Custom, Excise & Service Tax Tribunal
Krishan Gopal Lawania vs Kanpur on 17 July, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
REGIONAL BENCH : ALLAHABAD
COURT No. I
APPEAL Nos. E/55963-55964/2013-EX[DB]
(Arising out of Order-in-Original No.08-CX/COMMR./KNP/2012 dated
30/11/2012 passed by Commissioner of Central Excise, Kanpur)
Shri Krishan Gopal Lawania Proprietor of
M/s Taj Products
(In Appeal No. E/55963/2013)
&
Shri Sunil Kumar Agarwal Director of
M/s Astha Fragrance Pvt. Ltd.
(In Appeal No. E/55964/2013) Appellants
Vs.
Commissioner of Central Excise, Kanpur Respondents
Appearance:
Shri Aalok Arora (Advocate) & Ms. Rinki Arora (Advocate) for Appellant Shri Rajeev Ranjan (Addl. Commr.) AR for Respondent CORAM:
Hon'ble Mrs. Archana Wadhwa, Member (Judicial) Hon'ble Mr. Anil G. Shakkarwar, Member (Technical) Date of Hearing : 28/06/2018 Date of Decision & Pronouncement : 17/07/2018 FINAL ORDER NOs. - 71536-71537/2018 Per: Archana Wadhwa Both the appeals are being disposed of by a common order as they arise out of the same impugned order of the Commissioner vide which a demand of Rs.2,40,50,000/- (Two crores forty lakhs fifty thousands) 2 APPEAL Nos. E/55963-55964/2013-EX[DB] stands confirmed against Shri Krishan Gopal Lawania, proprietor of M/s Taj Products alongwith imposition of penalty of identical amount under Section 11AC of Central Excise Act, 1944. Further penalty of identical amount stands imposed upon the other applicant Shri Sunil Kumar Agarwal, who as the owner of the brand name 'Chandrakanta'.
2. As per facts on records, the premises of Shri Krishan Gopal Lawania at Village Rehan Kala, Etmadpur, Agra were visited by the Central Excise officers on 10/04/2011 and it was found that they were engaged in the manufacture of Pan Masala. Two packing machines were found in their premises which were being used for the packing of Pan Masala under the brand name of 'Chandrakanta'. As the appellant was neither registered with the Central Excise Department nor was paying any duty on the clearance of Pan Masala, the officers entertained a view that Pan Masala was being manufactured illegally and was being cleared in a clandestine manner, without payment of duty. Accordingly further investigations were conducted.
3. Statement of Shri Bhagwan, who was present on the spot and introduced himself as Supervisor of the said 3 APPEAL Nos. E/55963-55964/2013-EX[DB] unit was recorded on 10/04/2011 itself in which he inter alia stated as under:-
In the premises the unit was engaged in the illicit manufacture and clearance of 'Chandrakanta' Brand Pan Masala.
'Chandrakanta' Brand Pan Masala of MRP Rs.1/- was being manufactured at this premises, since last four months with the help of two FFS Pan Masala/Gutkha Pouch Packing Machines, working round the clock. The said Pan Masala was being manufactured on the directions of Shri Ajay Agarwal and Shri Sunil Agarwal, who bring all the raw material related to Pan Masala and take away the packed pouches of manufactured Pan Masala. The names of M/s Taj Products, Agra and M/s Astha Fragrance Pvt. Ltd., Agra are printed on these pouches.
The loose Pan Masala was coming from M/s Taj Products, 15 Yamunotri Vihar Kamla Nagar, Agra.4 APPEAL Nos. E/55963-55964/2013-EX[DB]
4. Statement dated 10/04/2011 of Shri Vipati Singh landlord of the searched premises was also recorded wherein he, inter alia stated that he is the owner of the premises, which have been rented out to Shri Ajay Agarwal since last 3-4 months at the rent of Rs.1,000/- (One thousand) per month.
5. In view of the above, officers seized the machine totally valued of Rs.1.55 lakhs (One lakh fifty five thousands) approximately along with seizure of the Pan Masala found present in the said premises. Proceedings were recorded in the Panchnama on 10/04/2011. The seizure proceedings are not part of the present matter inasmuch as the same stand adjudicated separately by way of issuing separate show cause notice dated 15/09/2011.
