Customs, Excise and Gold Tribunal - Bangalore
Hilton Tobaccos Ltd. vs Commissioner Of Central Excise on 27 December, 2004
Equivalent citations: 2005(183)ELT378(TRI-BANG)
ORDER T.K. Jayaraman, Member (T)
1. These appeals are against the OIO No. 26/2002 dated 6-5-2002 passed by the Commissioner of Central Excise, Hyderabad-I Commissionerate, Hyderabad.
2. The appellants M/s. Hilton Tobaccos Ltd., Kompally (hereinafter referred to as appellants/HTL) are the manufacturers of Cigarettes and Cut Tobacco, falling under Chapter No. 24 of CETA, 1985. The brief facts of the case are as follows.
3. The Central Excise Officers visited the factory premises of the appellants on 10-10-1998. During the scrutiny of the records, the officers came across certain private documents maintained in the factory. After investigation, the Department came to the conclusion that the appellant had not accounted for a quantity of 41,777 kgs. of raw tobacco procured by them. It was alleged that out of the unaccounted raw tobacco, a quantity of 43,866 kgs. of cut tobacco was produced and cleared without payment of duty. The Revenue initiated proceedings against the appellant. The adjudicating authority confirmed a demand of Rs. 21,77,550/- towards duty and imposed equal penalty under Section 11AC. Interest under Section 11AB has also been demanded. Penalty of Rs. 1,00,000/- was imposed under Rules 9(2), 52A(8), 173Q and 226 of CE Rules, 1944. A penalty of Rs. 50,000/- was imposed on Shri B. Raja Vara Prasad, Director of HTL under Rule 209A of CE Rules, 1944. The appellants strongly challenged the findings of the adjudicating authority.
4. Shri R. Sashidharan, learned Sr. Advocate and Shri M.S. Rajappa, learned Consultant appeared on behalf of the appellants and Shri L Narasimha Murthy, learned SDR appeared on behalf of the respondents.
5. The learned Advocate and the learned Consultant urged the following points :
1. The appellants' unit is under physical control. Each clearance is on the basis of the permission from the Central Excise Officer posted in the factory. Removal of huge quantity of cut tobacco is not possible especially when the unit is under physical control.
2. The documents required by the Revenue were tendered voluntarily by the appellant. Action that has been initiated is only on the basis of the documents tendered voluntarily. According to the Department, the details of unaccounted raw tobacco used in the manufacture of cut tobacco and the duty payable are as follows. This is as per annexure C to the Show Cause Notice.
(in Kgs.)
(i) Work sheet maintained by the Assessee 9,584 showing 'Receipt' of unaccounted raw tobacco in page No. 142 of file 3/3
(ii) Blend Sheets written twice for operation 22,028 numbers PE-1 to PE-11 of PSSIX DB2 blend cut tobacco Showing 44,111 kgs of raw tobacco issued for Processing but accounted for only 22,083 kgs (Pages 17 to 38 of file 3/3)
(iii) Blend sheets for operation numbers WI-1 9,865 to WI-5 of WP blend cut tobacco dated from 25-9-1998 to 28-9-1998 not ac-
counted for in RG-1. (Pages 101 to 105 of file 3/3) (iv) Blend Sheets for HB and HC samples of 300 cut tobacco (pages 90 and 91 of file 3/3)
----------
Total Un-accounted raw tobacco 41,777
Total cut tobacco manufactured 43,866
(being 5% more than raw-tobacco issued)
----------
Total Duty payable Rs. 21,93,300/-
(@ Rs. 50/- per kg. of cut tobacco)
6. The learned Advocate and the Consultant, after taking us strenuously through the various documents, contended that the Department has not produced an iota of evidence to prove that 9,584 kgs. of raw tobacco was used in the manufacture of cut tobacco and that the said cut tobacco was removed clandestinely. They stated that the quantity of 9,584 kgs. of raw tobacco as mentioned in the working sheet forms part of the receipt of the raw tobacco into the factory. As regards the quantity of raw tobacco of 22,028 kgs., it was submitted that the Revenue based its conclusions in view of the blend sheets having been written twice. It was explained that the blend sheets were written twice only with a view to maintain secrecy of the blend. The blend sheet meant for the exporter did not completely tally with the original blend sheet in respect of the various grades of