Custom, Excise & Service Tax Tribunal
Royal Marwar Tabacco Products Pvt Ltd vs Ahmedabad-Ii on 16 March, 2022
CUSTOMS,EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST ZONAL BENCH : AHMEDABAD
REGIONAL BENCH : COURT NO. 3
EXCISE Appeal No. 11867 of 2013-DB
[Arising out of Order-in-Original/Appeal No 02-AKG-COMMR-AHD-II-2013 dated 23.01.2013
passed by Commissioner of Central Excise-AHMEDABAD-II]
Royal Marwar Tabacco Products Pvt Ltd ...Appellant
Shed No. 316,
Gidc, Sector-28,
GANDHINAGAR
GUJARAT
VERSUS
C.C.E.-Ahmedabad-ii ...Respondent
CUSTOM HOUSE... FIRST FLOOR, OLD HIGH COURT ROAD, NAVRANGPURA, AHMEDABAD, GUJARAT 380009 AND EXCISE Appeal No. 11207 of 2013-DB [Arising out of Order-in-Original/Appeal No 02-AKG-COMMR-AHD-II-2013 dated 21.01.2013 passed by Commissioner of Central Excise-AHMEDABAD-II] C.C.E.-AHMEDABAD-II ...Appellant CUSTOM HOUSE... FIRST FLOOR, OLD HIGH COURT ROAD, NAVRANGPURA, AHMEDABAD, GUJARAT-380009 VERSUS ROYAL MARWAR TOBACCO PRODUCTS PVT LTD, SHRI ...Respondent KIRANSING PRADHANJI THAKOR, SHRI SHAFI MOHMAD FAIZ MOHMAD PATHAN, SHRI HIMANSHU JASUBHAI SHUKLA, SHRI DIPAK BHOGILAL KOTHARI Shed No. 316, Gidc, Sector-28, GANDHINAGAR GUJARAT WITH EXCISE Appeal No. 11583 of 2013-DB [Arising out of Order-in-Original/Appeal No 02-AKG-COMMR-AHD-II-2013 dated 21.01.2013 passed by Commissioner of Central Excise-AHMEDABAD-II] Dipak Bhogilal Kothari ...Appellant B-52, Daval Avenue, Nr. Associated Petrol Pump, C.g.road, Panchvati, AHMEDABAD 380006 VERSUS C.C.E.-Ahmedabad-ii ...Respondent CUSTOM HOUSE... FIRST FLOOR, OLD HIGH COURT ROAD, NAVRANGPURA, AHMEDABAD, GUJARAT-380009 2 E/11867/2013-DB & ors.
APPEARANCE:
Present For the Appellant: Shri PP Jadeja, Consultant & Shri Saurabh Racch, Advocate Present For the Respondent: Shri T.G. Rathod, Additional Commissioner (Authorised Representative) CORAM:
HON'BLE MEMBER (JUDICIAL), RAMESH NAIR HON'BLE MEMBER (TECHNICAL),RAJU FINAL ORDER NO. A/12642-12644 / 2021 DATE OF HEARING: 29.11.2021 DATE OF DECISION: 16.03.2022 RAJU This appeal has been filed by M/s Royal Marwar Tobacco Products Pvt. Ltd. and Shri Dipak Bhogilal Kothari against order of Commissioner confirming:
(1) Confiscating goods under Rule 25 (i)(b) & (c) of Central Excise Rules, 2002 (2) Demand of duty amounting to Rs. 5.7 crores against all the noticees mainly Royal Marwar Tobacco Products Pvt. Ltd., Gandhinagar, Shri Kiransingh Pradhanji Thakor, Shafi Mohmmad Faiz Mohmmad Pathan, Himanshu Jasubhai Shukla and Dipak Bhogilal Kothari is equal proportion i.e. Rs. 1.14 crores each under section 11A(1) of Central Excise Act, 1944 and Rule 17 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008.
(3) Imposition of penalty at the rate of Rs. 1.14 crores each against persons mentioned in Sno. (2) above. (4) Demand of interest under section 11AB of the Central Excise Act, 1944.
(5) Imposition of penalty of Rs. 1.14 crores against each person mentioned in Sno. (2) above.
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Revenue has also filed an appeal against the said order. In the said appeal memo of the Revenue‟s appeal, it was found that the name of Shri Kiransingh Pradhanji Thakor, Shafi Mohmmad Faiz Mohmmad Pathan, Himanshu Jasubhai Shukla and Dipak Bhogilal Kothari were not appearing and the cause title was referred to as Royal Marwar Tobacco Products Pvt. Ltd. and others. Revenue filed Miscellaneous Applications no. 10088, 10179- 10183 of 2021 for incorporating the names of Kiransingh Pradhanji Thakor, Shafi Mohmmad Faiz Mohmmad Pathan, Himanshu Jasubhai Shukla and Dipak Bhogilal Kothari which was allowed by Miscellaneous Order no. M/10128-10133/2021 dated 08.06.2021.