6. It is seen that during the course of further investigations, Shri Krishan Gopal Lawania, Proprietor of M/s Taj Products appeared before the Superintendent of Central Excise and tendered a statement wherein he deposed that he was a registered manufacturer of Pan Masala under the brand name 'Chandrakanta', which brand name belongs to M/s Astha Fragrance Pvt. Ltd. and has been assigned to him under agreement. The 5 APPEAL Nos. E/55963-55964/2013-EX[DB] searched premises were taken on rent about three months ago only and the two machines were installed there for the manufacture of the said Pan Masala. In his further statement recorded on 19/04/2011 Shri Krishan Gopal Lawania deposed that he was manufacturing Pan Masala under the brand name 'Chandrakanta' at registered premises and about three months back he further installed two machines at the rented premises and started manufacture of said Pan Masala which was cleared by him without payment of duty. In his subsequent statement recorded on 20/04/2011 Shri Lawania handed over two checks of Rs.15 lakhs (Fifteen lakhs) each towards duty of excise so evaded by him.
During the course of further investigations statement of Shri Ajay Agarwal, Real Estate Agent was recorded admitting the fact that the searched premises was rented by Shri Lawania only about 3-4 months. Statement of Shri Sunil Agarwal, Director of M/s Astha Fragrance Pvt. Ltd. was also recorded wherein he deposed that he was the owner of 'Chandrakanta' brand which was assigned to M/s Taj Products vide their agreement dated 01/10/2010. The said agreement was for manufacture of Pan Masala under their brand name from the premises 15, Yamunotri Vihar, Kamla Nagar, 6 APPEAL Nos. E/55963-55964/2013-EX[DB] Agra at a monthly payment of Rs.25,000/- (Twenty five thousands) per month. Inasmuch as the said agreement was only for the premises shown in the agreement, and not for any other premises and came to know from the news about the illicit manufacture of Pan Masala from different premises in village Rehan Kala and he is not responsible for the same.
7. During the course of further investigations statement of various other persons were recorded. On the basis of the investigations, a show cause notice dated 03/04/2012 was issued to the appellant proposing confirmation of demand of duty as also for imposition of penalty. Notice also proposed imposition of penalty on Shri Sunil Kumar Agarwal, Director of M/s Astha Fragrance Pvt. Ltd. The show cause notice referred to the provisions of Rule 17(2) of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 and demanded duty from April, 2010 to the extent of Rs.2,40,50,000/- (Two crores Forty lakhs fifty thousands). The notice proposed imposition of penalty upon the manufacturer as also upon the owner of the brand name. The said show cause notice stands adjudicated by Commissioner vide which he has confirmed the duty, as proposed along with confirmation 7 APPEAL Nos. E/55963-55964/2013-EX[DB] of interest and imposition of penalty of identical amount. In addition penalty of the same amount stand imposed upon Shri Sunil Kumar Agarwal, Director of M/s Astha Fragrance Pvt. Ltd. who is the owner of the brand name under the Rule 26 of Central Excise Rules, 2002.
Hence the present appeal.
8. After hearing both the sides duly represented by Shri Aalok Arora advocate with Ms. Rinki Aroa advocate and Shri Rajeev Ranjan Additional Commissioner, we find that there is no dispute about fact that the appellants were operating illegally from premises located at Rehan Kala Village, Agra and were indulging in clandestine manufacture and removal of the Pan Masala, without obtaining the registration and without paying the duty. The only dispute require to be resolved in the present appeal is as to whether duty is required to be paid by the appellant for the period during which actual manufacture of Pan Masala took place or the same would be required to be paid from 01/04/2010. The appellant's contention is that even in terms of Rule 17(2) of Pan Masala Packing Machines (Capacity of Determination and Collection of Duty) Rules, 2008 which provided for a deeming clause to the effect that if the unit is found to be 8 APPEAL Nos. E/55963-55964/2013-EX[DB] manufactured and clearing Pan Masala without registration, then the duty liability was to 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 officers, such machines shall be deemed to have been in operation since the First day of April of Financial Year in which the unit was found to be not registered. Inasmuch as their unit was found to be not registered on the day of visit of the officer i.e. 10/04/2011, the duty liability would be fastened against them from First day of April, 2011, in terms of said Rule. The learned Advocate, however, agrees that inasmuch as in their case there is a evidence to the effect that the unit was working from 1st January, 2011 onwards, they are under legal obligation to pay duty from January, 2011 and there was no justification to confirm the demand by extending the period to 1st of April, 2011.
