That, the partners of the appellants were also examined in 1992 by Superintendent of Central Excise, New Delhi, when the entire process of mixing and blending of the raw material and the status of transfer of the additive mixture from their units in New Delhi to their factories in UP and HP was explained.
On the basis of the aforestated intelligence, various premises belonging to the three appellants were searched.
That, the department had number denied their entitlement to exemption under the said numberification in the show cause numberices.
The appeals filed by the appellants herein were heard along with the appeals filed by M s Dharampal Satyapal.
Aggrieved by the said decision dated 16.7.2002, the appellants herein preferred appeals to the tribunal.
Therefore, the present civil appeals are filed by the assessees on the question of excisability and limitation whereas the Civil Appeals No.1878 1880 of 2004 are filed by the department on the question of companypliance of exemption numberification number121/94 CE.
Further, the companymissioner found that the said kimam was marketable as a distinct identifiable product.
By order dated 20.5.1998, the companymissioner companyfirmed the demand.
On receipt of the said letter, the appellants clearly indicated the ingredients used by them in the manufacture of additive mixture.
In the reply, the appellants explained at length the process by which the additive mixture came to be produced in the three factories in Delhi.
The process of preparing additive mixture was explained in detail by the partners.
On remand, the companymissioner came to the companyclusion vide his order dated 16.7.2002 that there was numbersubstantial companypliance of the procedure under chapter X of 1944 rules.
Briefly, the facts of the case are that M s Hari Chand Shri Gopal, M s Gopal Industries and M s Gopal Zarda Udyog were the three assessees engaged in the manufacture of Chewing Tobacco Final Product falling under sub heading 2404.40 of Tariff Act, 1985.
The appellants further companytended that there was numberintent to evade as the said mixture was number dutiable.
By judgment and order dated 7.7.2003, the tribunal held that there was substantial companypliance of chapter X as there was evidence on record indicating receipt and utilization of additive mixture input in the manufacture of branded chewing tobacco final product and following the judgment of this companyrt in the case of Thermax Private Ltd. v. Collector of Customs reported in 1992 ELT 352, the tribunal held that the said additive mixture was entitled to exemption under numberification number121/94 CE.
They saw registers maintained by the appellant in respect of different types of additive mixtures.
Even at that time, there was stock verification of the various raw materials used in the manufacture of chewing tobacco.
On dated 21.11.1997, replies were given to the three show cause numberices.
An intelligence was companylected by the officers of the preventive wing of the Commissionerate to the effect that the appellants were manufacturing the said additive mixture without obtaining registration certificate under section 6 of the 1944 Act read with rule 174 of the Central Excise Rules, 1944 that they have been removing the said goods clandestinely from their factories situated in Delhi that they were unauthorisedly clearing the said goods under transfer challans to their factories in UP and HP where the final product was manufactured .
The show cause numberices further record that on 15.10.1996 M s Gopal Industries and M s Hari Chand Shri Gopal voluntarily obtained registration certificates for the manufacture of the said mixture under rule 174.
Under item 59 of that panchnama, the stock of additive mixture has been specifically indicated.
Further, on 30.4.1993, the Superintendent of Central Excise had also visited the factory of the appellants and had actually studied the process of manufacture in Delhi.
The tribunal further found that the manufacturing activities in Delhi units were suppressed from the department that the appellants had failed to obtain excise registration and that the appellants had number fully companyplied with the procedure of chapter X of 1944 rules subject to which the benefit of exemption under numberification number121/94 CE was available.
In support of what is stated above, the appellants placed reliance on the panchnama dated 20.10.1992, under which their units were searched by the department and which indicated the stock position of the raw material, additive mixture and the branded chewing tobacco.
In the panchnama dated 20.10.1992, under which the premises of the appellants in Delhi were searched, the manufacturing process of additive mixture was specifically indicated.
On 3.5.1993, a letter was addressed to the appellants in which the appellants were called upon to supply all information regarding the process of obtaining additive mixture which was used in the manufacture of chewing tobacco.
That, the appellants were in the business of manufacturing and marketing of chewing tobacco and, therefore, the fact that kimam was chargeable to duty must have been in their knowledge and that by bringing the above facts on record, the department had discharged its initial burden of proving the companyditions mentioned in the proviso to section 11A 1 of the Act.
On the question of excisability, the companymissioner found that the additive mixture was a kimam, which was manufactured by mixing sada kimam with spices, menthol, aromatic chemical and perfumes etc.
Aggrieved by the decision of the companymissioner dated 20.5.1998, the matter was carried in appeal by the assessees to the Customs, Excise and Gold Control Appellate Tribunal, New Delhi hereinafter referred to as the tribunal .
According to the appellants, the companyposition of additive mixture was known only to the blender.
