TMI Blog2017 (7) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... the Pan Masala Packaging Rules, 2008. The confiscation of the gutkha available in the factory is also wrong as such finished products were found inside the factory and there is no allegation that the same were being attempted to be removed in a clandestine way. Further from the photographs which are relied upon by the Revenue it is evident that the machines have been kept in a small place and placed very close to each other, there being hardly any space to operate and/or space for workers to operate the said machines. It appears like, in a tightly packed elevator people are doing aerobics, as per allegation in the Show Cause Notice. Further from examination of the so called invoices of the machine manufacturer which have been relied upon in the show cause notice, we find that the format of the said invoices is very different from the earlier invoices issued a few months back for purchase of packing machine, Supari cutting machine etc., from the same manufacturer/supplier - Further as stated by the said manufacturer- Lalit Kumar Singh, who has stated that he has sold the subsequent seven machines on credit, but has not produced any evidence of delivery of such machines on credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd name Ronak'. 2.2 The appellant set up this unit for manufacture of the aforesaid products in December, 2007. The appellant was initially paying duty based on the value of the goods cleared in terms of the provisions of Section 3 of the Central Excise Act, 1944. 2.3 Consequent to introduction of the compounded levy scheme for the Pan Masala containing tobacco (Gutkha) under Section 3A read with the notifications issued there under, with effect from 1st July, 2008, the appellant opted for payment of duty based under the Compounded levy scheme under Section 3A of the Act. 2.4 The appellant filed a declaration dated 7.7.2008 declaring the various details required in terms of this scheme, indicating therein that the appellant had one pouch making machine. Based on this, single pouch making machine which was installed and being used by the appellant in their factory, the appellant determined the duty liability under the Compounded levy scheme as ₹ 12.50 lakhs per month. In terms of the notification, the appellant discharged their duty liability for the month of July, 2008 onwards @ ₹ 12.50 lakhs per month. Based on this declaration, after causing necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant on 22.8.2008 and conducted investigations regarding the installation of the plant and machinery in terms of the declarations filed by the appellant under the compounded levy scheme. The DGCEI authorities drew a Panchnama dated 22.8.2008 pertaining to the factory premises of the appellant. The Panch witnesses were the various persons who are not residents within the local jurisdiction of the Department nor the residents in vicinity of appellant s factory and were in fact brought by the DGCEI along with them. The fact regarding the Panch witnesses not being the persons of the appellant s locality, is also evident from the Panchnama wherein the addresses of the Panch witnesses were given as Lucknow and Fatehpur respectively. During the visit, the departmental authorities also resumed various documents from the premises of the appellant and undertook physical stock taking of the various goods lying in the factory premises of the appellant. 2.9 During the visit by the departmental authorities, even though the DGCEI authorities found only one pouch making machine installed and being used in the factory premises of the appellant, they forcibly brought seven other pouch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugust 2008 as alleged by the department or only 1 pouch packing machine was there as claimed by M/s Wizard. The learned Commissioner took note of the visit note/confidential report of Shri Ranveer Singh, Joint Commissioner dated 4th October, 2008 which was submitted to the Chief Commissioner as there were complaints by the appellants - M/s Wizard that actually they were having only one packing machine on the date of visit and the other seven machines were brought by the inspection team with them and they got the said seven machines inside the factory of the appellant with the assistance of the workers of the appellant and thereafter photographed the same and have made a false and fabricated case of evasion against them. The said inspection note, has been quoted in the order, in respect of inspection and the visit note dated 4th October, 2008 have been reproduced in the order which is reproduced herein for ready reference as follows:- Visit Note:- Dated 04.10.2008 In accordance with the instruction received from the Chief Commissioner, telephonically on 03.10.2008, I had visited Gorakhpur Division in connection with the case booked by DGCEI in relation to unauthorized manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Superdaginama to the company. On being asked to furnish invoices pertaining to purchase of these machines, Shri Tiwari informed that all the documents had been seized taken over by the DGCEI Officers, statement of Shri Narendra Tiwari is enclosed as per which only one machine was in operation before the search conducted by DGCEI i.e. 22nd August, 2008. In this regard, I have issued a letter to