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M/s Wizard Fragrances, Vinayak Ultra Flex Pvt. Ltd. Versus Commissioner of Central Excise, Allahabad

2017 (7) TMI 476 - CESTAT ALLAHABAD

Confiscation - 8 bags of Ronak brand Gutkha containing 94,200 pouches of MRP ₹ 1 seized at the time of inspection - redemption fine - penalty - Rule 17 of Pan Masala Packing Machine (capacity determination & collection of duty) Rules, 2008 - Section 11A read with Section 3A of the Central Excise Act, 1944 - jurisdiction - Held that: - The order is wholly without jurisdiction being under Section 11 A of the Act in view of the ruling of Hon'ble Supreme Court in the case of Hans Steel Rerolli .....

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to the orders determining duty payable under Rule 6 of 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 bein .....

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hine 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 withou .....

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r: Anil Choudhary These appeals are arising from common Order-in-Original No. MP (Dem 36/2009) 76 of 2009 dated 21/12/2009 passed by Commissioner of Central Excise & Service Tax, Allahabad whereby he has been pleased to confirm Central Excise duty ₹ 1,75,00,000/- under Section 11A read with Section 3A of the Central Excise Act, 1944 on M/s Wizard Fragrances & appropriated amount of ₹ 87.50 lakhs deposited during the investigation along with interest and also imposed equal amo .....

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/- and further imposed penalty of ₹ 25,00,000/- for contravention of the provisions of the Central Excise Rules, 2002 & Pan Masala Rules, 2008 and further have been pleased to impose penalty of ₹ 50,00,000/- on the other appellant M/s Vinayak Ultra Flex Private Limited under Rule 26 of the Central Excise Rules, 2002. 2. The brief facts of the case are as follows:- 2.1 The appellant, Wizard Fragrances, at Gorakhpur, is a Proprietorship unit and is engaged in the manufacture of Pan .....

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ing 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 app .....

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y liability based on one operating packing machine installed in the unit. This order of the Assistant Commissioner has not been appealed against or reviewed in any manner known to law till date. 2.5 Pursuant to the Appellants declaration dated 7.7.2008 furnishing information for determination of the Annual Capacity under the compounded levy scheme, the departmental officers having jurisdiction over the factory of the Appellants periodically visited the factory of the Appellants. The evidences on .....

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to provide information regarding the Pan Masala/Gutkha manufacturing units falling in their jurisdiction. 2.7 In terms of this letter issued by the DGCEI, the Superintendent of Central Excise (AE), Allahabad addressed a letter dated 30.7.2008, giving details of the information of the Pan Masala manufacturing units under Notification No. 42/2008-CE dated 1.7.2008. In this letter, the details of the facilities/machinery available with the appellant and other relevant were furnished by the Superin .....

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ad addressed a letter dated 14.8.2008 giving various details called for by the DGCEI along with other relevant information, as desired. 2.8 The officials of the DGCEI thereafter visited the factory premises of 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 t .....

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es 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 making machines from outside the factory premises of the appellant and showed as if they were i .....

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f the Allahabad Commissionerate visited the factory premises and various other premises which were earlier visited by the officials of the DGCEI. The team of vigilance officers thereafter collected evidences and other material regarding the way the DGCEI officials conducted the investigation/raid in the premises of the appellant. The reports in the local newspapers were also examined by the officers of the vigilance. In fact, the local Central Excise authorities had also led evidence in support .....

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led by the appellant under the compounded levy scheme. 2.12 A show cause notice dated 10.12.2008 was issued by the DGCEI alleging that, in all eight pouch making machines were found installed in the premises of the appellant on 22.8.2008 and, therefore, excise duty demand is to be calculated based on eight machines. Accordingly, the show cause notice demanded duty under Section 11A read with Section 3A of the Act for the months of July and August 2008, with proposal to impose penalty. 3. The sho .....

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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 ev .....

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M/s Wizard Fragrances, GIDA, Gorakhpur. In this connection I had first visited the Factory premises located in GID Industrial Estate, Gorakhpur. This is the small factory owned by Shri Amar Tulsiyan and is located in a remote area of the Industrial Estate. It comprises of two major halls. In the first hall, an oven meant for heating Betel nuts and other machinery for cutting Betel nuts etc. were located, in addition, there were other machineries for preparation of lime, katha etc. The main manuf .....