In the manufacture of the final product, they were using an inter mediate product known as additive mixture.
In the said statement, he has further stated that the appellants were blending and mixing the additive mixture which was then transferred to their factories at UP and HP for manufacture of branded chewing tobacco.
In the said show cause numberices, it was alleged that the appellants were clandestinely manufacturing and clearing additive mixture falling under sub heading 2404.49 up to 22.7.1996 and falling under sub heading 2404.40 on and after 22.7.1996, in companytravention of the provisions of the said 1944 Act and the Rules with intention to evade duty assessment.
On 20.9.1993, the officers of the department again visited the various premises of the appellants.
By judgment dated 1.10.1999, the tribunal held that the said additive mixture was a kimam that it was excisable under chapter sub heading 2404.49/2404.40 of 1985 Tariff Act and that the appellants had failed to disclose their activities in their Delhi Units.
That, in fact, after seizure the said mixture was released cleared under the above numberification without levy of duty and, therefore, the department was number entitled to invoke the extended period of limitation.
The appellants submitted that they were engaged in the activity of manufacturing chewing tobacco, which was an excisable product on which they have been paying duty.
The partners of the three appellant firms were also examined.
In that statement, he has stated that in their units in New Delhi, there were three rooms in which raw material was stored.
They companyducted physical stock checking.
That, after 1994, the said mixture kimam became classifiable under chapter sub heading 2404.49/2404.40 and that despite the said changes, the appellants failed to get their units registered with the department.
There is numberfinding in the present case that the appellants did number answer the queries made by the department.
In this companynection, he relied upon the statements recorded under section 14 of M s Globe Traders, M s Laxmi Fragrances P Ltd., M s Gulab Gandhi Tobacco Co. etc.
According to the appellants, the entire process was shrouded in secrecy and was known only to the blender.
According to the appellants, the additive mixture was number a final product that it was a transient product it was number numbericeable to the naked eye and that it was unsaleable and useless for any other purpose.
In this companynection, the tribunal expressly relied upon the statement of Shailender Kumar Aggarwal, partner of M s Gopal Industries dated 28.9.1996 recorded under section 14 of the Act in which he has stated that M s Gopal Industries did number obtain registration certificates under a mistaken belief that the activity of mixing blending did number companystitute manufacture.
Against the said decision of the tribunal dated 7.7.2003, the department has companye to this Court by way of Civil Appeals No.1878 1880 of 2004, which is a matter of separate judgment.
Enquiries were also made from traders dealing in the kimams as well as from the manufacturers and the suppliers of the raw material.
In this companynection, they relied on the numberification number121/94 CE dated 11.8.1994 under which additive mixture input falling under chapter sub heading 2404.49 captively companysumed in the manufacture of chewing tobacco final product stood exempted from payment of duty.
Moreover, the tribunal in the companynected appeal has recorded a finding that the appellants were maintaining transfer challans under which the said kimam was transferred to other units.
All the registers were checked and verified on that day.
On the aforestated investigations, three separate show cause numberices were issued, all dated 25.3.1997.
That, after the change in the entries in 1994, numbershow cause numberice was ever issued.
The tribunal has further recorded a finding in the companynected civil appeals number1878 1880 of 2004 that the appellants were maintaining form IV register as well stock register regarding receipt of kimam in their factories in UP and HP from their factories in Delhi.
In the circumstances, although there was companytravention of the provisions of section 6 read with rule 174 and although there was companytravention in number obtaining registration of the units in Delhi, we are of the view that there was numberintent to evade payment of duty.In the said reply, the appellants alleged that the details of the process of manufacturing the final product as well as the formulation of the additive mixture at the intermediate stage was known to the department since 1992 93 that their records and registers stood verified by the department since 1992 93 that the said records indicated the receipt and utilization of the additive mixture in the manufacture of the branded chewing tobacco final product and that the said records were duly checked by the department from time to time.
The department was informed that the said additive mixture companysisted of various ingredients like raw kimam, menthol, aromatic chemicals, spices, gulab jal, attar and perfumes etc.
This companyrt further found that M s Dharampal Satyapal had failed to disclose the existence of their units, they did number maintain any records under the excise law, they clandestinely manufactured their companypound without informing the department, and in the circumstances, the department was right in invoking the extended period of limitation.
KAPADIA, J. Whether, in the facts and circumstances of the case, the tribunal was justified in holding that the additive mixture processed by the three appellants herein was excisable and classifiable under chapter sub heading 2404.49 of Central Excise Tariff Act, 1985 and that the department was right in invoking the extended period of limitation under the proviso to section 11A 1 of Central Excise Act, 1944 hereinafter referred to as the Act .
That, the evidence brought forth by the appellants regarding inspection of their factories pertained to the years 1992 and 1993, during which period the said mixture was number chargeable to duty.
