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TMI Blog2017 (10) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s Shankar Traders at Malipur Road, Sijhouli Ambedkar-Nagar and at factory premise of Shri suresh Kumar Verma situated at Yahiya Kamalpur, Akbarpur, Ambedkar-Nagar and at the residential premises of the appellants. It was found that Shri Suresh Kumar Verma was engaged in the manufacture of Shiv Baba Brand scented Supari also called as Pan Samagri which was having retail sale price of Rs. 1 per pouch and said manufacture was being undertaken at 2 unregistered premises at Malipur Road and at Yahiya Kamalpur and at the said two premises Shri Suresh Kumar Verma was also undertaking the process of packing raw unmanufactured tobacco having no brand name without mention of any retail sale price. The officers conducting the raid also found raw materials in the premises. They noticed that 4,91,400 pouches of chewing tobacco on which no brand was mentioned and 8,59,950 pouches of Shiv Baba Brand scented Supari also called Pan Samagri were found in the manufacturing premises and some quantity of raw material and packing material was also available. The officers carried out investigations and recorded statements. They had also seized the entire quantity of raw mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to as Rules, 2010 or 2010 Rules) as having covered by the notification issued under sub Section (1) of section 3A of Central Excise Act, 1944 and therefore Central Excise duty as provided in said Rules, 2010 should have been discharged by Suresh Kumar Verma. Further, in the said show cause notice it is alleged that the two premises put together were having 14 packing machines. It was further alleged in Para-46 of the said show cause notice that such machines were deemed to have been in operation since 1st day of April, of respective financial years and therefore the duty has to be determined for the period from 1 April, 2013 to October, 2014 and that the rate of duty applicable for manufacture of chewing tobacco of MRP upto Rs. 1/- under Notification No.14/2012 dated 17.10.2012 was Rs. 12 lakh per machine and under Notification No.02/2014-CE dated 24.01.2014 it was Rs. 14.07 lakh per machine and under Notification No. 17/2015 CE dated 11.07.2014 it was Rs. 15.92 lakh per packing machine per month. Therefore, the Revenue calculated that Shri Suresh Kumar Verma was required to pay for the period from 01 April, 2013 to October, 2014 Central Excise duty amounting to Rs. 35,55,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le on the packing machines was plain green colour roll which was not having any brand name written on the same and that Panch witnesses conformed during the cross-examination that there was no perfume mixing machine lying in the manufacturing premises at the time of raid conducted by officers of Central Excise. They further contended that it had come out from the cross-examination of Shri Dikun Nag and from the statements of Shri Ram Shiromani Verma, Shri Sanjeev Kumar Verma and Shri Suresh Kumar Verma that the packing material containing the brand name of Shiv Baba Brand Zarda scented tobacco was delivered by mistake to the searched premises and also contended that chemical examination report by Departmental laboratory has indicated that there was no perfume added to the sample forwarded to them for chemical examination and all said evidences put together establishes that appellant Shri Suresh Kumar Verma was manufacturing only unbranded, unmanufactured tobacco which was being packed in the packing machines and in the pouches which did not have any brand name and MRP printed on the same and the machines were also used for packing of scented Supari which was also called as Pan Sama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ambedkar Nagar during the financial year 2013-14 & 2014-15 further submitting that the cylinders for packing lamination Rolls were supplied by the parties. Shri Dikun Nag, Partner of M/s S. Overseas, 25-B, 1st Floor, Dada, Kanpur in his statement dated 03/06/2015 submitted that his firm has supplied Printed Laminated Rolls and pouches for supari to M/s Shankar Traders, Akbarpur, Ambedkar Nagar for which order was given by Shri Ram Shiromani Verma and cylinders were supplied by the party themselves. Shri Dikun Nag was also cross examined by the noticee and its counsel wherein he informed that the packing materials were supplied as per their orders by both the parties to whom either the material was sent by same trucks or the parties themselves collected it. 45. The statements of the suppliers of laminated rolls as above and seizure of packing material of Shiv Baba zarda, a brand of M/s Shiv Products (which is situated at a different place at Lorpur Road, Chawaniya, Shahjadpur, Akbarpur, Ambedkar Nagar) alongwith 14 FFS machines at the two unregistered manufacturing premises not only indicates the fact that it cannot be a coincidence but also points to a deliberate well planned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing activity at the two unregistered premises, both of which are his ancestral properties, at Yahiya, Kamalpur, Akbarpur, Ambedakar Nagar and at Malipur Road, Sijhauli, Akbarpur, Ambedkar Nagar, with the aid of 14 FFS machines as required under the law. Shri Suresh Kumar Verma (Noticee No.2) indulged into the manufacturing of Chewing Tobacco with the