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TMI Blog2022 (9) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... h Chand Purohit (Sh. Purohit in short) is the Managing Director of the appellant company. The appellant company is registered with the Central Excise Department and was operating under compounded levy scheme during the period of dispute from April, 2012 to April, 2013. 3. The Appellant has the following three manufacturing units: (I) Unit-I, located at Upar ki Oden, Nathdwara, and having Central Excise Registration No. AABCM4952DXM001, is engaged in packing of processed chewing tobacco in pouches, using automatic 'Form, Fill & Seal' (FFS) machines; (II) Unit-II, located at Khetan Road, Rabcha, Nathdwara, and having Central Excise Registration No. AABCM4952DXM002, is engaged in mixing of lime and tobacco upon receipt of raw tobacco and selling of entire semi-finished goods to Unit-III upon payment of Central Excise duty; and (III) Unit-III, located at Village Kheda Bhansole, Mavli, Udaipur, and having Central Excise Registration No. AABCM4952DXM003, is engaged in processing of tobacco which includes drying, grading and coating and selling of entire processed tobacco to Unit-I. The appellant company regularly deposits the duty in advance at the beginning of each assessment pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate penal proceedings. The IT Department for the previous year 2012-13 and 2013-14 passed the Assessment Orders, both dated 12.3.2015. Investigation by the Central Excise Department. 6. Pursuant to the information gathered from the IT Department during REIC meeting on 27.3.2015, the officers of the Central Excise Department (CE Department) requested for supply of relevant documents, which were made available by IT Department under their letter dated 14.9.2015. Thereafter, the CE Department conducted investigation against the Appellant by recording statement of Sh. Purohit on 15.6.2016, wherein he reiterated the submissions which were already made before the IT Department regarding the contents of Survey sheet. 7. The Department also conducted verification from various tobacco manufactures and jurisdictional Central Excise authorities of such manufacturers, the details whereof were mentioned in the survey report. Some of the said manufacturers submitted letters and the authorities provided the reports regarding the investigation, the details of which are mentioned below: 1) Letter dated 28.3.2017 by Ld. Superintendent, Varanasi, regarding M/s Mala Zarda Industries; 2) Letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal report pursuant to search by the IT Authority, wherein it was presumed that the figures appearing in the red column in the survey sheet are the unrecorded figure of turnover, outside the books of accounts. 9.2 In order to examine the veracity of the survey report as submitted by Sh. Purohit, the Department made further enquiries by issuing letters to the jurisdictional Assistant / Deputy Commissioner of such units/ manufacturers to verify whether the manufacturer names appearing in the survey report are engaged in manufacture of tobacco product with the brand name as divulged by Sh. Purohit and to provide their production and clearance figures and accordingly the reports were received as aforementioned. As per the reports received, there appeared to be variation in the brand name as Sh. Purohit was recording the data in the name of the manufacturing company, instead of the brand name. It appeared that the contention of Sh. Purohit is wrong and misleading. For example, as per the report of Range Superintendent having jurisdiction over M/s Golden Tobacco Manufacturing Co. Pvt. Limited, it was informed that they are engaged in manufacture of branded chewing tobacco under the bran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch permission was denied by the Adjudicating Authority vide order dated 08.06.2018. Being aggrieved, the appellant challenged the said order in appeal No. E/51687/2018 before this Tribunal, vide Final Order reported at 2018 (9) TMI 821 disposed of the appeal with the following observations:- "15. In view of entire above discussion, it is held that the request of the appellant in question was a premature request before the Commissionerate hence the Order under challenge needs no interference. However, the Commissioner is hereby required, irrespective of the appellants filing any reply to the Show Cause Notice or not, to follow the principles of adjudication as far as the examination of the witness and cross examination thereof is concerned, as discussed above. The adjudicating authority-Commissioner is required to reconsider the request of the appellant at the appropriate stage. However, keeping in view that the basic concept behind the cross examination is fair play, it being the most effective of all the means for extracting truth and exposing falsehood. It is clarified that above observations shall have no effect on the discretionary power of the