By TIOL News Service

MUMBAI, MAY 02, 2014: THIS case originated on account of disclosure of unaccounted income of about Rs.42 crore by Malpani Group, Sangamner, Dist. Ahmadnagar.Shri Rajesh O Malpani, Director of M/s Sargam Retail Pvt. Ld. on behalf of the Malpani Group admitted to such unaccounted income in his statement dated 7.2.2009 before the Income tax authorities. In the said statement, he also made a disclosure that an amount of Rs.21.86 crore was realized on account of sale and marketing of excisable goods i.e. tobacco products manufactured by M/s Fasttrack Packers Pvt. Ltd. who was authorized to manufacture both branded unmanufactured and manufactured tobacco in the brand name of ‘GaiChhapZarda' and ‘BadshshKhaini' and the amounts received on account of unaccounted sale of BadshahKhaini for the years 2008-09, 2009-10 and 2010-11 amounted to Rs.5.8 crore. The department was of the view that since Sargam Retail Pvt. Ltd. (SRPL) is a major wholesale dealer of the main appellant herein, i.e., Fasttrack Packers Pvt. Ltd. (FTPL) and the receipt pertains to sale of BadshahKhaini, the said amount of Rs.5.8 crore received by SRPLshould be added to the assessable value of the goods manufacturedand sold by M/ FTPL.

Consequently, a show-cause notice dated 25.5.2012 was issued demanding excise duty of Rs.4,61,64,018/- from M/s. FTPL and also proposing to recover interest and penalties not only on the main appellant but also on the co-appellants.

Vide Order-in-original dated 16.8.2013 the CCE, Nashikconfirmed the CE duty demand of Rs. 4,61,64,018/- along with interest thereon and also imposing equivalent amount of penalties on the main appellant M/s Fasttrack Packers Pvt. Ltd. He has imposed a penalty of Rs. 15 lakhs each on the 3 directors of the main appellant namely Shri R.R. Gholap, shri Sachin S Palod and ShriMilind S Palod under the provisions of Rule 26 of the Central Excise Rules, 2002. He has also imposed a penalty of Rs.5 lakhs each on the 3 C&F Agent namely M/s Vandana Enterprises, M/s Adipranav Agency and M/s. Rajlaxmi Agency under the provisions of the said Rule 26. He has imposed a penalty of Rs. 1 crore each on M/s Sargam Retails Pvt. Ltd. and its Director Shri Rajesh O Malpani under the said Rule 26. He has further imposed a penalty of Rs. 50,000/- on ShriRajendra S. Raka proprietor of M/s Rajesh Trading Company, who was the dealer for the main appellant.

Aggrieved, the ten appellants are before the CESTAT.

It is submitted -

++ Two parallel proceedings have been initiated by the department on the consideration amount of Rs.5.8 crore alleged to have been received by M/s FTPL. Vide show-cause notice dated 5.9.2011 issued to M/s SRPL, Service Tax of Rs.71,55,424/- is demanded on the consideration of Rs.5.8 crore received by treating the entire transaction as a service transaction falling within the taxable service of ‘Business Support Services'.

++ This SCN was adjudicated and vide order dated 4.12.2012& the CCE, Nashikupheld the demand and imposed penalties and interest and the ST paid by SRPL was appropriated towards the said demand.

++ Again, on the very same amount of Rs.5.8 crore, another SCN dated 25.5.2012 was issued to M/s FTPL alleging the transaction to be undervaluation in respect of the goods manufactured by FTPL and sold through the C&F agents namely M/s Vandana Enterprises, Adipranav Agency and Rajlaxmi Agency. Further, an amount of Rs. 7,57,569/- has been confirmed towards excise duty demand in respect of the sales made through Rajendra Trading Company, a dealer of M/s FTPL on the ground that the appellant received sum of Rs.50,92,000/- from the said dealer over and above the value declared in the invoices issued.

Inasmuch as the appellant submitted that there cannot be two parallel proceedings on the same transaction, one under the Finance Act, 1994 and another under the Central Excise Act, 1944. That either the transaction is a service transaction or it is a Central Excise transaction; it cannot be both at the same time.

It is further submitted that the three directors of M/s FTPL in their statements recorded before the excise authorities have denied having received any amount either from C&F agents or from M/s SRPL in respect of the sales of BadshahKhaini brand of tobacco manufactured and sold by them. Shri R. Malpani, director of M/s SRPL has also not admitted before the authorities that he had paid any amount to M/s FTPL. In the absence of any documentary evidence and inculpatory statements of any of the people concerned, there is no evidence available on record to show that the receipt of Rs.5.8 crore by M/s SRPL pertains to unaccounted receipt towards the manufacture and sale of branded tobacco by M/s FTPL through its C&F Agents. In view of the above, the impugned order confirming the demand of excise duty on the consideration received of Rs.5.8 crore alleged to have been received by the main appellant M/s FTPL is clearly unsustainable in law.

It is also pointed out that in respect of another case pertaining to same appellant, falling within the jurisdiction of Aurangabad Commissionerate, demand was made in respect of the same transaction for an amount of Rs.33 lakhs (approx.) paid to the appellant's unit at Aurangabad and the duty demand in that respect was set aside by the lower appellate authority vide Order-in-Appeal No. AV(4)271/2014 dated 6.1.2014.

In these circumstances, the appellant submits that the demand of CE duty cannot sustain.

The Revenue representative chose to reiterate the findings of the adjudicating authority.

The Bench observed -

++ It is seen that the revenue has undertaken two parallel proceedings in respect of the same transaction. On the one hand, they have treated the entire transaction as Business Support Services rendered by M/s SRPL and has accordingly confirmed the Service Tax demand and on the other they are treating the transaction as an excise transaction and on the same consideration received, excise duty demand of Rs.4.6 crore (approx.) has been confirmed.

++ The transaction cannot amount to both service and manufacture and sale at the same time; it can be only one of the two. On this very ground alone, the impugned order cannot be prima facie sustained.

++ Further, there is no evidence available on record with regard to the receipt of the consideration by the main appellant M/s FTPL and all the C&F Agents and Directors of the main appellant M/s FTPL have denied having received any money.

++ Similarly, in the case of transaction with Rajendra Trading Company in the jurisdiction of Aurangabad Commissionerate, the Revenue has taken a view that the duty demand is not sustainable.

Holding that the appellants have made out a strong case in their favour, the Bench granted unconditional waiver from pre-deposit of the adjudged dues and stayed the recovery.

In passing : Any which way you look at it, victory is a distinct possibility!Perhaps both the orders were accepted as legal &proper by the Committee for they were in favour of Revenue!

(See 2014-TIOL-686-CESTAT-MUM)