2. The facts of the case are that Police authorities of Surendranagar detected a factory manufacturing "gutkha" at "ginning place", Kherva Gam, Patdi Taluka, the officers of Central Excise, Ahmedabad-II visited the said premises on 05.02.2009, and it was found that the said premises was being used for manufacture of 'Goa 1000 gutkha clandestinely without obtaining Central Excise Registration. During the course of verification under panchnama proceedings dated 05/06.02.2009, 15 Gutkha Pouch Packing Machines, packing materials for packing gutkha and finished goods totally valued at Rs 58,42,940/- were placed under seizure. A show cause notice was issued alleging that M/s Shree Raj Exports Pvt Ltd, Jodhpur who were engaged in manufacture of 'Goa-1000' Gutkha had closed down their manufacturing activity from 01.09.2008 and cleared 1500 kgs of lamination roll and 456000 pcs. of outer pouch, as such, to M/S Royal Marwar Tobacco Products Pvt Ltd, Gandhinagar, under Invoice No. 123 dated 03.11.2008, because that their franchisee agreement with brand owner of 'Goa 1000"
brand Gutkha has been cancelled. M/s Global Technology & Trade Marks Ltd, Mumbal was the brand owner of 'Goa 1000'. Shri Ashok Banvarlal Gehlot, 4 E/11867/2013-DB & ors.
driver of vehicle No.RJ-19-GS-1066, in his statement dated 21.12.2009 stated that the said goods were transported and unloaded at M/s Royal Marwar Tobacco Products Pvt Ltd., Gandhinagar. Shri Balraj Chamanlal Maurya and Shri Dilipbhai A. Jani, Auhtorised signatory & Director of M/s Shree Raj Exports Pvt Ltd & M/s Royal Marwar Tobacco Products Pvt Ltd, in their respective statements, stated that they had not received such material from M/s Shree Raj Exports Pvt Ltd, Jodhpur. However, it was allegedt that M/s Royal Marwar Tobacco Products Pvt Ltd, Gandhinagar, had intentionally not mentioned the receipt of the said goods, as cleared by M/s Shree Raj Exports Pvt Ltd, Jodhpur, in their records and diverted the said goods at "Ginning Place' Kherva Village, Tal. Patdi, District-Surendranagar, where 'Goa 1000' brand Gutkha was clandestinely manufactured. 2.1 It was alleged that M/s Royal Marwar Tobacco Products Pvt Ltd, Gandhinagar, Shri Kiransingh Pradhanji Thakor, Shri Shafi Mohmad Faiz Mohmad Pathan, Shri Himanshu Jasbhai Shukla and Shri Dipak Bhogilal Kothari, knew each other and were all accomplices in Illicit manufacture of excisable goods. It was further alleged that they consciously & with a clear knowledge and Intent had come together to carry out the clandestine manufacture of sub-standard Gutkha. Show Cause Notice was issued to (1) M/s Royal Marwar Tobacco Products Pvt Ltd, Gandhinagar (ii) Shri Kiransingh Pradhanji Thakor (iii) Shri Shafi Mohmad Faiz Mohmad Pathan (lv) Shri Himanshu Jasbhal Shukla and (v) Shri Dipak Bhogilal Kothari, proposing confiscation of "the seized goods values at Rs. 68,42,940/- under Rules 25 (1) (b) & (c) of Central Excise Rules, 2002; demanded Central Excise Duty amounting to Rs. 22,80,00,000/- under the proviso to Section 11A (1) of the Central Excise Act, 1944 read with Rule 7 and sub-rule (2) of Rule 17 of Pan Masala Packing Machines (Capacity Determination & Collection of Duty) 5 E/11867/2013-DB & ors.
Rules, 2008. The notice also proposed to impose penalty in terms of the provisions of Rule 17 of the Pan Masala Packing Machines (Capacity Determination & Collection of Duty) Rules, 2008 read with Section 11AC of the Central Excise Act 1944 and Rule 25 & 26 of Central Excise Rules, 2002. The notice also proposed to recover interest under Section 11AB of Central Excise Act 1944. The said SCN also proposed to impose penalty in terms of provisions of Rule 26 (1) of Central Excise Rules, 2002 and Rule 17 (1) of Pan Masala Packing Machines (Capacity Determination & Collection of Duty) Rules, 2008 on the above mentioned five noticees.
2.2 The Commissioner decided the said SCN vide O1O No. 02/Commr/AKG/AHD-II/2013 dated 21.01.2013. Commissioner observed that in view of Section 2 (f) of Central Excise Act 1944, not only the person(s) who actually indulged in manufacturing of excisable goods, but the person(s) who employed the labourers is/are the "manufacturer". He held that the contention of the noticees that they were not involved in the manufacturer of the seized Gutkha and that they were not the manufacturers' was not correct as they had engaged themselves in the clandestine manufacture of the seized Gutkha, which clearly comes out from the role played by each of them. The Commissioner examined the role played by Shri Kiransinh P. Thakor, Shri Shafi Mohamad Pathan, Shri Himanshu J. Shukla, Shri Dipak Bhogilal Kothari and M/s.Royal Marwar Tobacco Pvt. Ltd. at Para 29.1.1 to 29.5.8 of the O1O and observed that Shri Dilipbhai A. Jani, Director of M/s.Royal Marwar Tobacco Pvt.Ltd., S/Shri Dipak B. Kothari, Kiransinh P. Thakor, Shafi Mohamed Pathan, Himanshu J. Shukla had consciously come together and formed an „association of persons‟ and collaborated to engage themselves to manufacture Goa-1000 Gutkha at Kherva Village, Tal. Patdi, District- Surendranagar with a clear 6 E/11867/2013-DB & ors.