aid of FFS packing machine which falls under Tariff Head 24039910 of the Central Excise Tariff, 1985 and falls under the category of 'notified goods' as defined under the Rule 2(c) of the 2010 Rules, and therefore, he is liable to Central Excise duty as specified in Rule 7 of the said 2010 Rules read with Notification No. 17/2014-CE dated 11/07/2014 as amended. The above acts of Shri Suresh Kumar Verma (Noticee No. 2) proves his mens rea, as he wilfully evaded the Central Excise duty which was due thereon by clandestine manufacturing and clearance of branded Shiv Baba Brand Zarda as well as packing unbranded tobacco through FFS machine on an unregistered premises and makes him liable to pay Central Excise duty under provisions of Section 11A (4) of the Act read with Rule 18(2) of the 2010 Rules, along with interest th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or leaves in the natural state or as cured or fermented leaves, whole or stemmed or trimmed or untrimmed, broken or cut but not tobacco ready for smoking. It was further contended that Board in Para-5 of the said Circular clarified that unmanufactured tobacco is merely broken by beating and then sieved and packed in the retail packets with or without brand name for consumption as chewing tobacco and would be classifiable under Heading 24.01. (iii). They further contended that Hon ble Supreme Court of India in the case of the Damodar J Malpani v/s Commissioner of Central Excise reported in 2002 (146) ELT 483 (SC) has held that the classification of the product can be decided only after the goods are examined and tested by the laboratory and contended that the CRCL report indicated that samples did not contain any flavouring compound, therefore, Original Authority's finding that the goods were classifiable under 24.03 and were subjected to levy through Section 3A of Central Excise Act, 1944 was not tenable in law. 6. Heard the learned Counsels for the appellants. The contentions of learned counsels are as follows:- 6.1. The impugned show cause notice relied upon the Panchna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial in any part of the premises so as to manufacture scented chewing tobacco. 6.8. While the said Panchnama dated 14.10.2014 (RUD-1) drawn at the first premises of M/s. Shankar Traders at Malipur Road stated that Raw Tobacco purchased from the market was being mixed with scent etc and then taken to another room for packing in pouches, the second Panchnama (Rud-5) drawn at Yahiya Kamalpur merely records that at the time packing of 'Chewing Tobacco (tobacco) was being carried out on three machines'. Thus facts recorded in the second Panchnama (RUD-5) do not support the observations and inferences drawn on the basis of facts recorded in the first Panchnama (RUD-1). 6.9. None of the above said two Panchnamas record any fact showing existence in stock or recovery of any perfumery material or aromatic substance or any other material such as lime, molasses or kathha, that could be said to have been used or being used to convert raw unmanufactured tobacco into a manufactured tobacco product such as chewing tobacco. In the absence of any such evidence there does not exists any factual basis to infer or allege that the Appellant was engaged in the manufacture of Chewing Tobacco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 03/09/2015 and 08/09/2015 of Assistant Commissioner, Central Excise, Faizabad. 6.14. It is an admitted fact that samples were drawn at both the said unregistered premises from out of the seized quantity (i) of stock of raw (kacchi) tobacco packed in jute bags (ii) of "Chewing Tobacco Jarda" (loose) found in drums (iii) of "Chewing Tobacco Jarda" recovered from hoppers of the pouch packing machines found installed at the respective premises (iv)of "Chewing Tobacco" packed in unbranded pouches The Test Report of the Chemical Examiner as given in respect of all the samples of Tobacco, which were described in the Test Referral Memo as Chewing Tobacco" has been cited- at para 42 of the SCN and the same is reproduced below: "Sample is in the form of brownish bits of leaves. It is mainly containing tobacco. It does not contain added lime and flavoring agent" It is highly significant that all the Test Reports irrespective of the fact whether the samples were drawn from the unmanufactured raw (kacchi) tobacco packed in jute bags or from tobacco recovered from the drums or from the hoppers or from the unbranded pouches, have given the same results confirming the goods subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test reports received from CRCL, New Delhi for arriving at factually and legally tenable conclusions. However, the learned Respondent in Paras 40 to 43 of the impugned Order-In-Original has recorded his findings completely dismissing the challenge to the contents of the Panchnamas and recorded his conclusions in Para 43 as follows: "The opportunity was granted on the principal of natural justice. I am of the view that the panchas sign the Panchnama in token of having seen the proceedings conducted in proper manner. It is a settled procedure that the entire proceedings are always read out to the Pancha's if they are not able to read and write and they sign the same for having witnessed the entire activity done in a cordial manner which was done in this case. From the cross examination nothing came out regarding the Panchnama which was challenged by the Noticee as well as nothing came out regarding their claim that the goods were unmanufactured unbranded tobacco as claimed by the Noticees. On the contrary, the witnesses endorsed the facts that the goods were being packed through the FFS machine which was finally sealed by the officers. 