adjudicating authority below ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nferred under Section 3A(1), vide Notification No. 10/2010-CE (N.T.) dated 27.2.2010, specified inter alia 'chewing tobacco' falling under Tariff Item 24039910 of the First Schedule to the CETA, which is manufactured with the aid of packing machine and packed in pouches by FFS (Fill, Form and Seal) machines, as notified goods, on which duty shall be levied and collected in accordance with Section 3A. Simultaneously, in terms of Section 3A(3), the Central Government specified the rate of duty applicable in respect of the said notified goods vide Notification No. 16/2010-CE dated 27.2.2010 according to per packing machine per month, depending on different RSP's fixed for per pouch, manufactured in the factory. 11.5 For providing the manner of determination of the 'Annual Capacity of Production' of the factory, factor relevant to such production, collection of duty, etc., Central Government notified the Chewing Tobacco Rules in exercise of the powers conferred under sub-sections (2) and (3) of Section 3A of the Excise Act. 12. In the present case, admittedly, the Appellant is engaged in the manufacture of chewing tobacco falling under Tariff Item 24039910 with the aid of packing mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Excise Act and the Central Excise Rules, 2002, except for those provided under the Chewing Tobacco Rules itself, including relating to recovery of dues. 13. From the above, it clearly transpires that the Compounded levy scheme prescribed under the Chewing Tobacco Rules, is a self-contained code which not only provides for the manner in which duty is levied, but also for calculation of such duty. Thus, duty on notified goods is required to be determined strictly within the four corners of the Chewing Tobacco Rules and in no other manner whatsoever. 14. It is further submitted that duty is leviable on notified goods only on basis of number of operating packing machines installed in factory, meaning thereby that payment of duty under the compounded levy scheme in terms of the annual production capacity determined, is not relatable to actual clearance and sale of goods. Assessee working under the said scheme is bound to pay a particular quantum of duty irrespective of actual production/ clearance of such goods. 15. The appellant relies on the following decisions: * Hans Steel Rolling Mill v. Commissioner of C. Ex., Chandigarh, 2011 (265) E.L.T. 321 (S.C.). * Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achines not declared by them. The investigation has revealed that the assessee used undeclared machines for manufacturing the goods and clearing the same without payment of appropriate Excise duty, naturally would not be found installed in the declared premises after two years of detection by the income tax authorities." [Emphasis supplied] 18. On perusal of the above, it is abundantly clear that no such undeclared machines, on which Appellant has allegedly manufactured the notified goods and cleared the same, was ever found/investigated by the department. Accordingly, the duty demand based on theoretical determination of number of alleged undeclared machines operated by the Appellant for clandestine manufacture of goods, is devoid of logic and not tenable. 19. Further urges the duty on notified goods is determined only on the basis of number of machines operating in the factory in terms of the Chewing Tobacco Rules only. As a corollary, it is submitted that no duty demand can be raised on the basis of presumed undeclared machines, as done by the Department in the present case, which is violative of the Chewing Tobacco Rules. 20. At this juncture, reliance is placed on the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid documentary evidences by simply holding that Appellant would not operate the undeclared machines from its declared premises. However, it is submitted that even the department has utterly failed to provide a single piece of evidence to corroborate existence of undeclared machines being operated by the Appellant during the relevant period. Thus, such findings are not sustainable. Hence, in the absence of undeclared machines, duty demand cannot be confirmed against the Appellant. 26. Without prejudice to above, assuming without admitting that even if there was extra production of goods during the relevant period, duty demand is not sustainable since duty is levied on the basis of number of machines operating, and not based on the actual production of goods. 27. Amount of Rs. 92,12,154/- pertained to outstanding dues of Uma Polymers which remained unpaid due to defective packing material supplied. No adverse inference can be drawn. In any case, there is no evidence to support the allegation that such packing material was used in clandestine manufacture of goods. 