intent to evade payment of duties of excise. The Commissioner held that since the association of persons had indulged in clandestine manufacture of Goa-1000 Gutkha falling under subheading 2403 9990, having retail price of Rs.1.50, on 15 PPMS installed and being operated in the said premises, the duty liability came to Rs.2,85,00,000/- per month (15 PPMS x Rs. 19 lakh per PPM) in terms of Notification No.42/2008-CE dated 1.7.2008. The Commissioner observed that as per sub-rule (2) of Rule 17 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, the deeming provision of charging duty from 1.7.2008 was applicable only unless evidence to the contrary was provided to the satisfaction of the Central Excise officer. After discussing the evidences on record, Commissioner observed that the said factory had started only from 31.01.2009 till the date of raid by police on 4.2.2009, therefore, there was enough evidence to suggest that production could not have started prior to January, 2009 and not later than 04.02.2009. Therefore, duty can be demanded only for these two months of January February, 2009. Accordingly, the duty payable comes to Rs.5,70,00,000 in terms of Notification No.42/2008-CE dated 1.7.2008. Accordingly, Commissioner has passed order to the effect that:
(i) confirming confiscation of seized goods totally valued at Rs.68,42,940/- under Rule 25(1)(b) & (c) of Central Excise Rules, 2002 read with Rule 17(1) of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008;
(ii) confirmed the amount of Central Excise duty of Rs.5,70,00,000/-
against all the five noticees, in equal proportion I.e. Rs.1,14,00,000/- against each of the noticees, under the proviso to Section 11A(1) [now Section 11A(4)] of CEA, 1944 read with Rule 7 E/11867/2013-DB & ors.
7(2) and Rule 17 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008.
(iii) Imposed a penalty of Rs.5,70,00,000/-, in terms of the provisions of Rule 17(1) of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, read with Section 11AC of CEA, 1944, and Rule 25 of CER, 2002, payable by all the five noticees in equal proportion i.e. Rs. 1,14,00,000/- each.
(iv) Ordered to pay interest under Section 11AB [now Section 11AA] of CEA, 1944.
(v) Imposed penalty of Rs.1,14,00,000/- each on all the five noticees, in terms of the provisions of Rule 26(1) of CER, 2002 and Rule 17(1) of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008.
Seized goods valued at Rs.68,42,940/-, which included packing materials (Packing Rolls, Outer Packing Materials with chain, used Pouch Packing Rolls) and machineries (15 Pouch Packing Machines and Generators etc.) apart from finished goods (217 HDPE bags containing 18000 Retail pouch of 'Goa 1000 brand Gutkha), were confiscated under Rule 25(1)(b) & (c) of CER, 2002 read with Rule 17(1) of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules,2008. 2.3 Against this order, both Revenue as well as assessees are in appeal. On the side of assessee appeal has been filed by M/s Royal Marwar Tobacco Products Pvt. Ltd. and Shri Dipak Bhogilal Kothari. No other appeal has been filed by other noticees. From the side of Revenue, appeal has been filed against all five noticees.
2.4 Shri P. P. Jadeja, Learned Counsel for the appellant M/s Royal Marwar Tobacco Products Pvt. Ltd. argued that the Commissioner as committed a 8 E/11867/2013-DB & ors.
grave error in confirming duty against individual persons. He argued that the appellants M/s Royal Marwar Tobacco Products Pvt. Ltd. and Shri D.B. Kothari were not involved in seized Guthka and they were not the manufacturers. He argued that only the persons who were found to be connected with such manufacture could be held liable to duty. He argued that no findings or arguments were given to establish appellant‟s role in manufacture of goods. Learned Counsel argued that the unit namely M/s Royal Marwar Tobacco Products Pvt. Ltd. is located in Gandhinagar whereas the packaging machines were found at "Ginning Place" Kherwa, Taluka of Patdi, Distt Surendranagar which is a different premises located at 100 kms. away from the appellant M/s Royal Marwar Tobacco Products Pvt. Ltd. and Dinesh Bhogilal Kothari‟s unit. Learned Counsel pointed out that appellant M/s Royal Marwar Tobacco Products Pvt. Ltd. was manufacturing "Goa 1000"
brand gutkha under the agreement with the brand owners. He pointed out that such goods were being manufactured by many units under different agreements with brand owners. He argued that in such circumstances the duty liability of production of such "Goa 1000" brand Gutkha at the premises at "Ginning Place" Kherwa, Taluka of Patdi, Distt Surendranagar cannot be affixed on the appellant namely M/s Royal Marwar Tobacco Products Pvt. Ltd.
2.5 Learned Counsel argued that the Commissioner has failed to appreciate that the material supplied by M/s Shree Raj Exports Private Ltd., Jodhpur had cleared 1500 kgs of lamination rolls and 4,56,000 pieces of outer pouches "as such" to M/s Royal Marwar Tobacco Products Pvt. Ltd., Gandhinagar under invoice no. 123 dated 03.11.2008 which was also shown in their ER-1 return for the month November, 2008 filed by M/s Shree Raj Exports Pvt. Ltd. He pointed out that the said unit M/s Shree Raj Exports Pvt. Ltd. had closed down their manufacturing activity with effect from
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01.09.2008 as reported by the Assistant Commissioner, Central Excise, Division, Jodhpur vide letter dated 11.02.2009. The said unit M/s Shree Raj Exports Pvt. Ltd. vide letter 05.11.2008 had intimated that since their franchisee agreement with brand owners of "Goa 1000" brand Guthka has been cancelled and their factory lying closed for 3 months, they were returning lamination roll to M/s Royal Marwar Tobacco Products Pvt. Ltd. He pointed out that from the Bilty no. 1802 dated 03.11.2008, it is seen that 35 drums Kimam, 40 CIR lamination and 40 bags PP bags, total weighing 6,935kgs were cleared to M/s Royal Marwar Tobacco Products Pvt. Ltd. Learned Counsel pointed out that impugned order relies upon the statement of Shri Ashok Bhanwarlal Gehlot, driver of truck no. RJ19 GA 1066, who in his statement dated 21.12.2009 has stated that he unloaded the goods as mentioned in the Bilty no. 1802 dated 03.11.2008 at M/s Royal Marwar Tobacco Products Pvt. Ltd. and for which he was paid Rs. 4,800/- from the office of M/s Royal Marwar Tobacco Products Pvt. Ltd., Gandhinagar. Learned Counsel pointed out that Learned Commissioner has also relied on the statement of Shri Ashok Vaishnav, authorised signatory of M/s Shree Raj Exports Pvt. Ltd. Jodhpur who in his statement has stated that they have been advised by the trademark holder to send the consignment to M/s Royal Marwar Tobacco Products Pvt. Ltd., Gandhinagar. He pointed that Shri Dilipbhai Amrutlal Jani, Director of M/s Royal Marwar Tobacco Products Pvt. Ltd., Gandhinagar and Shri Balraj Chamanlal Mauraya, Authorised signatory of M/s Shree Minakshi Foods Products and M/s Royal Marwar Tobacco Products Pvt. Ltd. have stated that there is no entry in their books of accounts showing receipt of said consignment. Learned Counsel pointed out that the Commissioner has not correctly appreciated that the said evidence of receipt of goods in the factory of M/s Royal Marwar Tobacco Products Pvt. Ltd. only leads to prove that he said 10 E/11867/2013-DB & ors.
