TMI Blog2017 (7) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... nd pass order concerning the annual capacity of production of the factory within 3(three) working days. The second proviso to Sub-rule 6(2) provides that if a manufacturer does not receive the approval in respect of his declaration within a period of 5(five) working days, the approval shall be deemed to have been granted subject to the modifications, if any, which the Deputy Commissioner or the Assistant Commissioner of Central Excise, as the case may be, may communicate later on but not later than 30(thirty) days of filing of the declaration. The approval of declaration is not automatic or routine and before the declaration is approved, the authority can make necessary enquiry including physical verification of the machine. The expression used in Sub-rule 6(2) is “maximum packing speed at which each of the packing machines available in his factory can be operated for packing” - While passing the aforesaid order dated 27.11.2015, it was noted that there was no good reason for physical verification of the machine to determine the maximum packing speed at which it could be operated. The aforesaid order was set aside by the Commissioner (Appeals) vide his order dated 30.08.2016 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings pursuant to the notice dated 18.11.2015 and the Summons dated 16.09.2016. However, it was provided that it would be open to the respondents to pass order under Rule 6(2) of the Pan Masala Packing Machines (Capacity Determination and Calculation of Duty) Rules, 2008 (for short, Rules ), as amended, as per direction of the appellate authority. For vacating the interim order dated 04.10.2016, two Interlocutory Applications, one by the Commissioner of Central Excise and Service Tax, and the other by the Assistant Commissioner of Central Excise (Anti-evasion) were filed and the said applications were registered as I.A. (Civil) No.2024/2016 and I.A. (Civil) No.2178/2016, respectively. When these two Interlocutory Applications were taken up for consideration on 16.03.2017, learned counsel for the parties had suggested that instead of taking up the same, the writ petition may be taken up for disposal as hearing of the Interlocutory Applications would take, more or less, the same amount of time which may be required for hearing of the writ petition. Acceding to the aforesaid request, the Court had proceeded to hear the writ petition at the admission stage. 4. The pleaded cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, it filed a declaration indicating that the machine would be operated for manufacturing of Rajanigandha Pan Masala of 18 gms (plus 10% extra) pouch (RSP: ₹ 50/- per pouch) with maximum packing speed of 1000 pouches per minute. The declaration was approved by the Assistant Commissioner of Central Excise by an order dated 23.07.2014. Subsequently also the petitioner filed declarations declaring the maximum packing speed of the machine as 1000 pouches per minute and the same were also approved. (d) At that point of time, factor relevant to production under Rule 4 of the Rules was the number of packing machines in the factory of the manufacturer and a Table laid out under Rule 5 provided for the quantity that is deemed to be produced, which was on the basis of retail price of the pouches manufactured. (e) However, with the issuance of Notification No.6/2015-Central Excise dated 01.03.2015, brought into effect from 01.03.2015 amending the Notification dated 01.07.2008, there was a change in the method of determination of duty payable by a manufacturing unit. Section 4 was amended to read that the factors relevant to the production of notified goods shall be the number of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 751 pouches per minute. The Assistant Commissioner approved the said declaration by an order dated 29.05.2015 and allowed proposed manufacturing of the product at RSP: ₹ 25/-. (i) On 12.06.2015, the petitioner wrote a letter to the Assistant Commissioner of Central Excise informing that the manufacturer had communicated that the high end CPU of the machine does not synchronize with the internal checks and controls of the machine and, therefore, it was decided to downgrade the CPU and, after change over, it would like to conduct a non-commercial run to find out the maximum packing speed of the machine. By the letter, it was informed that new CPU had already been imported and engineers would come for necessary alterations and the machine was expected to be ready for trial run by the evening of 15.06.2015 and, as such, conduct of non-commercial trial run was proposed on 16.06.2015, in presence of departmental officer for determining the maximum packing speed. Accordingly, request was made to depute an officer. An order was passed on 15.06.2015 by the Assistant Commissioner of Central Excise directing the Superintendent of Central Excise, Range-IIA, Guwahati Division-II, to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded by his letter dated 25.11.2015. In the said letter, declarations made by the petitioner were reproduced in the form of a tabular chart. On the basis of the declarations made, it was opined in the said letter that the maximum packing speed of the machine cannot be less than 1000 pouches per minute and that, consequently, it would fall in the category of 751 pouches per minute