TMI Blog2005 (4) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... en the assessee had been dealing with other traders who operated from licensed factories. It was for the assessee to explain the reasons for not getting the units registered or licensed. It was for the assessee to explain its failure to maintain the records under the 1944 Act and rules thereunder. In this connection, no evidence was put before the commissioner about receipt and utilization of the compound in the manufacture of Tulsi Zafrani Zarda. No evidence was led to show that the amount of proforma/modvat credits was equal to the duty demanded, although it was urged that after 3/94, the liability to duty on inputs stood shifted to the final product. A right to claim proforma/modvat credit against duty on final product was different from the defence of bonafides in a case where circumstances mentioned in the proviso to section 11A(1) stands proved by the department for invoking larger period of limitation. The burden to prove the defence of bonafides was on the assessee and the assessee in this case has failed to prove its bonafides. Under modvat, excisable finished products made out of duty-paid inputs are given relief of excise duty to the extent of duty paid on inputs. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68/2, Okhla Industrial Estate, Phase-II, New Delhi, Noida (UP) and Barotiwala (HP). The assessee claimed that the compound (kimam) was an intermediate item, not marketable as such and was, therefore, not excisable. Enquiries were made by the department at Barotiwala (HP), where the assessee claimed to have transferred the compound (kimam). The said enquiries indicated receipt of the said compound (kimam) in balties at Barotiwala during the period 16-2-1995 to 20-12-1996. 4.Based on the above investigations carried out by the department, it appeared that the compound (kimam) was excisable and had been manufactured and cleared without obtaining registration and without payment of duty on the clearances during the period 1-4-1994 to 3-10-1996. 5.Accordingly, a show-cause notice dated 19-6-1997 answerable to the commissioner was served upon the assessee demanding duty under Rule 9(2) of the Central Excise Rules, 1944 read with proviso to Section 11A(1) of the said 1944 Act with interest under Section 11AB. By the said show cause notice, penalty under Rule 173Q and Section 11AC was also proposed to be levied. The show cause notice alleged suppression of material facts with intent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state, Phase-II, New Delhi, Noida (UP) and Barotiwala (HP). The order of the commissioner was also challenged on the ground that the assessee was under a bona fide impression that no duty was leviable on the compound (kimam); the full quantity of the compound (kimam) manufactured at 96, Okhla Industrial Estate, Phase-III, New Delhi/E-1, Maharani Bagh, New Delhi was used captively and, therefore, proforma credit/modvat credit was available to the assessee and, therefore, there was no intention to evade payment of duty. That, the assessee was entitled to exemption under Notification No. 121/94-C.E., dated 11-8-1994 even though the assessee had not complied with the procedure under Chapter-X. 8.After hearing both the sides, the tribunal upheld the commissioner's order dated 28-4-1998 with respect to : (a) the excisability of the goods in dispute and the classification thereof under sub-heading 2404.49/2404.40; (b) the rationale for invoking the extended period of time under proviso to Section 11A; and (c) inadmissibility of proforma credit/modvat credit. However, as regards applicability of Notification No. 121/94, the tribunal observed that though the assessee had not followed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances, it was urged that the said compound (kimam) was neither a chewing tobacco nor a preparation containing chewing tobacco and, therefore, it was neither marketable nor excisable. 11.On the rationale for invoking extended period, learned counsel submitted that the assessee was under a bona fide impression that the compound (kimam) was not excisable; the full quantity of the compound (kimam) was used captively and, therefore, proforma/modvat credit was available and, therefore, there was no intent to evade payment of duty. In this connection, it was submitted that prior to 1-3-1994, branded chewing tobacco including preparations therefrom came under 2404.41 and were made liable to duty whereas unbranded products falling under 2404.49 were chargeable to nil rate. However, after 1-3-1994, the nil rate on unbranded products was given a go by and consequently, the unbranded items falling under 2404.49 attracted duty and duty was again required to be paid on the branded item under 2404.41 which created an anomaly. Therefore, on and from 8-3-1994, the benefit of proforma credit was made available for the duty paid on the unbranded item, which, was to be set-off against the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove