Indian Kanoon - Search engine for Indian Law

(viii) I also impose penalty of Rs. 10,000 (Rupees Ten thousand only) each on M/s Vijayalakshmi Enterprises, Shri Paranthaman and Shri Veerabhadran separately on each of them under Rule 209A of the Central Excise Rules, 1944."

M/s. Ravi Kumar & Co., proprietorship of one Shri K. Shankar Rao, appellant in Appeal No. E/166/2002, is aggrieved by a demand of duty, confiscation of excisable goods and penalty. The appellants in Appeal No. E/168/2002 are aggrieved by confiscation of excisable goods as well as imposition of penalty. The appellants in Appeals Nos. E/165/2002 and E/167/2002 are aggrieved by imposition of penalties. The demand of duty confirmed against M/s. Ravi Kumar & Co., is on a scented supari viz. "Ajantha Sugandhi Supari" held to have been clandestinely manufactured and cleared during 1.4.1995 to 11.3.1997. While quantifying this demand, Ld. Commissioner deducted duty from invoice price of the goods to arrive at assessable value in terms of Sections 4 (4)(d)(ii) of the Central Excise Act, 1944 as prayed for by the assessee. This abatement of duty is under challenge in the Revenue's Appeal No. 284/2002. The Revenue has also challenged the Commissioner's finding that scented supari was not dutiable during the period prior to 16.3.1995.

3. Ld. Counsel representing the appellants in the parties' appeals has challenged the demand of duty on numerous grounds. He questioned the very basis of the demand. He submitted that the demand was based on a sort of formula worked out arbitrarily by the officers of Central Excise on 4.4.1997 in the Mahazar drawn for seizure of goods viz. scented betel-nut (supari) powder (finished stock). It was submitted that the officers visited the factory of M/s. Ravi Kumar & Co. on 12.3.1997 and 4.4.1997. On the first occasion, the officers made an inventory of the machineries found in the factory as also the stocks of raw materials and semi-finished goods found there. It was found that scented supari powder in pouches of various M.R.P. denominations (0.20 Ps, Q.25 Ps, 0.60 Ps, Re.1 and Rs. 2) of a total value of Rs. 5,88,557 was kept in the factory as finished stock, unaccounted in RG 1 but ready for dispatch. These and other findings were recorded in a Mahazar on the same day 12.3.1997) in the presence of independent witnesses and a representative of M/s Ravi Kumar & Co. The stock of finished goods entered in the Mahazar dated 12.3.1997 was seized on 4.4.1997 in the presence of Shri K. Shankar Rao (Proprietor) and independent witnesses. The Mahazar drawn for this purpose stated a formula for computing the quantity of supari which might have been manufactured and cleared by the party during the 1.4.1994 to 11.3.1997. The Counsel submitted that this formula was irrational and speculative and the demand of duty based on it was not sustainable. No empty pouche was in existence in the premises when the officers visited. What was available then was laminated plastic film rolls and not pouches. It was also pointed out that no weighment of any goods was made by the officers and that no weighing machine was available in the premises.

7. We have considered the submissions. Insofar as the Revenue's appeal is concerned, the challenge is against the dropping of demand of duty on scented supari for the period prior to 16.3.1995 and the grant of abatement under Section 4(4)(d)(ii) to the assessee in the matter of valuation of goods. We find that the Commissioner relied on the Hon'ble Madras High Court's judgment in Writ Petition No. 4265 to 4267/1994, in the case of A.R. Safullah and Ors. to hold that 'Betelnut Powder' was different from 'Pan Masala' and hence could not be classified as Tan Masala' for Central Excise purpose. 'Betelnut Powder' became excisable for the first time with effect from 16.3.1995 with insertion of a new entry for it in the Tariff. Ld. SDR has pointed out that the High Court's judgment in the above Writ Petition has been appealed against. However, in answer to a query from the Bench, it has been reported by SDR that the operation of the above judgment has not been stayed in the Writ Appeal. The decision in the Writ Petition was that betel-nut powder (supari) was not excisable. The Revenue has no case that the question of excisability of supari for the period prior to 16.3.1995 is not covered by the High Court's judgment. Therefore, in the absence of stay of operation of the said judgment, we have only to affirm the Commissioner's order as regards dutiability of betel-nut powder (supari) for the period prior to 16.3.1995. Ld. Commissioner has rightly held the goods to be non-dutiable for the said period by following the ruling of the High Court. The second challenge in the Revenue's appeal is against abatement of duty in valuation of the goods, allowed to the assessee under Section 4 (4)(d)(ii). This challenge cannot be sustained in view of the Tribunal's Larger Bench decision in Sri Chakra Tyres v. CCE, 2002 (80) ECC 588 (LB): 1999 (108) ELT 361. We arc told by Ld. Counsel that this decision of the Larger Bench has been upheld by the Supreme Court in CCE, Delhi v. Maruti Udyog Ltd., 2002 (80) ECC 249 (SC): 2002 (141) ELT 3 (SC). Thus the Revenue's appeal fails and the same is rejected.

