CX - machines found in godown plugged into electric socket but with motor missing - whether Unmanufactured Chewing Tobacco can be deemed to have been manufactured - Matter referred to Third Member: CESTAT
By TIOL News Service
NEW DELHI, APR 09, 2014: THE appellant is engaged in the packing of pouches of unmanufactured chewing tobacco (Ch. 24) bearing brand name 'Laxmi Chhap'. The manufacturing activities are being conducted from the premises located at B-21, Krishnapuri, Old Ramgarh Mod, Jaipur. The premises of the appellants' company were visited by the central excise officers on 18.1.2011 who conducted various checks and verifications. They also visited the rented godown of M/s.Rajesh Tobacco Co. situated at 269, Govind Nagar East, Old Ramgarh Mod, Jaipur and found certain goods of 'Laxmi Chhap' brand were lying. In addition, the officers also found three packing machines in the said premises.
The CCE, Jaipur-I held that in terms of provisions of Chewing Tobacco and Unmanufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules, 2010 the goods shall be deemed to have been manufactured or produced with the aid of packing machine and accordingly, confirmed duty of Rs.3,17,41,935/-against the appellant and imposed equivalent penalty, interest and also a penalty of Rs.50 lakhs on the Director of the appellant firm.
During the course of investigation and during the adjudication proceedings the appellant submitted that the 3 pouch packing machines seized from the premises at 269, Govind Nagar East, Old Ramgarh Mod, Jaipur were obsolete and scrapped since not in working condition; they had requested the department to get the same examined/checked from any engineer or expert; that during the relevant period from January, 2010 to January, 2011, the electricity consumption was so minimal that it was not possible to manufacture the huge quantity of tobacco products, as alleged by the Revenue.
In the matter of the Stay application filed before the CESTAT, the Member (Judicial) observed -
++ Does it mean that wherever some packing machines are found in non-working condition and dumped therein, such deeming fiction so created by the capacity determination Rules has to be applied? If that be so, all the old, used and obsolete non-working packing machines, found anywhere, have to be held as resulting in production of unmanufactured tobacco pouches. This can never be the case. It is installation of the packing machine in the factory engaged in the manufacture of chewing tobacco, which is relevant.
++ Admittedly, 3 packing machines were found from the premises at 269, Govind Nagar East, Old Ramgarh Mod, Jaipur, which was neither a factory nor registered premises and machine were in non-working condition and were found to be in dumped condition. As such, the deeming fiction in respect of packing machine in terms of provisions of Chewing Tobacco and Unmanufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules, 2010 arrived at by the adjudicating authority for confirming of demand against the appellant cannot be prima facie appreciated.
Holding so, the Member(J) took a view that the appellant has a good prima facie case in their favour so as to allow all stay petitions unconditionally.
The Member (Technical) had a different view.
Adverting to paragraph 99 of the o-in-o, he held -
++ It is evident from Commissioner's observation that machine found plugged-in did not have motor in it. He also observed that as to why, a machine claimed to be scrap should be plugged into the electric socket. He also on perusal of photographs and physical status of the seized machines discarded this plea and held that it could not be proved that the machines were out of order from 8.3.2010. Commissioner also observed that the missing parts of the machines could always be attached to the machines to make the same operational as it did not require substantial engineering skills especially in machine No.3 where even the lights were found glowing and motor was only missing. However all other submissions made by appellants get answered in subsequent paras.
++ In view of clear facts and various statements recorded by the Revenue, it clearly comes out that M/s Goyal Tobacco Company was in the knowledge of all affairs of tobacco manufacturing. They have possessed FFS machines but later they shifted because compounded levy was imposed on these machines making evasion difficult. They also knew about rules - Chewing Tobacco & Unmanufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules, 2010 and were aware that whatever machines which were not used have to be got sealed from Central Excise authorities. However they removed machine from registered premises and installed in a premises which were not registered with Central Excise. It is also on record that the premises in which machines were installed were owned by his father and Shri Rajesh Goyal has been managing the all affairs. Statements of the Rajesh Goyal, Mrs. pratibha Goyal, Shri Harish Sharma or Shri Pramod Sharma clearly ratified the facts and there is clear admittance of manufacturing activity on these machines. I find that balance of convenience is in the favour of the Revenue. Chewing Tobacco &. Unmanufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules, 2010 also get attracted in this case. Duty per machine also get attracted @ 12.5 lakhs per machine.
Holding that it is not a case for total waiver of pre-deposit, the Member (T) ordered a pre-deposit of Rs.1 Crore.
In view of the difference in opinion, the matter was referred to the third Member.
(See 2014-TIOL-530-CESTAT-DEL)
