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M/s. Sri Ganesh Industries & Another v/s Commissioner of Central Excise, Madurai

    Appeal Nos. E/652 of 2003 & 653 of 2003

    Decided On, 24 November 2009

    At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Chennai


    Shri S. Venkatachalam, Advocate, for the Appellants. Shri T.H. Rao, SDR for the Respondent.

Judgment Text

Per Jyoti Balasundaram

In this case the Deputy Commissioner of Central Excise has confirmed a demand of Rs.5,61,862/- under Rule 196 of the Central Excise Rules, 1944 on a quantity of 3075 MTs of molasses received free of duty under Chapter X Procedure and cleared without using the same in the manufacture of cattle feed as per the assessee?s declaration and inter alia imposed a penalty of Rs.50,000/- on Sri Ganesh Industries and a penalty of Rs.10,000/- on its proprietor. He also confiscated certain goods. The duty demand was upheld by the Commissioner (Appeals) who however reduced the penalty on Sri Ganesh Industries to Rs.25,000/-. Hence these appeals.

2. The case of the Department in brief is that the assessee procured molasses under Chapter X for the manufacture of cattle feed. Evidence revealed that the molasses was diverted as such and never consumed for the manufacture of cattle feed. It was also found that rice bran which was also an ingredient required for the manufacture of cattle fee was not purchased by the assessees as stated. The case is made out on the basis of several pieces of evidence including the statement recorded from the so called purchasers of cattle feed who denied receipt of the cattle feed and so called suppliers of rice bran who also denied having sold any rice bran to the assessee. The evidence also brings out that although 30346 units of electricity are required for the production of cattle feed of the quantity shown in the assessee?s records only 4060 units of electricity were consumed during the period of six months and this clearly shows that the assessees could not have manufactured the quantity of cattle feed shown in the records during the period in dispute and the submission that additional electricity was utilized by hiring power generators from M/s. Nambiraj Radios & Electricals and from M/s. Saraswathy Sound Service has been found to be false for the reason that the proprietors of the above two concerns stated that they had never hired any power generators to the assesses and that they did not have such high power generators for running a factory like the assessees. The reliance placed by the assessees on the dual control by state excise officers who scrutinized registers maintained by the assessees for receipt of molasses and release of the same for the manufacture of cattle feed does not also lead to the conclusion of actual manufacture of cattle feed for the reason that there is no verification carried out as to cattle feed actually manufactured by the assessees and the registers only bear stray signature of state excise officials for the receipt of molasses and the entry showing release for use in the manufacture of cattle feed. Therefore, the registers maintained by the assessees do not establish that molasses had actually been consumed in the manufacture of cattle feed.

3. In the light of the above, we hold that the Department has made out a case that no cattle feed was manufactured by the assessees during the period in dispute and that, therefore, they are required to discharge duty liability on the molasses procured by them but not utilized for the manufacture of cattle feed. Since the demand is raised under Rule 196 of the Central Excise Rules the question of time limit does not arise and the assessees have also not challenged the demand on the ground of limitation.

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/> 4. We, therefore, uphold the impugned order insofar as it relates to Sri Ganesh Industries. However, since it is a proprietary concern of which Shri G. Jeganathan is the proprietor, separate penalty upon the proprietor is not sustainable and is set aside. 5. In the result Appeal No. E/652/2003 is rejected and Appeal No. E/653/2003 is allowed.