tobacco. But, the total quantity was the same. This was done intentionally to maintain secrecy. This explanation has not been accepted by the adjudicating authority. Hence he has come to the conclusion that the quantity of raw tobacco of 22,028 kgs. is not accounted. As regards the allegation that the 9,865 kgs. of raw tobaccos were used in the manufacture of cut tobaccos and cleared clandestinely, it was submitted that the allegation was based on the fact that the blend sheets for operation Nos. WI-1 to WI-5 of WP blend cut tobacco dated from 25-9-1998 to 28-9-1998 was not accounted for RG-1. This is a case of simple clerical error which was corrected and this contention could be proved if the RG-1 Register is perused. As regards the quantity of 300 kgs. of raw tobacco, it was submitted that the same has been duly accounted in the RG-1 Register and instead of mentioning the quantity manufactured in the relevant column, the clerk in-charge has inadvertently shown it in the opening balance. The following case laws were relied on :
1. ITC Ltd., Bangalore v. CCE, Bangalore - Final Order No. 1215/2002 (CEGAT-Bangalore) dated 20-9-2002 - 2002 (149) E.L.T. 1116 (Tri.-Bang.)
2. VST Industries Ltd. v. CCE, Hyderabad - 2001 (138) E.L.T. 549 (Tri-Chennai)
3. Godfrey Philips India Ltd. v. Collector - 1995 (75) E.L.T. 619 (T)
4. CCE, Coimbatore v. Sangamitra Cotton Mills (P) Ltd. - 2004 (163) E.L.T. 472 (Tri - Chennai)
5. Sulara Chemicals Pvt. Ltd, v. CCE, Bolpur - 2002 (145) E.L.T, 230 (Tri.-Kolkata)
6. Madhu Foods Products v. CCE, Hyderabad - 1995 (76) E.L.T. 197 (Tri.)
7. Ebenezer Rubber Ltd. v. CCE, Ahmedabad - 1986 (26) E.L.T. 997 (T)
8. K. Harinath Gupta v. CCE, Hyderabad - 1994 (71) E.L.T. 980 (T)
7. Learned SDR reiterated the findings of the OIO and prayed for dismissal of the appeal.
8. We have gone through the records of the case carefully. The Revenue has come to the conclusion that 41,777 kgs. of raw tobacco was unaccounted and the appellant had manufactured cut tobaccos out of it and removed it clandestinely. The inference is based on certain private documents only. There is no corroborative evidence recorded. If such huge quantity of cut tobacco was manufactured during the period from April 1998 to September 1998 when the factory is under physical control and removed, either the officer in charge has connived with the appellants or he closed his eyes to whatever was happening. In either case, the department should have proceeded against the officers. There is absolutely no indication in the investigation regarding any complicity of the officers posted in the appellants' unit. Moreover, the investigation has not found out at least a few buyers who have received the goods cleared clandestinely. There is no evidence of excessive consumption of electricity. When the officers visited the unit, they had not found out any unaccounted stock of cut tobacco. In the present case, the charges are based purely on a theoretical working out based on the private documents, which are not statutory. The Hon'ble CEGAT, in the case VST Industries Ltd. (cited supra), has held that the charges of clandestine removal cannot be based on assumptions and presumptions. In the Godfrey Philips case, the Tribunal has held that duty is not demandable on assumed productions. In the Sangamitra Cotton Mills case, it was held that in the absence of evidence of use of electricity, receipt of sale consideration to prove the event of manufacture and clearance of goods, clandestine removal cannot be sustained. In the Harinath Gupta case, it was held that the clandestine removal charge is not sustainable as the source of procurement of raw material has not been established, buyers of finished goods had not been contacted and the receipt of sale proceeds has not been proved. This is a case where investigation has miserably failed to get any corroborative evidence to strengthen the Revenue's case. The adjudicating authority, in his zeal to decide the issue in favour of Revenue, has not displayed a judicious approach and concluded that there has been clandestine removal in the absence of corroborative evidences.
9. In view of our observations, the OIO has no merits. It deserves to be set aside. Hence, we allow the appeals.