removal in the absence of corroborative evidences. 9. In view of our observations, the OIO has no merits. It deserves to be set aside. Hence, we allow the appeals. 8.11 In the case of Lanyard Foods Ltd. v. CCE, Bangalore (supra), Tribunal held that larger period is invokable, if collusion is alleged, but if the departmental officers are not implicated in the show cause notice, the show cause notice is flawed. The findings are as under : 7.6 Though the department alleges suppression of facts and mis-declaration, it is on record that the jurisdictional Inspector visited the Unit for verification of the Annexure-V declarations. In some of the declarations, his endorsement verified appears. Even the Superin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of facts/mis-declaration, etc, cannot be alleged, as the departmental officers were kept informed of the receipt of goods by the appellants. In cross-examination, they had categorically stated that there was no discrepancy. Even the AC who cancelled the bond has satisfied himself that conditions of Notification/IGCRDMEG Rules have been complied with. Therefore, to invoke longer period, the department should necessary allege collusion. This has not been done. The conclusion is that, the longer period could not have been invoked. Moreover, if collusion is alleged, the departmental officers also would be party to the Show Cause Notice. In view of these defects, we are of the view that there is a very serious and fatal flaw in the Show Cause Notice itself. In the absence of charge of collusion and notices to the departmental officers, the longer period is not sustainable. In such circumstances, we are not in a position to uphold the impugned order. 9. It can be seen from the above reproduced ratio of various decisions of this Tribunal, that in the cases where assessee s factories are under physical control of departmental officers and if there is a demand by invoking larger per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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