27.1. As mentioned above, packing material weighing 29,144.06 kg purchased from Uma Polymers was found to be def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Meerut, 2015 (315) E.L.T. 65 (Tri. - Del.). * Ravi Foods Pvt. Ltd. v. Commissioner of C. Ex., Hyderabad, 2011 (266) E.L.T. 399 (Tri. - Bang.). * Commissioner of Central Excise, Ludhiana v. Zoloto Industries, 2013 (294) E.L.T. 455 (Tri. - Del.) 30. THE SURVEY REPORT WAS PREPARED VIDE TELEPHONIC SURVEYS OF DEALERS, AND THE APPELLANT'S EXPLANATION THEREOF CANNOT BE DISREGARDED ON THE BASIS OF REPORTS/ LETTERS. IN ANY CASE, NO RELIANCE CAN BE PLACED ON SUCH REPORTS/ LETTERS. 30.1. In the present case, Department has discarded the Appellant's explanation regarding the contents of Survey sheet by holding that such sheet is a private document(s) containing the clandestine clearances of Appellant, and chose to rely on the reports/ letters relating to the competitors, to raise duty demand against the Appellant. Such allegations have been confirmed in the impugned order. 30.2. In this regard, it is submitted that the Tobacco Market Survey Report was an informal telephonic survey from dealers, and was prepared by the Appellant capturing the details of sales (and not clearances) of Appellant's competitors as informed by the dealers. Naturally, the survey report had only captured sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same has been complied with the requirement of cross-examination. In the absence of such cross-examination, the reports/letters cannot be made the basis for discrediting the explanation provided by the Appellant. Such reports / letters are required to be discarded. 33.3 It is further submitted that not providing the opportunity of cross examination in the present case, is also violation of the principle of Natural justice. Reliance in this regard is placed on the following decisions, where cross-examination of Chemical Examiner was allowed by this Tribunal to ascertain the veracity of the test reports relied upon by department against the assessee. Therefore, the ratio of such decisions equally applies to the present case, and categorically rebuts the finding recorded by Ld. Commissioner in Para 20 of the impugned order, for denial of such request: * Youngman Indus. Ltd., v. Commissioner of Customs, Amritsar, 2004 (175) E.L.T. 663 (Tri. - Del.) * Ultra Fine Fillers (P) Ltd. v. Commissioner of Central Excise, Jaipur-II, 2004 (167) E.L.T. 331 (Tri. - Del.). 34. EXTENDED PERIOD OF LIMITATION IS NOT INVOKABLE AND DEMAND IS ENTIRELY TIME-BARRED. 34.1. The demand proposed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compounded levy scheme which provides for manner of determination & collection of duty based on the capacity of production and have rather adopted an imaginary method of assessment of duty, which is not permissible under the Act or Rules thereunder. 38. In view of above submissions, it is urged that the extended period of limitation is not invokable. Further submits that no penalty is imposable on the Appellant Co. as well as on Sh. Purohit. It is further submitted that when demand itself is not sustainable, penalty is not imposable, and interest is also not recoverable. 39. In light of the above submissions, the Appellant prays that the impugned order passed by the Ld. Commissioner is liable to be set aside and the present appeals filed by the Appellant Co. and Sh. Purohit are fit to be allowed in full, with consequential relief. 40. Learned Special Counsel Sh. S. K. Mathur appearing for the Revenue urges that the goods manufactured by the appellant are prone of evasion of Central Excise duty. Accordingly, he urges that the duty has been rightly demanded in the impugned order, which is based on assumption and presumption, on the basis of the survey report (private documents) r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not relevant. Further, we find that once an assessee is assessed to compounded levy scheme, there is no scope for assessment of duty under Section 3, on the basis of actual production. We also find that the factory of the appellant was regularly visited from time to time by the Officers of the Department and they have never found any undeclared packing machine being operated by the appellant. 42.1 We further hold that in the facts and circumstances (Compounded Levy Scheme), undisclosed income declared before the Income Tax Department has no bearing on the duty payable under Central Excise Act. Further, it is undisputed that the amount of Rs.92,14,154/-, which was voluntarily offered to Income Tax and was confirmed in the Assessment order as undisclosed income, on appeal by the appellant, the ld. Commissioner of Income Tax (Appeals) vide Appellate Order dated 05.10.2016 have set aside the said amount. Thus, the Income Tax Department have not drawn any adverse conclusion with regard to the receipt of defective packing material from M/s Uma Polymers, which is one of the basis for drawing adverse assumption and presumption against the appellant. We further find that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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