6.17. The Appellants contended that the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f leaves which after being dusted off were put in the drums and then in the hoppers for packing in plain green colour rolls. The Panchas also testified during cross examination that they never got an opportunity to listen to the contents of the Panchnama in their own native language nor the contents of the Panchnama were explained to them. Further, Shri Gyanendra Kumar categorically deposed at the time of Cross Examination that his earlier statement was recorded purely on dictation by the officers and that therefore, it clearly comes out from the record of cross examination of Pancha's and other witnesses that tobacco which was being packed in pouches on the FFS machines at the said two raided premises was nothing but unmanufactured tobacco and that this fact also gets fully supported and established from the Test Reports given by the Chemical Examiner, CRCL, New Delhi which confirm that all the samples as: "brownish bits of leaves. It is mainly containing tobacco. It does not contain added lime and flavoring agent" 6.19. The Original Authority erred is not appreciating that in view of the depositions made during the course of cross examination of pancha's and other witnes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other hand, the test reports of the drawn samples furnished by the Chemical Examiner clearly establish that the goods produced and removed from the said two premises were nothing but "Unmanufactured Tobacco". Since unmanufactured tobacco not bearing any brand name is fully exempt from duty in terms of serial no. 41 of exemption notification no. 12/2012-CE dated 17/3/2012, there does not arise any question of any duty liability on account of having produced and removed unmanufactured tobacco packed on pouch packing machines in pouches bearing no brand name and no retail sale price. 6.22. With regard to the allegation that the Appellant was engaged in clandestine manufacturing and clearance of Shiv Baba Brand Scented Jarda/Chewing Tobacco in pouches bearing 50 Paise per pouch, it was contended that the Original Authority has in the impugned order merely reiterated the allegations leveled in the show cause notice and without discussing any facts and evidences to substantiate the allegation and held the Appellant to be guilty of being engaged in the manufacture of the said Shiv Baba Brand Scented Jarda/ Chewing Tobacco. 6.23. It was submitted that the above allegation has been lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have never been sent by his firm to the said two premises belonging to Shri Suresh Kumar Verma, though it is possible that on account of the mistake of their packaging material supplier, the said rolls of Shiv Baba Zard may have been delivered there in place of delivering the packing material for Shiv Baba Brand Scented Supari/ Pan Samigri. (e) While the above statement of Shri Ram Shiromani Verma is alleged in the show cause notice to be an afterthought the said statement cannot be out rightly dismissed as an afterthought since it is a responsibly tendered honest statement under Sec. 14 of the Central Excise Act, 1944. Moreover the said statement of Shri Ram Shiromani verma is fully supported and corroborated by the statements and letters cited at sub paras (a) to (c) above. All these statements taken together completely disprove the factually baseless and presumptive inference that Shiv Baba Brand Scented Zarda/ tobacco was being manufactured and cleared from the said two premises belonging to Shri Suresh Kumar Verma. (f) Apart from recovery of small quantity of printed laminated packing rolls bearing the brand name of Shiv Baba Zarda, which was mistakenly delivered at the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of goods on the basis of the report of CRCL laboratory on the chemical composition of the samples which were drawn from the manufacturing premises. We find from Para-42 of the show cause notice dated 01.10.2015 that CRCL has reported that sample was in the form of brownish bits of leaves and it was containing tobacco and that it did not contain any added lime or flavouring agent. We find that the Original Authority has held that the goods manufactured by the appellant were Shiv Baba Brand scented Zarda chewing tobacco. We do not find any evidence to establish that during the period of show cause notice any of the 14 pouch packing machines were engaged in manufacture of Shiv Baba brand scented Zarda chewing tobacco by the appellant. We did not come across any evidence in the whole proceedings to establish that during the entire period of show cause notice any of the 14 machines were engaged in the manufacture of Shiv Baba branded scented Zarda chewing tobacco of RSP 50 Paise. On the contrary when the officers visited the manufacturing premises on 14.10.2014 it was noticed that 6 machines put together in two premises were engaged in packing of unbranded unmanufactured chewing toba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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