By TIOL News Service

BANGALORE, NOV 26, 2014: M/S Dhariwal Industries Ltd. (DIL), Bangalore is a manufacturer of pan masala and gutkha falling under tariff heading 2403 99 90.

In the impugned order, it has been held:

(i)  57085 cartons of RMD gutkha cleared by the assessee has to be treated as clandestinely removed without payment of duty during the period from July 2007 to February 2008 and held to be liable to confiscation.

(ii) Central Excise duty of Rs.26,57,29,571/- with interest is payable.

(iii) A redemption fine of Rs.2.6crores in lieu of confiscation has to be paid.

(iv) Penalty of Rs.26,57,29,571/- is payable by DIL.

(v) Penalty of Rs.50 lakh is payable by Shri Rasiklal M. Dhariwal, Chairman of DIL.

(vi) Penalty of Rs.50 lakh is payable by Shri Prakash R. Dhariwal, Managing Director of DIL.

(vii) Penalty of Rs. 10 lakh is payable by Shri Sohanraj Mehta, Partner of Mehta Associates, the C & F Agent.

(viii) Penalty of Rs.5 lakh payable by Shri Prashanth S. Bafna, CEO,DIL.

(ix) Penalty of Rs.5 lakh is payable by Shri Jeevan B. Sancheti, CEO, DIL.

(x) Penalty of Rs.2 lakh is payable by Mr. Pavan Kumar Mehta, Proprietor of M/s. Mehta Marketing.

(xi) Penalty of Rs. 5 lakh is payable by Shri M. B. Mallikarjuna, Managing Partner, M/s. Sri Gajanana Arecanut Traders.

(xii) Penalty of Rs.2 lakh is payable by M/s. Champion Packaging Industries Pvt. Ltd.

(xiii) Penalty of Rs.1 lakh is payable by M/s. Rajhans Enterprises.

All are in appeal before the Tribunal.

The counsel for DIL brought a carton and showed and submitted that if 57085 cartons were to be removed without payment of duty and transported from the factory to the C & F Agent and thereafter to the dealers, more than 900 trucks would have been required for doing so. He also submitted that to carry the required supari supplied by the suppliers, a similar number of trucks would have been required. However not a single truck carrying such gutkha/pan masala removed without payment of duty or supari received in excess has been intercepted or seized.

The Tribunal observed,

What is required to be proved by the department is preponderance of probability and therefore we need to examine whether on the basis of evidence collected and investigations done, a case has been made out against the appellant or not and we are not required to examine what are the omissions in the investigation. We find that in the impugned order there is no mention of surprise visits of the officers and the supervision/control exercised by the department and how the assessee could produce excess quantity in spite of such intense supervision. We take note of the fact that the Commissioner's observation and the conclusion apparently is that the excess production and clandestine removal happened from the factory of the appellant which is registered with the Department. There is no indication to show that there was excess consumption of raw materials or there was mis-declaration of consumption by the appellants; there is no conclusion or evidence to show that quantum of production declared by the appellant was less than what was possible with support of evidence; no evidence has been gathered to show that there was excess use of machines or additional shifts of work done by the appellants during the relevant period; as already observed no consignment have been seized or intercepted while clearing without payment of duty; even though consumption of raw materials has been considered, how it has helped excess production has not been discussed. The fact of retraction of SLM has not been discussed; even though shri SLM had accepted certain income before the Income Tax authorities no questions were asked as to the what commission was earned and how much excess quantity he had sold and how he undertook these transactions; other than the statement of SLM, there is no other evidence to show that the meaning of codes A and Gutka package. The learned counsel questioned the correctness of the quantification based on loose sheets. No question has been asked and no verification has been conducted as regards the claim of Shri Shri Sohanraj Mehta that he was selling other products also. In our opinion, there is a need for detailed consideration of all evidences gathered; implication thereof and the correct classification on the basis of the evidence is required and this has not been done. We definitely are not saying that the fact that several aspects have not been investigated and therefore no case has been made out. What we say is that there is need for more detailed consideration of the available evidence and there is a need to show that with the available evidence, case has been made out. We also find that appellants had asked for cross-examination of only three persons and only one has been allowed and no reasons has been given for denying the cross examination of others. We feel that this also needs reconsideration. The learned counsel also submitted that even though it has been stated that a Chartered Accountant had been paid an amount of Rs.38 lakhs, no investigation has been done on this aspect also.

The matter is remanded to the Commissioner with a direction to consider each and every point that may be submitted by the appellants, record his observations and consider details of evidence gathered and why submissions of the appellants are not acceptable.

The appellants were directed to make a deposit of Rs. 40 lakhs as a condition for hearing the matter on remand by the Commissioner.

In this context, the AP High Court had recently held that Tribunal has no jurisdiction to put a condition of pre-deposit for adjudicating the matter afresh by the Commissioner of Central Excise . (2014-TIOL-2014-HC-AP-CX)

(See 2014-TIOL-2353-CESTAT-BANG)