goods may have been received in the factory at Gandhinagar unit only. He argued that even assuming that if the said goods were used clandestinely in unit at Gandhinagar, they could have been treated as used on machines on which the said unit at Gandhinagar has paid appropriate duty in advance. He argued that Commissioner in the impugned order had without evidence held that the goods cleared from the Shree Raj Exports, Jodhpur were diverted to the said unit at Kherwa. He said that the said finding is only a presumption and therefore no liability can be fastened.
2.6 Learned Counsel further argued that the impugned order relied heavily on the fact that Shri Dipak B Kothari, Shri Dilipbhai Amrutlal Jani, Director of M/s Royal Marwar Tobacco Products Pvt. Ltd. was in frequent touch with a mobile no. 9375793632 (held by Shri Kiran Singh Thakor). Learned Counsel pointed out that Shri Shafi Mohd. In his statement dated 19.03.2009 that the said Mobile no. was one amongst mobile numbers used by persons involved in clandestine manufacture of Gutkha at village Kherwa. Learned Counsel argued that Shri Dilipbhai Amrutlal Jani had shown ignorance about the said number. He argued that even if there was frequent interaction between the cell no. 9825010386 of Shri Dilip Jani and the number 9375793632 used by the person allegedly involved in clandestine manufacture of Gutkha, it does not become any evidence to prove the involvement of Shri Dilip Jani or M/s Royal Marwar Tobacco Products Pvt. Ltd. in the clandestine manufacture of Gutkha at Kherwa. Learned Counsel further pointed out that Shri Dilip Jani, Director of M/s Royal Marwar Tobacco Products Pvt. Ltd. had clearly stated that there was no inward entry in respect of the goods sent by Shree Raj Exports, Jodhpur in records of M/s Royal Marwar Tobacco Products Pvt. Ltd. He further argued that the 11 E/11867/2013-DB & ors.
impugned order without evidence holds that the said consignment cleared from Shree Raj Exports, Jodhpur was diverted to the said unit at Kherwa. 2.7 Learned Counsel further pointed out that there was news about duplicate factory of "Goa 1000" brand Gutkha in the newspapers in the month of February, 2009. After perusing such news, the brand owners of "Goa 1000" brand Gutkha had intimated to State Police and Central Excise department to take appropriate action in this regard. 2.8 Learned Counsel further argued that Rule 10 of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 is having a provision for Abatement of duty for non production of goods for over 15 days or more in a month. He argued that in the instant case, there is an evidence that in the month of January 2009 and Feb 2009, there was non production of goods for about 15 days. He argued that the impugned order does not grant the benefit of such rules. Learned Counsel argued that the operating machines commenced production only on 31.01.2009 and remained under seal from 04.02.2009. Appellant submit that the said unit had not produced notified goods except from 31.01.2009 to 04.02.2009 for the concerned months. He argued that the substantial benefit cannot be denied on account of failure of fulfillment of procedural requirements. Learned Counsel further pointed out that in terms of Rule 10 of the said Rules, there is no provision requiring a unit to pay duty first and then only claim the abatement. For this learned counsel relied on the CBEC circular no. 485/51/1999 dated 15/09/1999. Learned Counsel argued that in the instant case abatement is available to the unit as their factory had not produced any notified goods for 2 months for continuous period of more than 15 days. Learned Counsel further pointed out that para 12 E/11867/2013-DB & ors.
36.1 of the Order in Original clearly shows that the duty liability of unit shall be determined on the basis of number of packing machines found available in the units and the retail sale price of the pouches manufactured with the aid of such packing machines and unless evidence to the contrary is provided to the satisfaction of the Central Excise Officer, such machines shall be deemed to have been in operation since the 01 st July, 2008. Relying on this condition of the rules, duty was demanded in the show cause notice from 1st July, 2008 to February, 2009. Learned counsel pointed out that after considering various evidences, the Commissioner has held that there is enough evidences to suggest that production could not have started prior to January, 2009 and not later than 04 February, 2009. Therefore, the duty demand of Rs. 5.7 crores for the period of two months January-February, 2009 was confirmed. Learned Counsel pointed out that the Commissioner has ignored the evidence that the production has commences only on 31 st January, 2009 and may have continued till 04.02.2009 when police sealed the premises. In these circumstances total duty of Rs. 18,83,333/- applicable to 15 PPMsat the rate of 19 lakh per PPM for 05 days. He argued that in these circumstances, demand of Rs. 15,83,333/- could have been confirmed against all the noticees and out of the said demand Rs. 3,16,667 could have been demanded from the M/s Royal Marwar Tobacco Products Pvt. Ltd.