units at 96, Okhla Industrial Estate, Phase-III, New Delhi/E-1, Maharani Bagh, New Delhi. That, they have not filed declarations/returns required under the said 1944 Act and the rules framed thereunder. Learned counsel further submitted that in the original hand-written challans, the compound in question was indicated by the word "balties" whereas in the computerized challans, the word "balti" was replaced by "perfumed mixture + kimam poly bags". In this connection, it was submitted that the assessee was fully aware that if they had used the word "compound/additive mixture", it would have indicated "manufacture". That, to mislead the department, the assessee had changed the word "balti" and had replaced it by the words "perfumed mixture + kimam poly bags" to show that perfumed mixture and kimam were dispatched in separate packings from the factory. According to the learned counsel, the entire exercise was to conceal the activity of manufacture and to evade payment of duty. Further, the assessee had failed to maintain statutory accounts for the manufacture of the compound at 96, Okhla Industrial Estate, Phase-III, New Delhi/ E-1, Maharani Bagh, New Delhi. They have also not main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e test of classification is, how are the goods known in the market. These tests have been laid down by this Court in a number of judgments including Moti Laminates Pvt Ltd v. Collector of Central Excise, Ahmedabad [1995 (76) E.L.T. 241]; Union of India v. Delhi Cloth General Mills Co. Ltd. [1997 (92) E.L.T. 315]; Cadila Laboratories Pvt Ltd. v. Commissioner of Central Excise, Vadodara [2003 (152) E.L.T. 262]. 19.Applying the above tests to the facts of this case, we find that sada kimam was bought by the assessee as a raw material which was then blended with saffron, perfumes, menthol etc. to form a compound which was then packed in "balties" and cleared to the above three licensed units at Okhla Industrial Estate, Phase-II, New Delhi, Noida (UP) and Barotiwala (HP), where Tulsi Zafrani Zarda was manufactured. That, the assessee used to buy a similar compound (Lucknowi kimam) from the market from time to time and used in the manufacture of their final product. That, the compound (kimam) prepared by the assessee at 96, Okhla Industrial Estate, Phase-III, New Delhi and at E-1, Maharani Bagh, New Delhi, in the highly concentrated form, was cleared therefrom and taken to the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used to buy similar compounds from the market from time to time. That, other traders, namely, M/s. Globe Traders and M/s. Laxmi Fragrances Pvt. Ltd. used to manufacture compounds similar to the compound manufactured by the assessee; that they had their units duly licensed/registered with the excise department; that they had maintained their books and documents in accordance with the rules under the said 1944 Act; and that they paid duty on clearances of their compound. On the other hand, the assessee carried on their business of manufacturing the said compound without disclosing the existence of their units; they did not get their units licensed/registered; they did not maintain any records under the excise law; that they clandestinely manufactured their compound without informing the department; and in the circumstances, the department was right in invoking the extended period of limitation. 22.It was urged that the assessee was under a bona fide impression that no duty was leviable on the goods; the full quantity of disputed goods was used captively and, therefore, proforma credit/Modvat credit was available in respect thereof and, therefore, there was no intent to evade payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty and concealment of the existence of two units in which the compound (kimam) was manufactured. No explanation has been given by the assessee for not disclosing the affairs of these units, particularly when the assessee was in business for couple of years and when the assessee had been dealing with other traders who operated from licensed factories. It was for the assessee to explain the reasons for not getting the units registered or licensed. It was for the assessee to explain its failure to maintain the records under the 1944 Act and rules thereunder. In each of the above decisions, we find that there was substantial compliance of the rules under the said Act. In each of the decisions the findings indicate technical non-compliance and not total non-compliance of the rules. It was for the assessee to explain the basis of its alleged bona fide impression. In this connection, no evidence was put before the commissioner about receipt and utilization of the compound in the manufacture of Tulsi Zafrani Zarda. No evidence was led to show that the amount of proforma/modvat credits was equal to the duty demanded, although it was urged that after 3/94, the liability to duty on inputs sto ..... X X X X Extracts X X X X X X X X Extracts X X X X
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