JUDGMENT
S.L.Peeran
1. All these appeals raise a common question of law and facts and arising from three Order-in-Original namely 30, 31, 32/2000-C.Ex.dated 31.10.2000 passed by the Commissioner of Customs & Central Excise, Hyderabad-III division.
2. Appellants are manufactures of ‘Pan Masala’ bearing the brand name ‘Manikachand Gutka’ falling under chapter sub-heading 2106.00 of Central Excise Tariff Act, 1985. They were issued with show cause notices alleging that they had manufactured and cleared ‘Chewing Tobacco/Zarda’ and the same was liable to be classified under heading 2404.49 and 1996-97 under chapter sub-heading 2404.40. The allegation was that the same was captively used in the manufacture of ‘pan masala’ within their factory.
3. The appellants took the view that the said product was an intermediate product and not capable of consuming and it was in a non-consumable nature/character. It was stated that the intermediate product had to undergo several other processes for the purpose of making it consumable. They contended that the item being not in a marketable stage cannot be charged to duty and they also claim that the process of production of pan masala, tobacco looses its identity and ceases to exit and were covered by notification No. 67/95 dated 16.3.95. They further pleaded that they have factories at Pune and Vadadora wherein similar proceedings had been initiated for levy for duty on this intermediate product. Appellants brought to the notice of the respective Commissioners that it was not in a consumable stage and not goods. The Commissioners by independent orders dropped the show cause notice and demand. In view of this submission, the earlier order passed by the Commissioner holding this item as ‘goods’ was remanded for de novo consideration. On de novo consideration, again the Commissioner has upheld the proceedings. In para-39 in Order-in-original No.30/2000, the Commissioner has drawn inference of the marketability solely on the basis of her own basis without any evidence on record. Despite the fact that two of the revenue witnesses namely Shri Hanumantha Rao and Shri Vijaya Kumar had clearly stated before her during the course of cross examination that the item cannot be consumed, but the Ld. Commissioner cast suspicion on the said statements holding that the statements cannot be accepted as they had not discharged (SIC) of the duty evasion. Paras-39 to 43 of the Order-in-Original No.30/2000 is reproduced herein below:-
39) Regarding consumability of the product, Shri Hanumantha Rao stated that it cannot be consumed straight away as it contains more perfumes. The reason given by Shri Hanumantha Rao is quiet contrary to the claim of Dhariwal who claim that the product is not consumable as it contains an over does of quimam. Sri Vijay Kumar states that to the best of his knowledge it cannot be consumed as such and he did not give any reasons as to why it cannot be consumed. it is surprising to note that none of them tasted the sample as seen from the record of personal hearing but offered their opinion peremptorily on the chewability or consumability of the same.
40) It is well known that in the eye of law, an expert is one who has acquired specialized knowledge, skill or experience in any branch of science, trade of profession. As observed by the Supreme Court in Haji Mohammed v. State of West Bengal (AIR 1959 SC 488) the Court can refuse to place its reliance on the opinion of an expert which is unsupported by any reason. Export’s opinion, being weak and infirm in nature particularly when not supported by reasons, cannot from the sole basis of conviction unless substantially corroborated by other independent evidence (The Tribunal in the case of Orbital Enterprises v. CC, 1990 (46) ELT 71 (T) followed and applied the above judgement of S.C.).
41) In such a case, it is unsafe to base any finding solely on the basis of an expert’s opinion without substantial corroboration. The opinion of an expert has to e treated like evidence of any other witnesses and does not stand on a higher footing. Therefore, under the circumstances and facts, I do not give any credence to the opinions given by the two dealers in respect of Chewing Tobacco processed by Dhariwal.
42) The Assessee contended that the alleged “mixture tobacco” dispatched from their unit at Pune is only a book transfer to their sister concern at Hyderabad for the purpose of captive consumption and that such transfer does not make the product marketable and cannot be considered as marketed.
43) There cannot be any book transfer of goods when the gods are physically transferred from Pune to Hyderabad. In fact, it is to be considered as stock transfer by book adjustment only. In this regard, Sri Prashant Bafna, Chief Executive, in his statement dated 21.11.1995 deposed that the scented/ Chewing Tobacco received from their own unit at Pune and the Chewing Tobacco Processed by them in their factory at Hyderabad from April, 1995 were one and the same; that Dhariwal started processing the said Chewing Tobacco from April 1995 and that during the earlier period from November, 1994 to March, 1995 they used to receive it from their Unit at Pune. It is Tobacco on payment of duty under Central Excise Invoice No. 1044, dated 15-12.1994 to their unit at Hyderabad for use in the manufacture of Pan Masala, i.e. Manik Chand Gutkha.
4. At the time of hearing the stay applications, the Ld. SDR was directed to call for a report from the Commissioner the order of the Commissionerates of Pune and vadodara considering the item to be not gods in terms of trade notice, case-laws, literature quoted by them. The Commissioner had sent a report stating that both the authorities of Vadodara and Pune had not taken into consideration the judgment of BELL MARK TOBACCO CO., 1967 (XIX) STC 120 (SC) wherein there was a discussion on treating the raw tobacco with jaggery juice and flavouring essences to be the Chewing Tobacco. Basing emphasis on this, the Commissioner in her written submission states that the impugned orders although differs from the other orders of the Commissioners of Vadodara and Pune yet her order should be confirmed for the reasons given by her in the impugned order. However, the Tribunal taking various pleas into consideration allowed the stay applications granting waiver of pre-deposit and directed the matter to be listed for final hearing today.