2.9 Learned Counsel further pointed out that in para 37 of the Show cause notice has fixed a fair price of seized goods i.e. "Goa 1000" brand Gutkha at as Rs. 0.64 paise per retail pouch. He argued that in these circumstances, the duty demand amount comes down to Rs. 10,41,667/- against all noticees and Rs. 2,08,333/- on M/s Royal Marwar Tobacco Products Pvt. Ltd.
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He further argued that the penalty imposed and demand of interest is unjust.
2.9 Shri Saurabh Rachch, learned counsel for the assessee Shri Dipak Bhogilal Kothari argued that the principle of natural justice has been violated in so far as the Revenue has relied on the statement of Shri Kiransingh Pradhanji Thakor for making a case against Shri Dipak Bhogilal Kothari. The said person was not made available for cross examination. Learned Counsel further argued that the statement of Shri Kiransingh P. Thakor could not have been relied upon for making a case against Shri Dipak B. Kothari in as much as Shri Kiransingh P. Thakor was a co-noticee. He argued that it is a well settled legal position that a statement of co-noticee in absence of any corroborative evidence cannot be relied upon for making out a case. He relied on the following case laws:
(i) Ismail Mohd. & Sons vs. Commr. of Customs (gen), Mumbai, reported in 2012 (282) E.L.T. 99
(ii) Sunshine Overseas vs. Commissioner of Customs & Central Excise, Rajkot reported in 2011 (268) ELT 374
(iii) Vikram Singh Dahiya vs. Commr. of Customs (Export), New Delhi, reported in 2008 (223) ELT 619 2.9 Learned Counsel further argued that impugned order is erroneous as the appellant was not the manufacturer of goods in question. He argued that the appellant in the impugned case has not appointed any labourers as is apparent from the facts of the case. In these circumstances it cannot be alleged that the appellant is manufacturer under provision of sub section 2F of the Central Excise Act, 1944. Learned Counsel pointed out that the allegation against the appellant based on certain statements. He argued that 14 E/11867/2013-DB & ors.
the statement dated 06.02.2009 of the co-owners of the property given on rent make it clear that the appellant was not involved in the said transaction of the land owned by them given on rent. Learned Counsel further pointed out that statement dated 19.02.2009 of Shri Jayantibhai Parekhdas Patel, proprietor of Parekh Engineers, makes it clear that he was engaged in the activity of purchase/sale, repair, supply of DG sets on rent and he had given DG set to Shri Kiransingh Thakor. He pointed out that this fact does not make him a manufacturer. He further pointed out that statement dated 12.03.2009 of the appellant himself stated that Shri Kiransingh Thakor had approached appellant Shri Dipak Kothari for help in regard to purchase of generator and appellant had recommended him to Shri Jayantibhai Parekhdas Patel of Mehsana. In another statement relied upon of Shri Shafi Mohammd Faiz Mohammd Pathan dated 19.03.2009 mentions that Shri Kiransingh Thakor had told him that they needed generators for their work and they had suggested him to contact Shri Dipak B Kothari, the appellant. He argued that in these circumstances no evidence has been produced against the appellant Shri Dipak B. Kothari to establish that he was in any way involved in the manufacture of goods. In these circumstances, the demand of duty as well as penalty cannot be imposed on the appellant.
3. Learned Authorised Representatives relied on the grounds of review filed along with appeal of Revenue. He pointed out that Commissioner has simply relied on various statements. As discussed in para 36.1 of the Order in Original and arrived at subjective satisfaction that the production has started from 31.01.2009 and continued till the raid of police on 04.02.2009. Therefore, duty could have been demanded from January 2009 to Feb, 2009. He argued that no evidence was shown to the Commissioner that said machines were not operational i.e. they were either (i) lying sealed in some 15 E/11867/2013-DB & ors.
other factory/godown prior to January, 2009 or (ii) were operational elsewhere and duty was paid on those machines, or (iii) the machines were manufactured in January, 2009 itself, a presumptive tax liability as per sub rule 2 of rule 17 ibid is required to be fixed for the 15 machines found in the unit, deeming them to have been operational since July, 2008. He argued that the statements of the persons cannot be treated as conclusive evidence. He further argued that no independent corroborative evidence has been produced by the noticee to prove that the operation of factory had commenced on after January, 2009 and not before that. He further argued that in terms of the rules where a manufacturer does not operate the machine at all but for some reason fails to get it sealed under physical supervision of the superintendent, he would still be liable to pay duty on that machine for the said period irrespective of the fact that there was no production from the said machine during the said period. He further argued that the noticee had failed to produce any satisfactory evidence to show the actual date of receipt of machines. The appellant had in reply to the show cause notice and during personal hearing failed to produce evidence as regards :
(a) the date of purchase/leasing/renting of the machines.
(b)from whom the machines were purchased/leased/rented
(c) where were the said machine working/ stored earlier.
Learned Authorised Representative argued that as per provision of sub rule 2 of Rule 17, it was for the noticee to show evidence for the satisfaction of the officers that such machines were not used for packing/manufacture of Pan Masala/Gutkha prior to 31 January, 2009. He pointed out that no such evidence was produced.