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tor Set of 20 KVA was installed recently which was also apparent from the visual condition there. The Range Staff was directed to furnish invoices pertaining to these Generator Sets so as to ascertain the probable period of their installation. At the time of my visit six machines were found working, eventually Shri Agrawal informed me that these are new machines purchased by the manufacturer after the seizure conducted by DGCEI i.e. 22nd August, 2008. These machines were producing pouches of Ron .....

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of the visit. However, Shri Narendra tiwari, S/o Shri Jata Shankar Tiwari was found present. On casual enquiry, he informed that he was working there since the last 4 months. The Superintendent (Vig.) was directed to call Shri Tiwari to assist in the enquiry. Shri Tiwari also showed me that the Seven Gutkha Packing Machines which had been sealed by DGCEI and handed over under Superdaginama to the company. On being asked to furnish invoices pertaining to purchase of these machines, Shri Tiwari in .....

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tigation 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 re .....

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rea. The owner of the company Shri Amar tulsiyan was found absent and one security officer Shri satish Singh S/o Shri Sahabjada Singh, was found present. The officers were directed to take Shri Satish Singh to the Security agent so as to ascertain the names of the persons supplied by the security agent (Shri Udaybhan Yadav of Samrat security) to the Petrol Pump, on the day of the search conducted by DGCEI, so that, further detailed information could be collected. Incidentally Shri Udaybhan Yadav .....

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Yogesh Srivastava. The vigilance officers were directed to conduct their enquires as regards complicity of these two officers. On being asked: as the probable area, where the purported seven Gutkha Packing Machines were operational, A. C. Shri Agrawal guided us to a tin-shed located immediately behind the Petrol Pump. This shed also has an exit gate in the backyard towards the Transport Nagar area. This premises consisting of two small sheds (rooms) of about 18 x15 (slanting roof 7 -8 ). There w .....

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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 Pum .....

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e 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 engineering Works, Kanpur, vide their Invoice No.126 dated 1st July, 2008. The veracity of this statement has to be looked into and the details of the actual serial no. embossed on the machines shall be obtained from the manufacturers to ascertain as to whether these machines figure in the seizure of seven machines by DGCEI. 5. In this regard, the provisions of .....

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ted 1st July, 2008 and dealt with accordingly. Since, the finished product purportedly found at the place of unauthorized manufacture was a meager quantity, the DGCEI Officers might have considered it prudent to show the operation of unauthorized machines at the registered premises, so as to prove a much higher liability for payment of duty. This is however, subject to confirmation from the DGCEI Office. It is pertinent to point out, that the matter regarding vigilance angle has not been conclud .....

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ned Commissioner observed as follows;- 7.3 On perusl of Para 2 of visit Note above, I find that on the day of visit of Joint commissioner Sh. Ranbir Singh On 04.10.2008, a total of 6 pouch machines were found working and producing Ronak brand Gutakha, which is the brand owned by the Proprietor - Sh. Amar Tulsiyan. These machines were reported to have been purchased after seizure dated 22.08.2010 by DGCEI. The hall was found to have the provision of seven power points for installing gutakha machi .....

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zard. 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 Co .....

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brought there and photographed is rejected by way of a passing reference. Learned Commissioner further observed that the report of Shri Ranveer Singh Joint Commissioner does not help the case of the appellants as to the fact that only one machine was available and/or running in the factory and further observes that from the said report it is suggestive that power connection plus power backup was sufficient to run 8 (6 +2) machines at a time. Further referring to the various letters, interdepartm .....

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han one pouch packing machine engaged in manufacture of Gutkha in the said premises and that seven additional pouch packing machines are perhaps brought in the factory premises by the DGCEI Officers on 22nd August, 2008. The learned Commissioner further observed that power load of 15 kva with backup available in the factory was sufficient to run eight machines at a time, has already been established during the visit of Joint Commissioner on 4th October, 2008, when 6 pouch packing machines and 2 .....

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e factory of Wizard and the allegation of the appellant that such machines were forcibly 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 i .....

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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 Kumar Singh (the Authorised person of M/s Kapoor Engineering Works, Kanpur) dated 25th August, 2008. 6. Accrodingly, the learned Commissioner agreed with the allegations in the Show Cause Notice and as to availabi .....

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ing invoices in the name of one Vijya Traders on the direction of the proprietor of M/s Wizard for dispatch of packing materials of "Ronak" brand Gutkha, bearing the same design, same Central Excise registration number and name of the manufacturer - M/s Wizard, with the sole intention of facilitating the appellant to receive unaccounted packing materials to be used in manufacturer Ronak brand Gutkha by the seven undeclared machines and sale thereof, without payment of duty on such unde .....

