- (1.) We have heard Shri Ashish Agrawal, learned counsel for the appellant. Shri Ashok Singh appears for the Central Excise Department. This Central Excise appeal under section 35G of the Central Excise Act, 1944 arises out of an order passed by the Customs, Excise and Service Tax Appellate Tribunal dated 11.9.2013 by which it has while disposing of the application under Section 35F of the Central Excise Act for waiver of the pre-deposit of the Central Excise duty and penalty, directed the appellant to deposit an amount of Rs. 55 lakhs towards penalty within 12 weeks and report compliance by 10.12.2013.
(2.) On the basis of the investigation in which the appellant was found running packing machines a 'Pan Masala' unit without registration with the department, a show cause notice was issued on 3.4.2012. During the course of adjudication the appellant admitted and paid excise duty of Rs. 55.50 lakhs for the period January, 2011. The Commissioner, Central Excise and Service Tax, Kanpur by an order dated 30.11.2012 found that in view of Rule 17(2) of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) rules, 2008 the deeming clause of the period for operating the machines will be applicable to the applicant with effect from 1st April of the financial year i.e. 1st April 2010 and not 1st April, 2011 as claimed by the appellant. The Tribunal found that deeming clause under rule 17(2) will be applicable, unless evidence to the contrary proves to the satisfaction of the Central excise Officers that the machines were used in the previous financial year as well. In the present case the brand owner Shri Sunil Kumar Agarwal, Director of M/s. Astha Fragrance Pvt. Ltd. has executed agreement with the petitioner to run the unit on 1.10.2010. It was admitted that unit was running in the month of January, 2011. In the circumstances the Commissioner, Central Excise found that the financial year under consideration will begin from 1st April, 2010 and not 1st April, 2011. The findings of the Commissioner, Central Excise in his order dated 30.11.2012 is quoted as below:-- It is observed that duty liability has been admitted by the notice No. 1 since January 2011. The basic issue for decision is whether duty can be demanded from April 2010 onwards. For the sake of convenience, I take on record the provisions of rule 17(2) of the Pan Masala Rules, as amended vide Notification No. 8/2010-CE (NT) : , Dated 27.02.2010 which is as under:-- (2) 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 day of April of the financial year in which unit was found to be not registered and shall be construed as operating packing machines for the purposes of rule 7 and dealt with accordingly. On perusal of the above provision, it emerges that in case when manufacture of the goods without obtaining registration and filing the declaration and without payment of duty is detected, duty is to be demanded from the first month of the financial year in which the machines were found available, unless evidence to the contrary is provided to the satisfaction of proper officer, such machines are deemed to be in operation since the 1st day of April of the financial year in which the unit was found to be not registered. It is an undisputed fact as the same has been admitted by the notice No. 1 in his statement dated 19.04.2011 recorded under Section 14 of the Central Excise Act, 1944, that they were indulged in unauthorized operation of the manufacture of Pan Masala since the last three months i.e. January 2011. This makes it explicit that the Pan Masala packing machines were run by them in clandestine manufacture and they were engaged in clandestine removal of excisable goods during the financial year 2010-11, which in turn proves beyond doubt that the machines were found to be not registered during the financial year 2010-11. Under such circumstances, the FFS machines detected are deemed to be in operation since the 1st day of April 2010. Accordingly I am of the view that demand of duty has been quantified correctly under the provisions of the Pan Masala Rules, as amended. Further in view of the clandestine manufacture and clearance made by the notice No. 1 without obtaining registration under Section 6 of Central Excise Act, 1944 read with Rule 9 of the Central Excise Rules, 2002 and without observing the provisions of Rule 6 and Rule 9 of the Pan Masala Rules with regard to filing of necessary declaration and payment of central excise duty respectively, the proposed demand of duty is liable to be confirmed and the same is recoverable from the notice No. 1. Accordingly I hold the same.
(3.) The Commissioner Central Excise raised a demand of central excise duty to the tune of Rs. 2,40,50,000/- recoverable under Section 11A(1) of the Central Excise Act, 1944 read with Rule 7 of the Rules of 2008. An amount of Rs. 55,50,000/- already deposited was appropriated against the demand. The Commissioner imposed penalty equivalent to the amount of duty on Shri Krishna Gopal Lawania under Section 11AC of the Act read with Rule 17 of the Rules of 2008 with an option to pay an amount of 25% of the central excise duty as per the provisions contained in the first proviso to Section 11AC of the Act. He also directed recovery of interest under Sections 11AA and 11AB of the Act and further imposed penalty of Rs. 2,40,50,000/- on Shri Sural Agarwal under Rule 26 of the Central Excise Rules, 2002. The Tribunal considered the application for waiver of pre-deposit and has given substantial relief to the appellant. After recording findings that the appellant has deposited Rs. 55.50 lakhs, it gave waiver of the entire remaining amount of central excise duty, as reduced by Rs. 55.50 lakhs and directed the appellant to deposit a further amount of Rs. 55 lakhs towards penalty within 12 weeks.;