By TIOL News Service

ALLAHABAD, FEB 15, 2019: M/S Kurele Fragrances Pvt. Ltd. (KF) is engaged in the manufacture of Pan Masala/Gutkha bearing various brand names such as "Gagan", "Patel", "Fiza", etc. Similarly, M/s Kurele Chemicals Company (KC) manufactures Pan Masala/Gutkha bearing various brand names such as "Gagan", "Patel". M/s Latex Chemicals (LC) is a manufacturer of Laminated Pouch Rolls and Multilayer Co-extruded Film. On 30.05.2006, factory premises of KF and office premises of KC was searched by Officers of Central Excise Intelligence. Excess stock of finished goods and raw materials was seized along with Indian currency of Rs.7,90,000/- under the reasonable belief that the same was related to the sale proceeds of the clandestinely removed guktha; records were resumed from the factory premises and from the premises of the transporters. Statements were recorded and all this culminated into issuance of a SCN dated 13.06.2008.

The matter was adjudicated by the Commissioner of Central Excise, Kanpur by an order-in-original dated 31.03.2010 whereby the following order was passed –

(1)  M/s. Kurele Fragrances Pvt. Ltd.:

Demand of Central Excise duty of Rs. 10,84,961/- and Education Cess of Rs. 21,700/- confirmed under proviso to Section 11A (1) of the CEA, 1944.

Interest was held payable u/s 11AB of CEA, 1944 and equivalent penalty of Rs.11.06 lakhs was imposed u/r 25 r/w s.11AC.

(2)  M/s. Kurele Chemicals Company:

Demand of Central Excise duty of Rs. 70,45,596/- confirmed under proviso to Section 11A (1) of the CEA, 1944.

Interest was held payable u/s 11AB of CEA, 1944 and equivalent penalty of Rs.70.45 lakhs was imposed u/r 25 r/w s.11AC.

Amount of Rs. 50,00,000/- voluntarily deposited vide TR6 dated 03.06.2006 was appropriated against the confirmed duty liability of M/s. Kurele Fragrances Pvt. Ltd., Kanpur and M/s. Kurele Chemicals Company, Kanpur.

(3) M/s. Latex Chemicals:

Demand of Central Excise Duty of Rs. 7,90,518/- and Education Cess of Rs. 15,810/-, confirmed under proviso to Section 11A (1) of the CEA, 1944.

Interest was held payable u/s 11AB of CEA, 1944 and equivalent penalty of Rs 8.06 lakhs was imposed u/r 25 r/w s.11AC.

(4) Penalty of Rs. 10,00,000/- imposed upon Ram Prakash Dewakar, Director of M/s. KF and Authorized Signatory of M/s. KC u/r 26 of CER, 2002.

(5) Penalty of Rs. 2,00,000/- imposed upon Sanjay Kumar Kurele, Director of M/s. LC u/r 26 of CER, 2002.

The assessees preferred appeals and the CESTAT vide order dated 24.07.2017 [2017-TIOL-3522-CESTAT-ALL] set aside the order-in-original (by holding the SCN as unsustainable) and allowed the appeals with consequential relief.

This is the crux of the Tribunal order –

+ Entire show cause notice is based on bilties/GR's claimed to have been recovered from M/s. Vinod Forwarding Agency, Kanpur.

+ During the cross examination it has been established that the brand name of the Gutkha booked by M/s. Vinod Forwarding Agency has not been stated on the said GR's/bilties and it was only presumed by Revenue that wherever no mention of Rajshree is established said Gr's/bilties should be treated as if the said goods were booked by the appellants and that the said goods were having brand name of 'Patel' and 'Kisan'.

+ Through the cross examination it has been very clearly revealed that the statements on the basis of which said show cause notice was issued were recorded under duress and all the submissions made in the statements were retracted by the witnesses and during the cross examination they have also stated that the statements were recorded under pressure by the officers and one of the witness has also stated that he was tortured for extracting statement from him.

+ We find the possibility of use of same GR's repeatedly for framing charges against various manufacturers of Gutkha without connecting the GRs with the goods manufactured by the particular assessee on the basis of particulars of goods stated on the  GRs.

+ We further find that there is no investigation conducted about procurement of raw material of allegedly clandestinely cleared goods.

+ Unless criteria is provided through legal provisions to charge duty on the basis of capacity of production or consumption of electricity, the same cannot the basis for allegation of manufacture of goods and their clandestine removal.

Aggrieved with this order, the CCE is before the Allahabad High Court and raises the following questions of law -

(1) Whether on the facts and in the circumstance of the case the Tribunal has erred in law to hold that the clandestine manufacture and removal of final product is not proved?

(2) Whether on the facts and in the circumstance of the case the Tribunal has erred in law to take into consideration the fact that when any person is involved in illegal activities, he will not maintain authentic records of the illegal activities or manufacture being done by him?

(3) Whether on the facts and circumstances of the case the Tribunal has erred in law to take note/consider that the private records relied upon were corroborative evidence?

Upon perusing the records, the High Court narrated the findings of the Tribunal and concluded that it did not find any infirmity in the same.

Holding that the Revenue appeal lacks merit, the same was dismissed. The questions of law were answered accordingly in favour of the respondent assessee and against the Department.

(See 2019-TIOL-351-HC-ALL-CX)