and above for the purpose of assessment. By the said letter, the petitioner was requested to submit its defence to establish that the maximum packing speed of the machine is below 750 pouches per minute for the pouch weight of 18 gms. of RSP ₹ 50/- on or before 27.11.2015, giving also liberty to appear in person, failing which it was indicated that assessment would be done on the basis of available records. The petitioner, vide its letter dated 27.11.2015 responded to the said letter highlighting that re-determination of packing speed was based upon a technical trial run of the machine by the then Assistant Commissioner of Central Excise with a team of his officers and a Chartered Engineer duly appointed by the department, conducted in their physical presence. Request was made to conduct a similar t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evasion of Central Excise duty. Further sum of ₹ 1 crore was paid by the petitioner on 03.06.2016. (q) On 13.01.2016, the petitioner submitted a letter dated 12.01.2016 to the Commissioner of Central Excise and Service Tax praying for a detailed physical examination of the machine to determine the maximum packing speed of the machine as well as for withdrawal of the investigation. Furthermore, the petitioner also filed an appeal on 25.01.2016 under Section 35 of the Act before the Commissioner of Central Tax (Appeals) against the order dated 27.11.2015. Sanko Machinery Company Ltd. also sent a letter to the petitioner confirming that a FP-1000 Controller programmed at 750 bpm was supplied against purchase order dated 14.05.2015 under invoice dated 27.05.2015. (r) A summons dated 18.07.2016 was issued to Mr. Chander Kant Sharma, Director and Key Managerial Person to appear on 26.07.2016. The Schedule of the summons is more or less an abridged version of the Schedule of the summons issued to Mr. C. Roy Choudhury. Mr. Sharma wrote back a letter dated 25.07.2016 informing that he did not have any specific responsibility pertaining to Central Excise and that the investigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a machine designed to run at a maximum packing speed of 1000 pouch per minute cannot be altered permanently as reversing whatever alterations were made would again enable the machine to operate at the maximum speed as per its specifications. It is pleaded that show-cause notice can be issued only after completion of the enquiry and non-appearance of one of the Directors, namely, Mr. C.K. Sharma, despite summons being issued, is one of the reasons why investigation could not be completed. The petitioner Company misled and the speed of the machine was lowered by way of fraudulent manipulation and the report of the Chartered Engineer and the circumstances under which it had been issued was also being enquired into. No quality issue of the pouches was raised when the criterion for determining the amount of Central Excise duty payable was not dependent on the maximum speed of the machine and the plea raised presently is a bogey, not supported by proof of waste generated or return of goods. The manufacturer had never specified that the maximum speed of the machine is 750 ppm but had only advised that it would run smoothly at a speed of around 740 bpm to 750 bpm. The petitioner also di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the enquiry and the order of the Commissioner of Appeals are on one and the same issue and the stand taken to the contrary in the affidavit is plainly misconceived and the issue having been decided and the same having not been questioned by filing appropriate appeal under Section 35B/35E of the Act, continued enquiry is illegal and the respondents have misused the provisions of Sections 11A and 14 of the Act. It is stated that the enquiry is being conducted with a pre-conceived notion to harass the petitioner and its officials, refusing another physical verification of the machine in order to re-confirm the speed of the machine. 6. Drawing attention of the Court to the affidavit filed, Dr. Saraf submits that it is not disputed by the respondents that the CPU of the machine had been changed. As a consequence of the change of the CPU, the maximum packing speed of the machine varies between 301-750 pouches per minute. The petitioner Company had declared the speed at 750 pouches per minute even when speed was not relevant for duty purpose, and had subsequently changed it to 1000 pouches per minute, when packing speed of the machine was relevant, and continued to declare it as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in 1992 Supp (1) SCC 443, A.S. Corporation -Vs- Union of India, reported in (2008) 223 ELT 26, Sri Ganesh Chandra Mrig -Vs- The Superintendent (Prev.), Commissionerate of Central Excise, reported in (2010) 110 CLT 526 and a judgement rendered by the Rajasthan High Court on 12.04.2016 in the case of Dinesh Fragrance -Vs- Union of India [WP(C) 3243/2015]. 