The Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the allegation regarding non-mention of Tobacco Gradation In Invoices cannot be the defensible ground for confirmation of the adjudged excise duty demands.
The bench of S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) has observed that the charges of clandestine clearance of branded tobacco, as levelled against the appellant/assessee cannot be sustained inasmuch as Revenue has not brought out any substantial documentary evidence to prove such charges. Therefore, the adjudged demands confirmed on the assessee fails and consequently, the penalties imposed on the other appellants in the impugned order cannot be sustained.
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Background
The appellant/assesseeis a proprietorship firm. It had four different units. All the four units were having different registration numbers issued by the jurisdictional Central Excise authorities. Those units manufacture ‘Unmanufactured Branded Tobacco’ and after packing the same in printed pouches bearing a brand name of ‘Om Special Pandharpuri Tambakoo No. 1’, were sold in the market.
All the above four units discharged their Central Excise Duty liability on removal of the said products and also maintained statutory records and filed their statutory returns separately. Those units were also separately audited under the provisions of the Central Excise statute.
In order to pack ‘Unmanufactured Branded Tobacco’ bearing a brand name ‘Om Special Pandharpuri Tambakoo No. 1’, Patel Product used to get the pouches printed with the said brand name. The printed pouches were supplied to Patel Product mainly by M/s Montage Enterprises (P) Ltd. In the four different units of Patel Product, the labourers were employed.
These labourers used to manually pack tobacco into pouches bearing brand name and used to seal the said pouches with the help of hand sealing machines. M/s Jalaram Traders, proprietorship firm of Arvindbhai N. Patel and subsequently M/s Shree Gajanan Agency, partnership firm of Arvindbhai N. Patel and Ashokbhai S. Patel used to purchase respective tobacco from the said three firms and sell the same to various buyers, situated within the municipal limits of Kalyan – Dombivli – KDMC, (ii)Thane – TMC, (iii) Pune – PMC, (iv) Bhiwandi – Nizamura – BNMC and (v) Ulhasnagar – UMC.
They also sell these products to various outstation buyers. Delivery of tobacco to the buyers situated within the aforesaid municipal limits was made in their own vehicles and delivery to outstation buyers were made through various transporters situated at Sakinaka, Mumbai.
During the course of searches conducted at the premises of the appellants as well in other places, the Central Excise officers have recorded statements of various persons. In his statement, Shri Mahendrabhai C. Patel, proprietor appellant had stated that raw tobacco used for production of ‘Om Special Pandharpuri Tambakoo No. 1’ is Grade-I quality and raw tobacco which is used for retail/bulk sale from M/s Shree Krishna Traders and M/s Shree M.C. Patel & Sons is Grade-II and III quality tobacco.
A Show Cause Notice (SCN) dated 08.07.2013 was issued, taking into consideration the aforesaid diversion of raw material i.e., superior grade tobacco in guise of inferior grade tobacco at the rate of 75 bags per trip, in regard to the period from June, 2008 to August, 2012, the alleged clandestine clearance of packed ‘Unmanufactured Branded Tobacco’ by M/s Patel Product was worked out.
The assessable value of bags of ‘Om Special Pandharpuri Tambakoo No. 1’ cleared clandestinely was considered as Rs.58,46,35,230. Basic excise duty at the rate of 42% upto 28.02.2010 and 50% w.e.f. 01.03.2010 along with 4.2% Additional Duty of Excise, Education Cess and Secondary & Higher Education Cess were accordingly worked out. A demand of total Central Excise Duty payable on such clandestine clearance of ‘Om Special Pandharpuri Tambakoo No. 1’ was worked out to be Rs.31,11,78,562.
Conclusion – Tobacco Gradation In Invoices
The Tribunal held that the adjudication order cannot make out a new case, which was not canvassed in the base document i.e., the SCN, and the adjudication proceedings cannot be culminated, without the evidence that such allegation or the material particulars having been dealt with in the SCN.
The CESTAT while allowing the appeal held that during the course of investigation, statements of the packing labourer and labour supervisor of Unit III of M/s. Patel Product, Kurla, were recorded and relied upon in the adjudication order. On that basis, the adjudicating authority has observed that ‘Om Special Pandharpuri Tambakoo No. 1’ was produced in excess, and was removed outside the premises in a clandestine manner. The appellants had requested the adjudicating authority for affording cross examination of the labour supervisor and packing labourer. However, the same was denied.
The CESTAT held that the order is set aside and the appeals are allowed in favour of all the appellants.
FAQs
Is Non-Mention Of Tobacco Gradation In Invoices Be Defensible?
No. The Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the allegation regarding non-mention of Tobacco Gradation In Invoices cannot be the defensible ground for confirmation of the adjudged excise duty demands.
Case Details
Case Title: Arvind N. Patel Versus Commissioner of Central Excise, Mumbai-II
Case No.: Excise Appeal No. 86076 of 2015
Date: 04.10.2024
Counsel For Appellant: Devashish K. Trivedi
Counsel For Respondent: Shambhoo Nath
