Appeal allowed for legitimate goods procurement despite investigation. Commissioner's decision overturned. Preliminary objection dismissed.

The appeal was allowed in favor of the appellant. The Tribunal found that the appellant had successfully demonstrated the legitimate procurement of goods through proper channels, despite being under investigation for possessing prohibited goods. The Commissioner (Appeals) overturning the dropping of the show-cause notice was deemed unsustainable, leading to the impugned order being set aside. The Tribunal dismissed the preliminary objection raised by the appellant regarding the maintainability of the appeal under Section 35E(2) of the Central Excise Act, 1944, as the appeal direction was given to the authority who passed the Adjudication order.

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Issues:
1. Appeal against order setting aside show-cause notice dropping.
2. Preliminary objection regarding maintainability of appeal under Section 35E(2) of the Central Excise Act, 1944.
3. Merits of the case regarding procurement of goods through proper channel.

Analysis:
1. The appellant filed an appeal against the order of the Commissioner (Appeals) setting aside the Adjudicating Authority's order dropping the show-cause notice. The appellant, a trader of polyester yarn, was under investigation for possessing prohibited goods. Despite producing documents like challans, invoices, and bank certificates to prove legitimate procurement, proceedings were initiated against them. The Commissioner (Appeals) overturned the dropping of the show-cause notice, leading to the appellant's appeal.

2. The appellant raised a preliminary objection regarding the maintainability of the appeal under Section 35E(2) of the Central Excise Act, 1944. The appellant argued that since the Adjudicating Authority's order was passed by the Additional Commissioner, the appeal filed by the revenue before the Commissioner (Appeals) was not maintainable. However, the Tribunal found that the appeal direction was given to the authority who passed the Adjudication order, hence dismissing the objection.

3. On the merits of the case, the appellant successfully demonstrated that they procured the goods through a proper channel by providing necessary documents. Despite the supplier's failure to prove legitimate procurement, no action was taken against them. The Tribunal concluded that the appellant had discharged the burden of proof regarding legitimate procurement, rendering the proceedings against them unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.

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