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4. We have considered rival submissions. The facts of the case are that police authorities of Surendranagar district detected a factory manufacturing Gutka in Kherwa Gam, Patdi Taluka. The information was passed on to Central Excise Bhavnagar Commissionerate who visited the premises on 05.02.2009. It was found that the said premises was being used for exclusive manufacture of "Goa 1000" brand Gutka, exclusively falling under chapter 24 of Central Excise Tariff Act, 1985. The said premises was not registered. It was found that there were 15 pouch packing machines for packing Gutka and there was finished good of totally value at 68,42,940 lying there. The said material was seized and handed over to Shri Nareshbhai Chaturbhai Patel, co-owner of premises under superintendence. The statement of Shri Nareshbhai Chaturbhai Patel was recorded on 06.02.2009 and he informed that the said premises belong jointly to him as well as his brother Shri Kantilal Chaturbhai Patel. He pointed out that his brother has signed he rent agreement with Shri Kiransingh Thakor on 31.01.2009 for a monthly rent of Rs. 5,000. He also pointed out that Shri Kiransingh Thakor was recommended by Shri Himanshu Jasubhai Shukla. He also stated that Shri Kiransingh Thakor had contacted him around 25 days prior to start of factory and the rent agreement was executed on 31.01.2009. He also stated that work of building walls had started before 31.09.2009 & factory was ready and started production on 31.09.2009. The statements of workers found in the said premises was also recorded who stated that they were working in the said premises for the past 4 to 5 days and most of them had earlier worked for manufacturer of Gutka of „Goa 1000‟ at Narela, Delhi and Gandhinagar.
4.1 The statement of Shri Nareshbhai Chaturbhai Patel, the owner of the said premises was recorded wherein he submitted that on 31.01.2009 his 17 E/11867/2013-DB & ors.
brother Shri Kantilal C Patel had given the premises to Shri Kiransingh Thakor on rent at Rs. 5,000 per month. He stated that the work of „building wall‟ started before 31/01/2009 and on 31/01/2009 the factory was ready and Shri Kiransingh had put up the machines and the production of gutka had started. He further stated that he did not know Shri Kiransingh. He further stated that gutka packing machines was run by generators which Shri Kiransingh Thakor had brought.
4.2 Shri Kantibhai Patel in his statement dated 06.02.2009 stated that Shri Kiransingh Thakor was introduced through Shri Himanshu Jasubhai Shukla and he was known to Shri Himanshu Jasubhai Shukla. He stated that because he knew Shri Himanshu Jasubhai Shukla, he gave the premises to Shri Kiransingh Thakor.
4.3 Statement of Shri Jayantilal Parekhdas Patel was recorded on 19.02.2009. Shri JP Patel was proprietor of Parekh Engineers and was involved in repair, purchase/ sale as well as supply of DG sets on rent. Shri Parikh proposed that he supplied one DG set (63KV) having Engine Serial No. PNEM006262Y (Type No. ALGPW04CTI E4, No. CMO 838) on rent basis to Shri Kiransingh Thakor vide delivery challan dated 16/01/2009. The said DG set was sent vide Eicher Mini Truck from the premises of Shri Patel. He further stated that he do not know Shri Kiransingh Thakor and he provided the DG set on the recommendation of Shri Deepak B Kothari whom he had known for last 20 years. He further stated that while no written agreement was made, the said DG set was sent at the rent of Rs. 6,000/- per month. He further stated that he had supplied another DG set (30 KV) on 04.02.2009 on rent basis. A perusal of the delivery challan dated 16.01.2009 it is noted that it is addressed to Shri Thakor Kiransingh Pradhanji and it 18 E/11867/2013-DB & ors.
appears delivery challan no. 27 dated 16.01.2009. The destination has been marked as Village- Thalota, Teh Visnagar, District- Mehsana. Shri Kantibhai Patel in his statement dated 06.03.2009 has stated that after speaking with Shri Himanshu Shukla, there was call from Shri Jasubhai Shukla after 10 days from his mobile phone and a rent of Rs. 5,000 was fixed for the factory premises. After that the working in the factory started which was looked after by Shri Himanshu Shukla and Jasubhai Shukla.
4.4 Shri Nareshbhai Chaturbhai Patel in his statement dated 06.03.2009 stated that on his land, the construction for the godown for making Gutka started 15 days before the agreement was made with Shri Kiransingh Thakor. He also stated that most of the work was done by Shri Himanshu Shukla son of Shri Jasubhai Shukla. He also stated that between 29/09/2009-31/01/2009 in the night the Gutka making raw material and machines arrived in Eicher Trucks. He also stated that the generator had come a day or two before the starting of manufacturing of Gutka and unloaded via tractor trolley. He also stated that while the gutka was made, a lot of vehicles used to come but he does not remember the vehicles. He also stated that in an expensive car, a person used to come who they said is their boss and his name is Rajeshbhai.
4.5 Shri Deepak Kothari in his statement dated 12.03.2009 stated that he knew Shri Kiransingh Thakor for 4 years as he was working under his brother Manoj Kothari. He stated that Shri Kiransingh Thakor and Shafi Mohd. Pathan was involved in busiess of liquor and in that reference he used to speak to them. He also stated at the end of January, 2009 Shri Kiransingh Thakor told him that he wanted to buy generator and requested him for source from where he can purchase. Shri Dipak Kothari referred him to Shri 19 E/11867/2013-DB & ors.
Jayantibhai Parekhdas Patel who was proprietor of Parekh Engineers, Mehsana.
