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M/s CA Chewing Fragrance Pvt Ltd, Shri Ashok Kumar Sahu, Director, Shri Anoop Kumar Sahu Versus Commissioner of Central Excise, Delhi

2015 (10) TMI 1566 - CESTAT NEW DELHI

Clandestine manufacture and removal of goods - moisture contained in tobacco - Confiscation of goods - Imposition of penalty - Held that:- the appellant has produced a report dated 14th February 2007 of Harcourt Butter Technological Institute, Kanpur which confirms that moisture content is 15.38%. The said report produced by the appellant has been brushed aside by the Adjudicating Authority which is not proper. As it is an admitted fact that tobacco being an agriculture product having moisture c .....

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going by the balance sheet figure and test report only, but Department has adduced sufficient corroborative evidence but no such evidence has been discussed in the impugned order. Moreover, the statements relied upon by the Adjudicating Authority of various persons, the cross-examination has not been afforded to the appellant for fair trial. The allegation of clandestine manufactured and removal of goods is not a simple allegation, the allegation is to be supported by sufficient and required ev .....

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ember (T) For the Appellant : Shri Rupesh Kumar, Adv For the Respondent : Shri R K Grover, AR ORDER Per Ashok Jindal The appellant M/s C.A. Chewing Fragrance Pvt. Ltd. (in short CACF) is in appeal against the impugned order demanding duty alongwith interest, equivalent amount of penalty and for confiscation of certain goods and the co-appellants for imposing penalties. 2. The facts in short are that M/s CACF is manufacturer of Madhu and Asha brand Gutkha and were not availing Cenvat credit. On i .....

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was found that the appellant is manufacturing Gutkha containing Tobacco and the data resumed reveals that the percentage of Tobacco in Gutkha ranges between 7 to 8% during the year 2000-2001 and 2001-2002. The representative samples of Madhu and Asha brand Gutkha were drawn and sent for analysis to Shriram Institute of Industrial Research, Delhi. On analyzing the Shriram Institute of Industrial Research, the report shows that Tobacco leafs are having 7.9% by mass in Madhu brand Gutkha and 7.8% .....

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ause notice was adjudicated and the impugned order has been passed. Aggrieved from the said order, the appellants before us. 2. Learned Counsel for the appellant submits that the Department case is based on the following grounds: (a) consumption of tobacco as per balance sheet figures, and (b) statement of different persons. He submits that to calculate the contents of tobacco in Gutkha manufactured by the CACF, samples were drawn and sent to Shriram Institute of Industrial Research which shows .....

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of the moisture contained in tobacco, therefore the test report cannot be relied to arrive at a decision of quantity of tobacco consumed in Gutkha and to demand duty on the said basis. As the content of tobacco in the manner in which same is purchased and sold in the market includes moisture. To support this contention, he relies on the decision of the Tribunal in the case of Mineral Enterprises Ltd. vs. CC, Mangalore reported in 2010 (253) E.L.T. 241 (Tri. - Bang.). He further submits that the .....

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ess consumption of tobacco as the test report is on dry basis of tobacco consumption. Therefore, if the moisture content is taken into consideration, the consumption of tobacco would be around 9.24%. He also submits that the show cause notice relies upon the balance sheet figures for consumption of tobacco, which is shown to 9.24% for total contents of Gutkha if the moisture content of 15.38% is reduced from this 9.24%, the consumption of tobacco would come on dry basis to 7.82% which corroborat .....

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ts that in any event the test report dated 20/03/2006 of the sample drawn on 19/01/2006 from the Gutkha seized on 28/11/2005 cannot be basis to the Gutkha manufactured during the period 2002-2005. To support the said contention, he relies on the decision of Hindustan Fibres Ltd. vs. CCE, Jaipur reported in 2009 (245) E.L.T. 337 (Tri. - Del.). He also submits that the allegation of clandestine manufacture and clearance are based only on assumption and presumption without any documentary evidence, .....

