CESTAT quashes Excise Duty Demand on Illicit Manufacture and Clearance of Pan Masala with Tobacco on ground of Absence of Real Manufacture [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the excise duty demand on illicit manufacture and clearance of pan masala with tobacco on the grounds of the absence of real manufacture. 

Pareshbhai Ramanbhai Amin, the appellant assessee was an individual and the department alleged that the clearance of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 from premises of Laxmi Tobacco Company, situated near Bahucharaji Mata Temple, Village Vasna did by the assessee without the payment of duty. 

The assessee appealed against the order passed by the adjudicating authority for confirming the excise duty demand of Rs. 2,16,00,000/- with interest under section 11AA of the Central Excise Act and for the imposition of a penalty of Rs. 25,00,000/- under Rule 26 of Central Excise Rules, 2002. 

P. P. Jadeja, the counsel for the assessee contended that the levy of duty under the Central Excise Act was on ‘manufacture’ as defined in Section 2(f) of the Central Excise Act, and the person who carries out an act of manufacture was only the manufacturer who was liable to pay duty becomes an assessee and had to take Registration as per provisions of Rule 9 of Central Excise Rules, 2002. 

Also submitted that the assessee was an individual and not an Assessee or a manufacturer. 

Tara Prakash, the counsel for the department relied on the decisions made by the lower authorities and contended that the assessee was liable to pay the excise duty demand. 

The Bench observed that in the case of Oudh Sugar Mills Ltd. v. Union of India, the court held that the finding which had been arrived at without any tangible evidence and was based only on inferences involving unwarranted assumptions was vitiated by an error of law. 

Here, there was no clinching tangible evidence or any corroborative evidence against the assessee to connect him with the actual manufacturer and also to establish him as a manufacturer. Thus, the assessee cannot be treated as the manufacturer liable to duty, interest, and penalty in this case. 

The two-member bench comprising Ramesh Nair (Judicial) and C L Mahar (Technical) quashed the excise duty demand and penalty imposed against the assessee while allowing the appeal filed by the assessee. 

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