4.6 Shri Shafi Mohd. Faiz Mohd. Pathan in his statement dated 19.03.2009 stated that in the end of January, 2009, Shri Kiransingh Thakor offered him a job of Rs. 25,000. He stated that he is a friend of Shri Kiransingh Thakor and they were doing business of liquor together. He further stated that Shri Kiransingh Thakor took him to Kherwa Gam, Patdi Taluka, Surendranagar District. In the village, Shri Kiransingh Thakor used his election ID card to purchase 8 or 9 Reliance mobile phone numbers. When he reached the village, he found about 40-50 labours present there. He also met Himanshu Shukla there. He also found that there was an Eicher Truck or Tata Truck with Rajasthan registration from which labours were removing machines. At that time Shri Kiransingh Thakor told him he has to work for manufacture of Gutka. In the late night they reached Visnagar and there Shri Kiransingh Thakor told him they need to organize generators which they have to take to Kherwa Gam, Taluka Patdi. He suggested the name of Shri Deepak Kothari and he would know somebody who would do the job. He stated that Shri Kiransingh Thakor called Deepak Kothari and then told him that they have to go to Mehsana to get the generator. He accompanied the Shri Kiransingh Thakor to a factory in Mehsana and then they took an Eicher truck on rent and loaded a generator from a godown on Modhera highway and started for Kherwa village. The truck malfunctioned at Kulfi Chowkdi where Shri Kiransingh Thakor called Himanshu Shukla on phone and Himanshu Shukla brought the mechanic. There, after repair they asked the driver to wait and he drove the truck to Kherwa village where the generator was unloaded through a trolley. Next day they stayed in the Kherwa village. Shri Kiransingh Thakor had told them some material was coming and they will go 20 E/11867/2013-DB & ors.
in only after that receiving that material. That night at around 1 o‟clock, raw material and packing roll came in a truck. In the next afternoon around 3 o‟clock he and Shri Kiransingh Thakor went to Ahmedabad and around 6 o‟clock in the even when they reached Sarkhej highway, Himanshu Shukla called them and told that Police has raided their factory. Thereafter they left for Visnagar.
4.7 Statement of Shri Himanshu Jasubhai Shukla was recorded on 23.03.2009 wherein he submitted that in the 2nd or 3rd week of December he met Shri Kiransingh Thakor and Shri Shafi Mohd. Faiz Mohd. Pathan. Shri Kiransingh Thakor told him that he is looking for some place for business in the district Surendranagar. He suggested to him the place of his father‟s friend Shri Kanthibhai Chaturbhai Patel in village Kherwa, Taluka Patdi, District Surendranagar in the month of December. He took them to Shri Kantibhai Patel where they spoke and a deposit of Rs. 25,000 was given and a rent of Rs. 5,000 was fixed. Shri Kiransingh Thakor also agreed to give him Rs. 2.5 lakhs for preparation of shed. The work of construction lasted for one and a half month. He further stated that in the end of January, three machines came first and after 5-6 days 40-50 people came with 12 or 13 machines. He stated that the work of manufacture of Gutka lasted for 3 days and 2 nights only. He further pointed out that before machines came Shri Shafi Mohd. Pathan and Shri Kiransingh Thakor got a generator in an Eicher vehicle.
4.8 Statements of the main players namely Shri Kiransingh Pradhanji Thakor, Shri Shafi Mohd. Faiz Mohd. Pathan, Shri Himanshu Jasubhai Shukla, Shri Dipak Bhogilal Kothari and following were recorded:
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Statements dated 6.2.2009 of workers who worked at "Ginning Place", Village Kherva, Tal Patdi, Dist Surendranagar.
Statement dtd.6.2.09 of Shri Kantilal Chaturdas Patel, co-owner of the premises of Ginning Place', Village Kherva, Taluka Patdi, District Surendranagar.
Statement dtd.19.2.09 of Shri Jayntibhai Parekhdas Patel, Cop oprietor of GIDC M/s. Parekh Engineers, C-1/146 & 147. SIDC, Mahesana Statement dtd.6.3.09 of Shri Kantilal Chaturdas Patel, the Cop co- owner of the premises of Ginning Place'. Village Kherva, Taluka Patdi, District Surendranagar.
Statements dtd.6.3.09 of Shri Nareshbhai Chaturdas Patel, the co- owner of the premises of 'Ginning Place', Village Kherva, Taluka Patdi, District Surendranagar.
Statement dtd 12.3.09 of Shri Pratapsingh Badaji Thakor, C Babalpura, Tal Dehga, Dist. Gandhinagar, Driver of Eicher truck No.GJ 18 T 8537 Statement dtd.11.5.09 of Shri Balraj C Maurya, athorised signatory of M/s. Shree Minakshi Food Production Pvt. Ltd. and Shri Royal Marwar Tobacco Products Pvt. Ltd., Gandhinagar Statement dtd.9.7.2009 of Shri Dilipbhai A Jani, Director of M/s. Royal Marwar Tobacco Products Pvt. Ltd., Gandhinagar Statement dtd.25.11.09 of Shri Ramkishor Ramdin Jat, Clerk of M/s. Shree Deshnok Roadlines, basin, Jodhpur Statement dtd.25.11.09 of Shri Jintendra S Mandot, Manager in M/s. Global Technology & Trademarks Ltd. (BVI), Mumbai Statement dtd.6.1.09/7.1.09 of Shri Jintendra S Mandot, Manager in M/s. Global Technology & Trademarks Ltd. (BVI), Mumbai recorded by the Superintendent of Central Excise (AE), Jodhpur Statement dtd.14.12.09 of Shri Ashok Vaishnav, authorized signatory of M/s. Shree Raj Exports Pvt. Ltd., Jodhpur.