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inely. On such findings the penalty was imposed under Rule 26 of Central Excise Rules, 2002. 8. The learned counsel for the appellant - M/s Wizard have urged that the entire case is based on the visit and Panchnama dated 22nd August, 2008, wherein it is alleged that 8 pouch packing machines were found installed in the factory premises of the appellant and therefore, in the month of July & August, 2008 the duty liability is to be determined based on the 8 packing machines. The point for decis .....

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. 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 .....

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bout the finished product available with the appellants - M/s Wizard. In the said report it is evident that finished product found at the place of manufacture was meagre. The learned counsel further points out that for running 8 packing machines, sufficient packing material and/or ready to pack gutkha is required, whereas at the time of inspection it is evident from the Panchnama that hardly any loose gutkha was found ready to be packed. 9. He further refers to the letter dated 31 August 2009 is .....

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ination 2 05.07.2008 11.07.2008 15.07.2008 26.07.2008 02.08.2008, 04.08.2008 06.08.2008 08.08.2008 11.08.2008 14.08.2008 21.08.2008 Shri M. K. Saxena - Inspector, Sector Officer, Central Excise, Range Rural, Gorakhpur. No irregularities reported 3 25.08.2008 Shri Vindhyachal Superintendent, Range Rural, Gorakhpur. No irregularities reported 4 26.07.2008 07/08.08.2008 Preventive Staff of Central Excise Division, Gorakhpur. No irregularities reported The learned Counsel further urges that above ta .....

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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 verif .....

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hines, after verification by his officers have determined monthly duty liability at the rate of ₹ 12.50 lakhs per machine, and for 6 machines ₹ 75,00,000/- per month. The learned counsel further submits that had there been any misdeclarations and or clandestine activity on the part of the appellants, the same would have been found out or revealed at least in one of the visits by the Department. But never any discrepancy and or illegality was found save and except as alleged on 22nd A .....

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chart is as follows:- Wizard Fragrances A-4/12, Sector 13 Gida, Sahjanwa, Gorakhpur Month of April, 2008 to December, 2008 Sr. No. Month Electric Unit 1 April, 2008 3721.00 2 May, 2008 4009.000 3 June, 2008 5251.000 4 July, 2008 5295.000 5 August, 2008 5295.000 6 September, 2008 6374.000 7 October, 2008 11259.000 8 November, 2008 6576.000 9 December, 2008 7010.000 Total 54790.000 The learned Counsel further submitted from the said chart it is evident that power consumption has been more or less .....

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actory. 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 cut .....

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report categorically refers to the visits by the Departmental Officer of the Range and Officers of Preventive section, on various dates and states that nothing adverse came to their notice at any point of time nor they had any intelligence or information of any clandestine activity on the part of the appellant M/s Wizard Fragrances. 11. The next point raised by learned counsel is that the Pan Masala Packing Machines (Capacity Determination & Collection of duty) Rules, 2008 is a complete code .....

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covery of amount dues under the compound levy scheme for Hot Rerolling Mills & Annual Capacity Determination Rules, 1997, otherwise, it is separate scheme for the collection of duty for the goods manufactured in the country. The Apex Court observed - on going through the records it is clearly established that appellants are availing the facilities under the compound levy schemes, which they themselves opted for and filed declarations furnishing details about annual capacity of production and .....

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vision regarding time and manner of payment and it also contains provisions relating to payment of interest and penalty in the event of delay in payment or non-payment of dues. Thus, this is a comprehensive scheme in itself and general provisions of the Act and Rules are excluded. The Apex Court further referred to its earlier ruling in Commissioner of Central Excise Versus Venus Castings (P) Ltd. reported at 2000 (117) E.L.T. 273 (S. C.) & Union of India Versus Supreme Steels & General .....

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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 .....

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g and vague wherein he observes that it was possible for the appellant to run eight packaging machines with sanctioned load of 15 KVA from the Electricity Department and availability of Generator having capacity of 5 KVA. Further the observations of the learned Joint Commissioner, who was appointed by the Chief Commissioner of Central Excise, Lucknow to enquire into the matter of irregularities in the Panchnama proceedings by DGCEI and had observed in his report and had taken notice of the facts .....

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ment have confirmed that at about 12 noon on 22nd August, 2008, 7 packaging machines were brought by the officers. The same were brought inside the factory, and photographs were taken of the said machines. Particular note has been taken that the said machines were not installed before in the said factory. This finding of the concerned designated Vigilance officer(s) have not been controverted and not found wrong by the learned Commissioner and as such the impugned order is vitiated for ignoring .....

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e 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 .....

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