8. Mr. B. Sarma, learned Standing counsel, Central Excise and Customs, has submitted that the enquiry proceeding was initiated under Section 11A of the Act for short payment of about ₹ 27 crores of excise duty occasioned by manipulation of maximum packing speed of the machine by replacement of the CPU. It is strenuously argued by him that the order dated 30.08.2016 passed by the appellate authority cannot be an impediment for conducting and carrying on with the enquiry and to issue summons for the purpose of bringing the enquiry to its logical end. He has emphasized that the enquiry undertaken is a judicial proceeding within the meaning of Section 193 and 228 of the Indian Penal Code, 1860. He has assiduously argued that the subject-matter of the issue involved in the order of the Assistant Commissioner of Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnual capacity of production of the factory within 3(three) working days. The second proviso to Sub-rule 6(2) provides that if a manufacturer does not receive the approval in respect of his declaration within a period of 5(five) working days, the approval shall be deemed to have been granted subject to the modifications, if any, which the Deputy Commissioner or the Assistant Commissioner of Central Excise, as the case may be, may communicate later on but not later than 30(thirty) days of filing of the declaration. 12. Therefore, the approval of declaration is not automatic or routine and before the declaration is approved, the authority can make necessary enquiry including physical verification of the machine. The expression used in Sub-rule 6(2) is maximum packing speed at which each of the packing machines available in his factory can be operated for packing . The declarations submitted by the petitioner were approved as and when the same were submitted. After the CPU was replaced, a non-commercial trial run was undertaken in presence of departmental officer as well as a Government registered Chartered Engineer nominated by the Department. According to report submitted, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to maximum speed and no explanation is needed for change of the parameters. Till date, the aforesaid decision and findings of the appellate authority has not been interfered with by any forum. 16. It is not in dispute that the petitioner had paid excise duty based on the annual capacity production calculated on the basis that the maximum packing speed of the machine falls in the category of 301-750 pouches per minute. 17. Having regard to the findings recorded by the appellate authority, I am of the considered opinion that these findings have a direct bearing on the legality and tenability of the enquiry which is initiated solely for the reason of lowering the packing speed of the machine as the change of maximum packing speed of the machine was the central issue before the appellate authority. If it is permissible to change the parameter of maximum speed of the machine, that too, without any explanation, as held by the appellate authority, the very edifice of the enquiry has no foundation. In that context, the plea of the respondents that the issue of packing quality was not raised earlier pales into insignificance. 18. I am unable to subscribe to the contention advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ganesh Chandra Mrig (supra) was in the context of summoning of the Managing Director of the company under Section 14 of the Act for personal appearance after conducting search and seizure in the business house of the company and, in the absence of any indication in the summons that any particular fact or document, which is material for the purpose of enquiry, is in possession of the Managing Director, the Court had observed that the authority issuing summons was more interested in the personal appearance of the Managing Director than to apply his mind to the books of account, documents seized in course of search and seizure and the documents produced thereafter to find out the amount/quantum of Excise Duty evaded, if any. It was observed that the Central Excise authority should not summon any person in exercise of powers under Section 14 of the Act in a mechanical manner. In A.S. Corporation (supra), the Court had recorded a finding that each and every detail, which was called for by way of summons, already existed with the respondent department, it having seized the same under seizure and that it was not even the case of the respondents that they were in possession of any informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal by the Revenue. The facts in Sudarshan Plywood Industries Ltd. (supra) are entirely different from the facts of the instant case. In Dunlop India Ltd. (supra), the Supreme Court deprecated the practice of grant of interim orders which has the potential of causing public mischief for mere asking. As the instant writ petition is taken up for disposal, the decision in Dunlop India Ltd. (supra) will have no application in the present case. 24. In Videocon Industries Limited (supra), the petitioner had questioned the jurisdiction of the authority to issue summons under Section 14 read with Section 83, Chapter 5 and 5A of the Finance Act, 1994 and to proceed with the matter. This Court had observed that it could not be said that the impugned summons had been issued without jurisdiction and, also considering that the same had not been issued mala fide and in arbitrary exercise of powers, declined to invoke the writ jurisdiction. The factual matrix of Videocon Industries Limited (supra), in the considered opinion of the Court, is entirely different from the facts of the present case. 25. The decision relied upon by Mr. Sarma in the case of Ugar Sugar Works Ltd. (supra) with p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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