TMI Blog2013 (4) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... ven, without delay, to the authority which recorded the original statement. Moreover, there should not be any inconsistency between the original and ‘clarificatory’ statements. In the present case, we have found inconsistencies also. Therefore the view taken by us with regard to the evidentiary value of the Managing Director’s original statement remains intact. Regarding demand on clearance to DTA - brought to any other place in India versus allowed to be sold in India - Held that:- The impugned demand of duty was quantified under the proviso even for the period prior to 11-5-2001, which cannot be sustained. As per the provisions interpreted by the Hon’ble Supreme Court CCE v. M/s. NCC Blue Water Products Ltd.(2010 (9) TMI 13 - Supreme Court of India ), the demand of duty on oleoresins cleared from EOU premises from April 1999 to 10-5-2001 requires to be requantified in terms of the main part of Section 3(1) of the Central Excise Act and we shall direct the adjudicating authority to do so. Regarding Demand on black phenyl - Held that:- we have found this dispute to be similar to the one pertaining to semi-finished herbal extracts and, therefore, there is no reason for a dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,000/- and Rs. 5,000/- imposed under Rule 26 of the Central Excise Rules, 2002. The original authority had imposed on the assessee under Section 11AC a penalty of Rs. 32,34,540/- which came to be reduced to Rs. 16,00,000/- by the appellate authority which upheld the order-in-original with this modification. The appellate order is under challenge in the present appeals. There is no appeal from the department against the above reduction of penalty. 2. M/s. Gani Natural Colors and Oleoresins Pvt. Ltd. (GNCOPL for short), presently called M/s. Bayir Extracts Pvt. Ltd. (BEPL for short), was licensed in the year 1997 as a 100% EOU (export-oriented unit) to manufacture oleoresins, herbal extracts etc. Under the EOU scheme, they procured raw materials and capital goods duty-free under relevant Exemption Notifications. They carried out commercial production during February to August 1999 and exported a few consignments of oleoresins worth Rs. 2.62 lakhs in 1999 and became defunct thereafter due to various reasons. They entered into a Memorandum of Understanding (MoU) with one Shri Ganapathy Bairy, proprietor of M/s. Bayir Chemicals on 29-11-2001 and subsequently entered into a sale ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty was not sustainable on these facts. According to him, job work was no taboo for EOU. Without prejudice to these submissions, the counsel claimed that the processes such as milling, soaking with solvents, etc., undertaken in the premises of M/s. BEPL did not result in any marketable and excisable product and therefore the demand of duty of Rs. 10,30,360/- was not sustainable. The learned counsel further submitted that the semi-finished herbal extracts were not shown by the Revenue to be marketable and hence not excisable. He also pleaded time-bar against the above demand of duty by submitting that the nature of job work undertaken by M/s. BEPL for M/s. Bayir Chemicals was known to the department through the latter s letter dated 18-11-2002 addressed to the Superintendent of Central Excise and therefore the demand of duty raised in show-cause notice dated 22-12-2003 was hit by limitation in the absence of suppression, wilful misstatement, etc. 3.1 The learned Additional Commissioner (AR) reiterated the relevant findings of the original authority and particularly referred to the statement of Shri Ganapathy Bairy who had admitted manufacture of semi-finished herbal extracts weigh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d water. In other words, their challenge to the demand of duty on the semi-finished herbal extracts on the ground of non-excisability must fail. There is, also, no merit in their alternative claim that the job-worked herbal extracts were further processed by Bayir chemicals Peenyan Unit and exported or cleared on payment of duty. There is no evidence to substantiate this claim. This apart, job work itself is outside the scope of a 100% EOU s activities (as rightly held by the lower authorities) inasmuch as the EOU s entire production is meant for export. 3.3 There is no valid plea of limitation either. It is not in dispute that the MoU and sale agreement between the EOU and M/s. Bayir Chemicals were not disclosed to the department, that the receipt of raw materials by the EOU from M/s. Bayir Chemicals or the manufacture of semi-finished herbal extracts from these materials or the dispatch of these extracts from the EOU premises was not disclosed to the department, that the Development Commissioner s permission was not taken by the EOU for clearance of the goods to the DTA unit, and that neither the EOU nor M/s. Bayir Chemicals maintained any records in the EOU premises regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. M/s. NCC Blue Water Products Ltd. : 2010-TIOL-73-SC-CX = 2010 (258) E.L.T. 161 (S.C.) (judgment dated 24-9-2010 in Civil Appeals Nos. 4608-4609 of 2005). According to the learned counsel, even assuming that duty was leviable on the aforesaid quantity of oleoresins, the amount of duty would be Rs. 7,98,354/- only if estimated in terms of the main part of Section 3(1) of the Act. Learned Additional Commissioner (AR) again reiterated the relevant findings of the adjudicating authority. 4.1 We have considered the rival submissions. The challenge to the demand of duty on oleoresins cannot be sustained inasmuch as the evidence on record is in favour of the Revenue. The Managing Director of GNCO/BEPL clearly admitted in his statement dated 15-7-2003 that 8,67,600 litres of rectified spirit procured from April 1999 to October 2001 had been used as solvent for manufacture of chilli oleoresins weighing 32,020 kgs. and that, out of this quantity, 31,370 kgs. of oleoresins was sold in the local market in retail. He also admitted that no records or books of accounts were issued/maintained in relation to this activity. He also admitted purchase of 1,62,400 kgs. of chilli without bills. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or M/s. Sneha Chemicals who supplied the necessary raw materials. After hearing both sides, we have found this dispute to be similar to the one pertaining to semi-finished herbal extracts and, therefore, there is no reason for a different view. Consequently, the above demand has only to be sustained. 6. The plea of limitation is not sustainable against any of the demands of duty, for which we have already recorded our reasons. The entire demand is liable to be honoured by the EOU which never sought debonding but only chose to plead with the Development Commissioner, even around the end of 2003, for an opportunity to work as EOU with the help of Shri Ganapathy Biary. The Development Commissioner granted this relief to GNCO/BEPL vide his Order-in-Original dated 18-2-2004 (page 69 of Paper Book). There is no reason why they should not pay duty on their DTA clearances. The learned counsel, who represented all the three appellants, did not argue for shifting this duty liability to Bayir Chemicals or Sneha Chemicals, either. 7. As regards interest on duty, the submission of BEPL in their memo of appeal is only that the provisions of Section 11AA cannot be invoked as the demand of dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As Shri Ganapathy Bairy was found to have actively abetted the clandestine activities of GNCO/BEPL, Bayir Chemicals rightly attracted this penal provision. However, in the facts and circumstances of this case, a penalty of Rs. 1/- lakh appears to be disproportionate and we reduce it to Rs. 50,000/-. The other penalty is on Smt. Veena Bairy, owner of Sneha Chemicals. She is the wife of Shri Ganapathy Bairy, owner of Bayir Chemicals. There is no evidence of the wife having been actively involved in the transactions with GNCO/BEPL. Hence the penalty imposed on her is liable to be set aside. 11. In the result, it is ordered as follows : (a) The demands of duty on herbal extracts and black phenyl are upheld and these duties are held to be recoverable with interest thereon from BEPL; (b) The demand of duty on oleoresins is set aside for the purpose of requantification in terms of the main part of Section 3(1) of the Central Excise Act by the original authority for the period from April 1999 to 10-5-2001 and in terms of the proviso to Section 3(1) for the subsequent period. The duty so requantified in respect of oleoresins is also recoverable with interest thereon from BEP ..... X X X X Extracts X X X X X X X X Extracts X X X X
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