5. Ld. Counsel Shri S.S.Radhakrishnan arguing for appellants submits that the two of other Commissioners have dropped proceedings in their own case with regard to the very item in question. He relies on the evidence on record to show that the intermediate product is not consumable and distinguished the Apex Court judgement in BELL MARK TOBACCO CO. (supra) relied by the Commissioner. He contended that the said item referred to by the Apex Court was different and the said item was in a consumable from as it had the ingredients of Quimam, Menthol and Saffron water besides jaggery juice and flavouring essence. So, their item was different from that of the item dealt with in the Apex Court judgement, as there was no flavouring essence, spices and jaggery added in their case. Therefore, It was a different item and not in a consumable stage. Ld. Counsel also pointed out to the Commissioner’s finding which have been recorded in para-39 about the revenue witnesses categorically stating that the item cannot be consumed unless the goods are in marketable condition. The intermediate product cannot be subject to levy of duty.
6. The Bench at this stage posed a query to Ld. SDR as to whether he has further report in the matter regarding orders passed by the Commissionerates of Pune and Vadodara in appellants own case Ld. SDR filed two letters of May 2001 one received from the Office of Chief Commissioner of Central Excise and Customs Pune issued by Asst. Commissioner, Pune Zone and the other from the Office of Chief Commissioner Central Excise & Customs, Vadodara, issued by the Joint Commissioner. Both t he authorities have not accepted the order of the Commissioner rendered in the appellants own case dropping the proceedings. However, LD.SDR pointed to various portion of the Commisioner’s order and submits that the impugned orders are required to be confirmed in the light of Apex Court judgement relied by the Commissioner in her report which is already noted supra i.e. BELL MARK TOBACCO CO.
7. Ld. Counsel further submits that the demands are barred by time as the entire process of manufacture was within the knowledge of the department and no information had been suppressed and therefore the question of confirming demands by invoking larger period and imposing penalty does not arise.
8. In Counter, Ld.SDR relied on the findings given by the Commissioner in the impugned order.
9. On a careful consideration of the submissions, we notice that Commissionerates of Pune and Vadodara had initiated proceedings by raising demands on this very item which arose within the intermediate stage. However, after taking into consideration the entire evidence, they passed orders, dropping the proceedings. The Office of the Chief Commissioners of Pune & Vadodara have intimated to Ld.SDR that the orders passed by the Commissioner of Central Excise, Pune & Vadadora have been accepted by the Revenue in appellants own case. In this circumstance, the Bench cannot take a differing view in so far as appellant’s unit located in Hyderabadis concerned. Revenue has not established that intermediate product is consumable and it can be marketed. Merely because of some product arises during the intermediate stage, it cannot be considered as a fully manufactured product, unless it is shown that it has got market ability and is consumable. Appellants clearly have brought out through revenue witnesses that the intermediate product cannot be consumed. However, the Commissioner in para-39 of OIO No.30/2000 has not accepted the statement of revenue witness on the ground that witnesses might not have tested the intermediate product. We are not in a position to accept this finding for the reason that the burden to prove the item to be marketable lies on the revenue and they have not done so. Revenue could not establish that the item is marketable in appellants own case with regard to utilization of intermediate product located in their factory at Vadodara and Pune. The Commissioner of Central Excise Pune and Vadodara have dropped the proceedings and the Office of Chief Commissioner of respective zones has accepted the orders passed by the Commissioners. Therefore, we are of the considered opinion that in the light of revenue’s stand accepting the orders of the Commissioners of Pune and Vadodare wherein the Commissioners have held that intermediate product is not goods and cannot be subjected to duty, therefore this Bench is inclined to accept the Chief Commissioner stand in this matter, to accept the orders passed by the said Commissionerates of Central Excise, Pune and Vadodara dropping proceedings against the same appellants. We have also applied our mind and are of the considered opinion that the intermediate product is different from the one which has arisen in the BELL MARK TOBACCO case supra. In the BELL MARK TOBACCO case, the ingredients were jaggery juice and flavouring essence besides other items. In the present case, appellants have not added jaggery juice and flavouring essence including spices. Therefore, it cannot be said that the item is similar to the one referred to by the Apex Court in BELL MARK TOBACCO CO. case on which goods, the Commissioner is relying for confirmation of demands.
10. We have also considered the prayer of appellants that demands are barred by time. The entire manufacturing process was within the knowledge of the department and the final product was cleared on payment of duty. Therefore, it cannot be said that the department did not have knowledge of the manufacturing process. Appellants have been paying duty on the final product and the manufacturing process has been brought to the notice of the department. Therefore, the plea of the appellants that there was no suppression of any fact is also required to be upheld.
11. In that view of the matter, we uphold the contention that demands are barred by time. In view of revenue’s failure to establish the intermediate product to be ‘goods’ and that revenue having accepted the appellant’s plea in so far as their factories located in Pune and Vadodara are concerned, we are of the considered opinion that appellants have established their case and revenue has not discharged the burden of marketability and excisability. of the intermediate item . In that view of the matter the impugned orders are set side and appeals allowed with consequential relief, if any, as per law.
(Dictated & Pronounced in open court)