The quantitative yardstick for raising the subject demand is not discernible from this document, nor could Ld. SDR explain it to us despite her best efforts. It is unintelligible. The demand seems to be based on certain weighments of finished goods, said to have been conducted by the officers. Ravi Kumar & Co. have denied that any weighment was done. Let us assume that weighments of goods were actually made as noted in the Mahazar. These weighments admittedly pertain to goods, which were found in stock on or after 12.3.1997. Nothing relating to such weighments can be basis for demanding duty on goods alleged to have been clandestinely manufactured and cleared prior to the said date. To raise such a demand is a presumptive or speculative exercise, which cannot be countenanced. Any demand of duty on an assessee for a given period should be founded on positive evidence indicating manufacture and clearance, without payment of duty, of excisbale goods during that period. It cannot be raised on the basis of some formula devised from facts pertaining to goods produced after the said period as in the instant case. In the present case, insofar as the period 1.4.1995 to 11.3.1997 is concerned, there is no evidence whatsoever, whether it be one of procurement and utilization of raw material or of production and clearance of supari out of the factory or of sale of such goods, to show that the assessee had clandestinely manufactured and removed supari during the said period. Hence we are unable to sustain the demand of duty raised by the Commissioner on M/s Ravi Kumar & Co. for the period 1.4.1995 to 11.3.1997. The Tribunal's decision in Ghodavat Pan Masala Products (supra) is squarely in support of this view. In that case, a demand of duty raised on the assessee by the Department on the basis of certain theoretical calculations of pouches generated per kgs. of printed laminated roll was set aside by the Tribunal. The facts of the instant case are also more or less similar to those of Ghodavat Pan Masai a Products (supra). The Department worked out an unintelligible formula for assessing alleged clandestine production and removal of scented supari pouches presumably on the basis of weighments of laminated plastic rolls found in the factory. There is no dispute of the fact that the manufacture of supari in pouches is a wholly mechanised process in which betel-nut powder and laminated plastic roll are fed into a machine and the pouches containing betel-nut powder emerge. But this by itself would not sanctify any guesswork (as in this case) for estimating production for the past period on the basis of weighment of laminated plastic roll, for demand of duty. The Tribunal's decision in Ghodavat Pan Masala Products (supra), in our view, squarely worked in favour of the appellants. The appellants can legitimately claim support from certain other decisions (cited by their Counsel) also. In the case of I.T.C. Ltd. v. CCE, Bangalore [Tribunal's Final Order No. 333/1996-D dated 13.5.1996 in Appeal No. E/1318/88-D], it was held that cigarette sample checks undertaken by the Department on 5th, 6th and 8th September, 1986 were not to be made applicable to past clearance of cigarettes. In the case of Sri Sakthi Textiles (P) Ltd. v. Government of India and Ors. [Madras High Court's order dated 1.4.1972 in W.P. No. 1421/71], it was held that, on the basis of the results of tests on samples of goods, duty could not be levied on the goods manufactured and cleared prior to the period of sampling. The Government themselves had taken the same view in the case of National Textile Corporation, 1982 ELT 639 (GOI), Aggarwal Metal Works, 1982 ELT 689 (GOI) etc. In the case of CCE, Coimbatore v. Cambodia Mills Ltd., 2001 (128) ELT 373 (Mad), the Hon'ble High Court held, in respect of goods manufactured on the date of drawal of sample, that demand of duty based on the test result was sustainable only in respect of the goods manufactured on that date. A demand for the subsequent period on the same basis was held unsustainable. In the case of Emami Ltd. v. CCE, Kolkata, 2002 (148) ELT 1238, a similar view was taken by the Tribunal. We find there is no dearth of decisions on the point, which are in favour of the appellants in the instant case. We, therefore, set aside the demand of duty.