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of raw material to CACF in respect of the huge quantity of 108625.48 kg. of Gutkha alleged to be manufactured. There is no evidence at all about (a) manufactured of said extra quantity; (b) transportation of said extra quantity; (c) clearance or sale or disposal of the said extra quantity; (d) receipt of price for the said extra quantity; and (e) any buyer having received the said extra quantity. Therefore, the demand is merely on the basis of assumption and presumption without any supporting ev .....

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t be upheld. To support this contention, he relied on the decision of Har Singar Gutkha Pvt. Ltd. vs. CCE, Lucknow reported in 2005 (186) E.L.T. 369 (Tri. - Del.), CCE, Indore vs. G.M. Products reported in 2007 (207) E.L.T. 723 (Tri. -Del) and Sanket Food Products Pvt. Ltd. vs. CCE, Aurangabad reported in 2005 (188) E.L.T. 107 (Tri. - Del.). 3. He further submits that during the investigation, the statement of some persons have been recorded and the same has been relied. In fact, the statement o .....

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demand has been raised on the basis of purchases of tobacco shown in the books of accounts and if any cash purchases has been made and the same has not recorded in the books of accounts therefore the quantity purchased in cash is required to be taken into consideration but the quantity purchased in cash is not the basis of issuance of show cause notice. He also submits that the statement of Shri Purshottam Das, Dealer has been recorded who stated that he received Gutkha from the appellant withou .....

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d High Court in the case of CCE, Meerut - I vs. Parmarth Iron Pvt. Ltd. reported in 2010 (260) E.L.T. 514 (All.) as no cross-examination of the persons whose statement has been relied has been afforded despite several requests, therefore, the impugned order is also in violation of the principal of natural justice. He also submits that to allege clandestine removal, the electricity consumption was also considered but the same was not the basis for demand and also submits that the electricity cons .....

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e. 4. On the other hand, the learned AR supported the impugned order and submit that in this case on the basis of intelligence, the investigation was conducted and during the course of investigation certain records were seized wherein excess stock of raw material was found, some cash was also seized. The statutory records were not prepared in proper manner by the appellant and tobacco consumption has also been considered and on the basis of the same, the demand has been raised. Apart from the to .....

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have clandestinely manufactured the excess quantity of Gutkha on the basis of consumption of tobacco and the purchases shown as per balance sheet figures and statement of various persons. 7. In the impugned order, the Adjudicating Authority has quantified the clandestine manufacture of the Gutkha on the basis of consumption of tobacco @ 7.99%. The total Gutkha manufactured is quantified on the basis of quantity of tobacco purchased by the appellant and the consumption of tobacco has been taken a .....

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this tobacco has been purchased by the appellant during the period 2002-2005 and the same has been used in the manufacture of Gutkha during the relevant time therefore the test conducted on the samples in March 2006 will definitely having less moisture content. We have seen the test report also which shows that the percentage of tobacco contained in Gutkha is on dry basis which shows that the tobacco contains in the pouch of manufactured Gutkha is having less moisture content. It is also a fact .....

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oisture content and no sample of raw tobacco has been drawn to ascertain the moisture content, the demand on the basis of consumption of tobacco in a particular period on which test is conducted later on is not sustainable. 8. Moreover, no sample of the other raw material were drawn to ascertain the truth. It is also a fact on record that there is no evidence to show the excess consumption of the other raw materials to be used in manufacture of Gutkha in the show cause notice. As without the usa .....

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he appellant for fair trial. The allegation of clandestine manufactured and removal of goods is not a simple allegation, the allegation is to be supported by sufficient and required evidence as held by this Tribunal in the case of Arya Fibres Pvt. Ltd. vs. CCE, Ahmedabad - II reported in 2014 (311) E.L.T. 529 (Tri. - Ahmd.), wherein the following principals have been laid down to allege clandestine manufacture/removal:- "Certain fundamental criteria have to be established by Revenue which m .....

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