DGCEI calling for respective copies of the statements, Panchnama and invoices pertaining to the seized machines. In addition the DGCEI has also been requested to kindly inform as to whether in the course of their investigation they have come across any evidence indicating connivance of any officer. This was considered essential as the first hand investigation was done by them and their investigation will be crucial from vigilance angle. The concerned Superintendent was directed to furnish the Ground Plan of the factory showing the details of the place where they intended to install the packing machines. Details of the working hour of the company were also taken from the concerned Superintendent. Details as regard No. of machines installed in the factory premises were taken and are al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead on the ground was found present. A few photographs of these premises were also taken and enclosed herewith. Thereafter we proceeded to the divisional office for further enquiry on the following lines. 1. On perusal of the newspaper report, given by the Hindi local paper Dainik Jagran on 23rd August, 2008 a request letter was sent by me to the office of Dainik Jagran, requesting to inform the basis on which the incident was reported and whether the concerned reporter was himself present at the location i.e., the Petrol Pump premises. 2. The Divisional Assistant Commissioner was directed to provide attested copies of the XT-I Diary reports of all the concerned Superintendents and Sector Officers. 3. Copies of the Electricity Bills of M/s Wizard Fragrances which can give a comparative idea of the power consumption before and after the introduction of the compounded levy scheme. 4. Vide the letter dated 2nd July, 2008, M/s Wizard Fragrances, GIDA, Gorakhpur, had informed that two pouch machines purchased by them vide Invoice No. 328 dated 8th March, 2008 and Invoice No. 01/004 dated 10th May, 2008, have been sold back to the manufacturer M/s Kapoor engineeri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and two power points for machineries meant for mixing etc. The unit was reported to have 15 KW electric supply with power back up of 3 generators, one of 5 KVA and two other of 20 KVA each. It is worth to note here that M/s Wizard in their interim defence dated 04.08.2009 and also dated 14.11.2009, pleaded that they have only 15KW electricity connection and one 5 KVA DG Set, not sufficient for running more than one machine. The facts revealed on 04.10.2008 goes contrary to the claim of M/s Wizard. I do not find any explanation from M/s Wizard how 6 pouch packing machines were running on 04.10.2008 with the same 15 KW connection. I also note that except for a passing reference to the statement of Sh. Narendra Tiwari, to the effect that only one machine was in operation before the search by DGCEI on 22.08.2008 visit note has not given any finding that only one machine was available on 22.08.2008. Hence reliance of M/s Wizard on Visit Note dated 04.10.2008 of Sh. Ranbir singh, Joint Commissioner, Central Excise, Allahabad is not going to help them to prove their contention of one machine theory. Rather, it is suggestive of the fact that power connection plus power back up w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y brought inside the factory by the inspection team, it is observed that Mr. Amar Tulsiyan - Proprietor in his statement dated 22nd August, 2008 admitted that at the time of visit eight pouch packing machines were engaged in the manufacturing of gutkha. Shri Sudhir Verma field officer of Wizard admitted the availability of eight machines, one declared and seven undeclared. Shri Kamal Shukla - Guard of Wizard in his statement on 22nd August, 2008 confirmed at the time of entry of officers, all the 8 packing machines were already installed. Further Shri Lalit Kumar Singh partner of M/s Kapoor Engineering Works, Kanpur, whose name was disclosed by Mr. Amar Tulsiyan himself on 22nd August, 2008, as a supplier of pouch packing machines in statement dated 25th August 2008 gave bill wise details of pouch packing machines sold to M/s Wizard and confirmed that total 10 machines were sold to M/s Wizard and out of which two are returned by them and as per his calculation, M/s Wizards must have eight pouch packing machines. It is further observed that in his further statement dated 28th August, 2008, M/s Tulsiyan proprietor, expressed his agreement with the contents of statement of Shri Lalit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice and concluded by the learned Commissioner. The learned counsel takes us to the following documents in support of his contention that only one machine was available, installed and working there, in factory of the appellant. He first refers to the visit note by Joint Commissioner (Preventive). The said note have been taken note of, hereinabove. The said note exclusively shows that the departmental authorities themselves know, the visit of DGCEI Officers and Panchnama drawn was not in accordance with law and was clearly malicious and arbitrary. In para 3 of the note it has been clearly indicated that Shri Narendra Tiwari employee have stated that only one machine was installed and in operation before and at the time and search. Further, the Jurisdictional Superintendent had also been directed to give records regarding ground plan of the