The imaginary 'Blank CD' and the Vendetta
ONE sunny day, the assessee is visited by some Central Excise officers. He is first given a lecture on etiquettes - that is he should have made a trip to the Central Excise office and "paid" his respect to his jurisdictional officers. Not having done that, the officers were required to trudge all the way to his factory and that would cost him MORE.
Not to be intimidated by such "paid respects", the assessee informs the "bank" [CBI] who co-ordinate with the assessee and a trap is laid - the hunter becomes the hunted!
High on seeking badla , a case is booked against the assessee and the demand runs - should we say, gallops - into crores. Not ready to take things lying down, the assessee files a Writ petition before the High Court. He says it is plain revenge.
In the meantime, the demand is confirmed and another SCN traipses in. A couple of Writ Petitions against this too! The assessee says that the demand is "imaginary" - no such "excisable goods" saw birth in his factory and it is wishful thinking on the part of the department. Proof in the form of photographs of the machinery and the flow chart of the manufacturing process and the report of the experts... Probably, the officers never took a round in the factory but visited only the Managing Director's office…
Anyways, there was never a Central Excise issue involved - it was only a personnel issue - personnel getting caught!
By the way, on the subject matter (read excisability) one of our guest columnists had many years ago narrated this in his piece - "A steal for Rs.2.95!"
"…This blended cut tobacco is fed into the cigarette making machine, which is a complex machinery boasting a multitude of ancillary functions like: -
1. Un-spooling the cigarette paper spool;
2. the cigarette paper is printed with the logo of the company, a written word being the brand name, and on occasions with the name of the manufacturer written sideways, black or golden yellow in colour;3. the cigarette paper after printing is simultaneously fed with the cut tobacco and immediately gets converted into a cylinder - a running tube with cut tobacco filled in it by sealing alongside with glue;
4. this laden tube is cut with a fast revolving blades into running lengths of specific size depending upon the intended cigarette length;
5. It then moves onto another roller which is being fed with cigarette filter rods (chapter 56) each 66 mm in length cut into filters of 22 mm which is placed on the roller to which two pieces of the cut tobacco filled tubes are placed on either side and then simultaneously covered and glued by the filter covering paper/wrapper - golden yellow, brown, dotted or white in colour, and finally halved on the filter portion into two cigarette sticks, one facing the other; (Way back in early ‘80's, while prescribing the effective rate of duty, it was mandatory that the cigarette filter should have a minimum length of 11 mm, nowadays the tariff entry itself prescribes this.)6. these processes are too quick to be noticed by the naked unless the machine breaks down and you can see the cigarette in various stages of un-dressing;
7. These cigarettes are moved in trolleys to a drying room if required and then carried to the packing/production section, where they will be dressed up into a packet;
8. The packing machine is another beautiful example of harmony, we have the conventional "shell and slide" pack and the premium brands are clothed in a flamboyant manner in a "hinge lid pack" (HLP), you have soft cup labels too;9. First - the shell and slide pack (the department sought duty on the "conjugal bliss" acquired by the shell and slide by alleging that a box classifiable under heading 4819.12 of the CETA'85 came in to being. Fortunately, the conjugal bliss was a long lived one for the Madras High Court in the case of Asia Tobacco Co. Ltd. v. U.O.I. () and again in the case of the very same company Asia Tobacco Co. Ltd. vs. A.C, C.Ex, () held that what comes into being is not a mere "packet/box/carton" consisting of a shell and a slide but a "CIGARETTE PACKET containing ten cigarettes". A look at the said manufacturing process would reveal that cigarettes, 10 or 20 in number are first placed mechanically on an embossed paper backed aluminium foil cut into a specific length by the machine leaving a portion of the foil for being folded upwards to keep a part of the cigarettes exposed, (note that embossing is done on the machine itself on the plain paper backed aluminium foil while being un-spooled), the exposed portion is then covered with another cut piece of embossed paper backed aluminium foil and this in turn is placed on the open slide, which then slides into the opened shell and what is ultimately formed is a "packet containing ten cigarettes" wrapped in embossed paper backed Aluminium foil. Had someone studied the manufacturing process and then proceeded to issue demand notices this exercise in futility could have been avoided . Although, Board Circular 11/89 dated 30.03.1989 in the context of "plastic milk pouches" and "tea packets" clarified that these were not chargeable to duty, no one bothered to apply the same logic here. Also refer the case of Milk Plant, 1995(79)ELT 315(Tri) wherein a similar view was taken."
For more on the CBI trap and Vendetta, look out for the Delhi High Court decision that we would be reporting tomorrow…some days ago, it was "Sex orgies, contraceptives, tomato ketchup, blow dryer & Tax Evasion"!