Statement dtd.21.12.09 of Shri Ashok Bhanverlal Gehlot, Driver of vehicle having registration No. RJ 19 GA 1066 On the strength of the statements of above show cause notice was issued seeking to demand Central Excise duty on the 15 machines found in the 22 E/11867/2013-DB & ors.
premises. The show cause notice invoked the provisions of Pan Masala Packing Machines (Capacity and Determination and Collection of Duty) Rules, 2008 to demand duty of Rs. 22,80,00,000/- for the period 01st July, 2008 to 08th February, 2009. The Show Cause Notice invoked sub rule 2 of Rule 17 of Pan Masala Packing Machines (Capacity and Determination and Collection of Duty) Rules, 2008 which states that if it is found that goods have been manufactured in or cleared from a unit which is not registered with the jurisdictional Central Excise Office, then the duty liability of such unit shall be determined on the basis of number of packing machines found available in the premises of the unit and the retail sale price of the pouches manufactured with the aid of such packing machines and unless evidence to the contrary is provided to the satisfaction of the Central Excise officer, such machines shall be deemed to have been in operation since the 1st July, 2008 and shall be construed as operating packing machine for the purpose of Rule 7 and dealt with accordingly. The Commissioner further confirmed the duty of Rs. 5,70,00,000 (Rs. Five Crore Seventy Lakh) on the ground that as per the evidence presented before him the machines operated only from 29/01/2009-04.02.2009 and, therefore, he confirmed the demand only for the months of January and February relying on the statements given by various persons listed above. It is seen that the attempts of cross examinations the person whose statements were relied could not succeed. However, it is not stated in the order as to what efforts were made to bring the person whose statements have been relied for cross examinations. Section 9 D of Central Excise Act reads as follows:
"Section 9D. Relevancy of statements under certain circumstances. -- (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of
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proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, -
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
(2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court." It is apparent that a statement can be relevant without cross examination only if the person who has given evidence is dead or who cannot be found, or who is incapable of giving evidence, or who is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense. If the above circumstances do not exist then if a statement is to be relied, cross examination of witnesses is a must. The impugned order records following in respect of the demand of cross examination:
"33.1 As regards the contention to cross examine the investigating officer and other co-noticees, it is stated that due or non-traceability or non-honouring the summons for hearing/cross-examination by the co-noticees, the same could not take place. The Counsel of Shri Dipakbhai Kothari was also requested to make efforts to locate and bring the co-noticee for cross examination. However, all efforts to serve summons/ notices failed."
The exact nature of effort made to cross-examine and how the statements become relevant under section 9D of Central Excise Act has not been stated. The appellant Shri Dipak Bhogilal Kothari has in his appeal specifically raised a plea of failure of Adjudicating Authority to grant cross examination. It is seen that the relief granted by the Commissioner is solely based on the statement of persons recorded during investigation. It is a fact that the 24 E/11867/2013-DB & ors.
machines were found present in the premises and as per Rule 6 read with sub rule 2 of Rule 17 of Pan Masala Packing Machines (Capacity and Determination and Collection of Duty) Rules, 2008, in such case involving clandestine manufacture the duty needs to be demanded from 1st July, 2008 to the date of which the factory was sealed by the Central Excise officers. In the instant case, the relief has been granted by the Commissioner relying on the statements which are not proven relevant evidence in the current circumstances. For statement to be relevant the conditions prescribed in rule 9 D of Central Excise Act need to be followed. The Revenue too in its appeal has argued that Commissioner had not examined the evidence in the proper perspective and should have confirmed duty for the entire period in terms of sub rule 2 of Rule 17 of Pan Masala Packing Machines (Capacity and Determination and Collection of Duty) Rules, 2008. We are in agreement of the observation of the Revenue for the reason that the relief granted by the Commissioner is based on the statements of various noticees and others, but Commissioner has not indicated as to how requirements of Rule 9D have been fulfilled for the purpose of statements to be relevant. We find that the impugned order records the inconsistencies in the statements in para 35.1 of the impugned order as follows:
35.1 It may be stated that all the noticees have tried their best to mislead the Department by creating inconsistencies. Some of the instances are when Shri Kiransinh Thakor says that Shafi Mohd Pathan had come to him with the proposal and Shafi Mohd introduced him to S/Shri Jasubhai Shukla, Himansu Shukla, and land owners S/Shri Kantilal C Patel/Naresh Patel. Further, it was Shri Kiransinh Thakor, who went alongwith Shafi Mohd Pathan to procure DG set from M/s Parekh Engineers. However, Shri Kantibhai Patel, land co-owner says that it was Shri Kiransinh Thakor, who contacted him on 25.01.09 for renting out the premises. Shri Shafi Mohd Pathan says that it was Shri Kiransinh Thakor, who informed him that Gutkha was going to be manufactured at the site and Shri Kiransinh Thakor paid Shri Himanshu Shukla Rs.2 lakh towards construction. However, Shri Kiransinh Thakor says that Shri Himanshu Shukla gave him Rs.25,000 25 E/11867/2013-DB & ors.
er lease agreement. Shri Nareshbhai Patel says that Shri Kiransinh Thakar used to give money to Shri Himanshu Shukla.
It is seen that there are many more inconsistencies as the timeline given by each person gives different outcomes. Shri Himanshu Jasubhai Shukla in his statement states that construction of factory lasted for one and half month but it is not consistent with the date when Shri Kantibhai Patel met Shri Kiransingh for the first time. The generator was delivered on document dated 16.01.2009 by Eicher Truck (As per Shri Parekh‟s statement) but the same was received in the end of the month.
5. In these circumstances, we have no option but to set aside the impugned order and remand the matter back to the Commissioner for fresh adjudication keeping all the issues open. Commissioner will specifically state how requirements of section 9D have been fulfilled if he wishes to rely on any statement. The appeals of Revenue, Royal Marwar Tobacco Products Pvt. Ltd. and Dipak Kothari are allowed by way of remand keeping all the issues open.
(Pronounced in the open court on 16.03.2022) (RAMESH NAIR) MEMBER (JUDICIAL) (RAJU) MEMBER (TECHNICAL) Diksha