factory, details of the place where the machines were installed, details of machines installed in the factory premises and details of duty payment before and after compounded levy schemes. The said note further refers that information was called from the news paper reporters, from the Divisional Assistant Commissioner regarding the XT-1, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the said application was enquired into and the duty was determined at Rs,12.50 lakhs for one machine per month. Subsequently he referred to the application of Wizard dated 1st September, 2008 wherein they applied for installation of 3 new pouch packing machines, in addition to the existing one, wherein in the, accompanying form, proper declarations have been made regarding, the packing machines, as to make and model, name of the supplier, their bill number, etc., as well as the make of the motor and its number. In response thereto by order dated 4th September 2008. The Assistant Commissioner, after verification have determined, that there are four single track packing machines in the factory and taking into account other factors determined the monthly duty liability at ₹ 12.50 lakhs per machine or ₹ 50,00,000/- per month. Thereafter by another order dated 3rd October, 2008 the Assistant Commissioner in terms of Rules 6 of the Pan Masala packing Rules, 2008, taking notice of the fresh application dated 30th September, 2008 for adding two more packing machines to the existing four machines, after verification by his officers have determined monthly duty liability at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... month of October, when further two machines (total 6) were added. The learned Counsel further pointed out that on increasing of number of packing machines, it is an admitted fact, till 31.08.2008, only one 5 KVA DG Set was available in factory. In September, 2008 20 KVA DG Set was added and with effect from 8th October, 2008, they have installed another 15 KVA generator. From such facts it is evident that in the month of August, with the available generator capacity of 5 KVA DG Set and the sanctioned load of 15 KVA, the appellant, by no stretch of imagination could have operated 8 packing machines. 10. Further the learned counsel refers to the letter of the Assistant Commissioner who has indicated that he procured newspaper cuttings which carried different version than the version of DGCEI Officers and had issued letter dated 27th August, 2008 to the Subordinate Officers calling for report on this issue. Thereafter the said Assistant Commissioner received reports from various Subordinate Officers namely Shri Satya Premi, Shri N.D. Singh and Shri Vindhyachal and on the basis of the report the authenticity of the panchnama proceedings dated 22nd August, 2008 were doubtful and appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Excise Versus Venus Castings (P) Ltd. reported at 2000 (117) E.L.T. 273 (S. C.) Union of India Versus Supreme Steels General Mills reported at 2001 (133) E.L.T. 513 (S. C.) wherein it has clearly laid down the principle, that the compounded levy scheme is a separate scheme altogether and an assessee opting for the scheme is bound by the terms of that particular scheme. It is settled matter now that Section 11A of the Act has no application for recovery under different or special schemes. Accordingly, the impugned order passed by the learned Commissioner under Section 11A of the Act, is wholly without jurisdiction and fit to be set aside. The learned counsel further urged that as the orders for determination of duty payable under the compounded levy scheme and Pan Masala Packaging Machines Rules, 2008 and the same have not been varied and not challenged by the department in any appropriate proceedings, accordingly the show cause notice is not sustainable and on this score also the impugned order is fit to be set aside. 12. The learned AR for Revenue have relied on the impugned order. 13. Having considered the rival contentions we find that impugned order is bad and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y space to operate and/or space for workers to operate the said machines. It appears like, in a tightly packed elevator people are doing aerobics, as per allegation in the Show Cause Notice. Further from examination of the so called invoices of the machine manufacturer which have been relied upon in the show cause notice, we find that the format of the said invoices is very different from the earlier invoices issued a few months back for purchase of packing machine, Supari cutting machine etc., from the same manufacturer/supplier. Further as stated by the said manufacturer- Lalit Kumar Singh, who has stated that he has sold the subsequent seven machines on credit, but has not produced any evidence of delivery of such machines on credit nor any credible evidence in the form of any acknowledgment from the authorized person of M/s Wizard Fragrances that they have received those machines on credit. It is very unlikely that any manufacturer will deliver machines on credit without retaining proper evidences for the same. (iv) In view of the our aforementioned findings, we find that the impugned order is vitiated and duty imposed along with confiscation penalty being unsustainable, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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