9. Learned A.R. appearing for the Revenue has drawn our attention to the provisions of Rule 17(2) and has submitted that inasmuch as the appellant was not registered and were found to be working from January, 9 APPEAL Nos. E/55963-55964/2013-EX[DB] 2011 that is during proceedings Financial Year also, the Financial Year has to travel to the previous Financial Year i.e. 2010 and the Commissioner has rightly invoked the provisions of Rule 17(2) of the said rules and has rightly confirmed the demand.
10. After considering the submission made by both sides, we find that the dispute revolve around interpretation of the provisions of Rule 17(2) of the said rules. For better appreciation of the rule in question the same is reproduced below:-
"(2) If it is found that goods have been 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 Officers such machines shall be deemed to have been in operation since the first day of April of Financial Year in which the unit was found to be not registered. And shall be 10 APPEAL Nos. E/55963-55964/2013-EX[DB] construed as operating packing machines for the purposes of Rule 7 and dealt with accordingly."
11. On going through the said rule, we note that the same is to the effect that if the manufacturer is found to be indulging in manufacturing activities without registration on the day of their visit, it has to be deemed as if such manufacturing activity was taking place right from the first day of April of that Financial Year in which unit was found to be not registered. Admittedly in the present case the unit was found to be not registered on 10/04/2011. As such by strict application of the said rule, the duty liability would arise against the appellant with effect from first day of April, 2011 and not first day of April, 2010.
12. However, we further note that there is exception in the said rule itself to the effect that unless evidence to the contrary is provided to the satisfaction of the Central Excise Officers. This shows that if an assessee is otherwise is in a position to establish actual date of stock of manufacture, the deeming provisions would not apply. It, thus, simplicitor leads us to hold that if the evidence is available on record to show the actual period during which production and clearance of Pan Masala had taken 11 APPEAL Nos. E/55963-55964/2013-EX[DB] place, duty would be confirmed from that date only. Deeming provision is applicable in those cases where there no evidence of start of production is available. In the present case, the Commissioner has accepted that the appellant was indulging in manufacture and clandestine clearance of Pan Masala since January, 2011. There is also evidence on record to show that there was agreement between the appellant and their brand owner, Shri Sunil Kumar Agarwal, Director of M/s Astha Fragrance Pvt. Ltd. which was executed with effect from 01/10/2010 and the present premises in which the machines were found to be installed were taken on rent by the appellant from January, 2011 as per the statement of the owner of premises. As such, it is clear that the appellant was manufacturing the said goods in rented premises with effect from January, 2011.
13. As such taking into consideration the entire evidence on record as also the provisions of Rule 17(2) of the Rules in question, we uphold that the duty liability is legally to be confirmed against the appellant from January, 2011.
As regards penalty, we note that the appellant was admittedly indulging in clandestine activity for 12 APPEAL Nos. E/55963-55964/2013-EX[DB] manufacture of Pan Masala and as such are liable to penalty of identical amount. In view of the above, we set aside the impugned order and remand the matter back to the Original Adjudicating Authority for quantification of exact amount of duty liability against the M/s Taj Products for the period of actual manufacture of the goods and for imposition of penalty.
14. As regards penalty imposed upon Shri Sunil Kumar Agarwal, we find that he was the owner of brand name 'Chandrakanta' which was used by Shri Krishan Gopal Lawania as per the agreement entered into between the two on 01/10/2010. In terms of the said agreement Shri Krishan Gopal Lawania was to manufacture Pan Masala under the said brand name, from registered premises at 15, Yamunotri Vihar, Kamla Nagar, Agra. In fact, the appellant was manufacturing in the said premises and was paying duty. It is only subsequently they started manufacturing from the present factory located at Village Rehan Kala, Etmadpur, Agra by clandestinely installing two packing machines there. There is no evidence on record to suggest that the said activity was in the knowledge of Shri Sunil Kumar Agarwal. In such a situation, the owner of the brand name cannot be, held 13 APPEAL Nos. E/55963-55964/2013-EX[DB] liable to penalty. We accordingly, set aside the penalty imposed upon him and allow this appeal.
15. Both the appeals are disposed of in above manner.
(Pronounced in Court on 17/07/2018)
Sd/- Sd/-
(Anil G. Shakkarwar) (Archana Wadhwa)
Member (Technical) Member (Judicial)
Lks