2025 (9) TMI 931 - HC - Central Excise

Decision set aside for lack of application of mind; appeal remanded for rehearing on merits within three months

The Principal Commissioner Central Tax And Central Excise, Chhattisgarh Versus M/s Devi Iron And Power Pvt. Ltd. ; Shri Ramanand Agrawal Director of M/s Devi Iron And Power Pvt. Ltd. ; Shri Arun Kumar Gupta Ex- Director of M/s Devi Iron And Power Pvt. Ltd. & Shri V.P. Goswami Manager (Sales), of Mahamaya Steel Industries Ltd.

HC set aside the Tribunal's order for lack of application of mind, noting the Adjudicating Authority's order was reasoned and based on evidence and ... Clandestine removal - no corroborative evidence available, without going into the merits of the case - non-application of mind - invocation of extended period of limitation - HELD THAT:- The Adjudicating Authority has considered the evidence of the parties as well as 58 documents brought on record before passing the order dated 10/02/2017 (Annexure A/3) which is a reasoned and speaking order, but the Tribunal (being the Appellate Authority) did not consider any of the said evidence as well as documents available on record and straightway came to the conclusion that clandestine removal is a serious charge which has not been proved by the Department as no corroborative evidence has been brought on record and after relying upon the decision rendered by the Allahabad High Court in the matter of Continental Cement Company [2014 (9) TMI 243 - ALLAHABAD HIGH COURT] proceeded to allow the appeal and set aside the order of the Adjudicating Authority. It is well settled that the judgment of the appellate court must reflect its conscious application of mind and record findings supported by reasons, on all the issues arising along with the contentions put forth, and pressed by the parties for decision of the appellate court. The Tribunal, being the first Appellate Authority, ought to have recorded points for determination and after consideration and a detailed discussion on each of the points so framed, ought to have recorded its findings supported by reasons thereof, which has not been done. As such, the impugned order dated 20/04/2018 (Annexure A/1) is hereby set aside and the substantial questions of law are answered in favour of the appellant and against the respondent Firm. Matter is remitted to the Tribunal for considering the appeal afresh on merits and to decide it in accordance with law after hearing the parties and considering the material available on record within a period of three months from the date of receipt of a copy of this order. Appeal allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether the Appellate Tribunal (CESTAT) was correct in holding that no corroborative evidence was available to prove clandestine removal, without addressing merits as discussed by the Adjudicating Authority. 2. Whether the Appellate Tribunal was legally justified in relying on a precedent (Continental Cement) without appreciating distinguishing factual features of the present case. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legal framework: The Court examined appellate duty to consider evidence and record reasons under principles of administrative and appellate adjudication, including obligations to frame points for determination and to apply mind to the issues raised; statutory provisions relating to demand, interest and penalties under the Central Excise Act and Rules were the substantive statutory background for the underlying dispute (recovery of duty, interest, confiscation and penalties for alleged clandestine removals). Issue 1 - Precedent treatment: The Court relied on settled jurisprudence that an appellate court must reflect conscious application of mind and record findings supported by reasons on issues pressed by parties (citing the principle in Santosh Hazari v. Purushottam Tiwari). That precedent was followed to require principled appellate decision-making. Issue 1 - Interpretation and reasoning: The Court reviewed the record and found that the Adjudicating Authority had considered witness statements and 58 documents and had passed a reasoned, speaking order addressing specific issues (recoverability, extended limitation, interest, confiscation/fine and penalties). The Tribunal, however, did not formulate points for determination, did not engage with the evidentiary material or the reasoning of the Adjudicating Authority, and recorded a brief conclusion that clandestine removal was not proved because corroborative evidence was absent. The Court held that such a brief, non-reasoned approach by the Appellate Tribunal amounted to failure to apply its mind to the merits and to the contentions advanced, rendering the appellate decision unsustainable. Issue 1 - Ratio vs. Obiter: Ratio: An appellate authority must frame issues, consider material and record reasoned findings on each issue; absence of such reasoning renders the appellate order liable to be set aside. Obiter: Observations on the sufficiency of particular seized documents (diary/loose sheets) as corroboration were treated contextually but the Court did not decide the evidentiary sufficiency on merits-it remitted the matter for fresh consideration. Issue 1 - Conclusion: The Court set aside the Appellate Tribunal's order for failure to record points for determination and for not discussing the evidence and issues with reasons, and remitted the appeal to the Tribunal to decide afresh on merits after hearing the parties and considering records within a stipulated time. The Court expressly refrained from expressing any view on the substantive merits of clandestine removal. Issue 2 - Legal framework: The Court addressed the appellate obligation to distinguish precedent when facts differ and to apply precedent only after assessing distinguishing features; appellate reliance on precedent requires appreciation of factual compatibilities and differences between the precedent and the case at hand. Issue 2 - Precedent treatment: The Tribunal relied on a High Court decision (Continental Cement) to support its conclusion that clandestine removal was not proved. The Court held that reliance on precedent without appreciation of distinguishing factual matrix is impermissible. The requirement is to consider whether the precedent is factually on all fours or distinguishable; an appellate court must record reasons when it follows or departs from precedent. Issue 2 - Interpretation and reasoning: The Court found that the Tribunal did not evaluate how the facts and evidence in the present file compared with the facts in the precedent relied upon. By simply invoking the precedent and adopting its conclusion without engaging with the bulk of evidence considered by the Adjudicating Authority, the Tribunal failed in its duty to apply legal principle to the facts. The Court treated the Tribunal's reliance on the precedent as inadequately reasoned because it omitted comparative factual analysis. Issue 2 - Ratio vs. Obiter: Ratio: An appellate authority cannot dispose of an appeal by mechanically applying precedent; it must analyze and record how precedent applies to the specific facts and evidence before it. Obiter: The Court did not overrule or limit the cited precedent; it confined its finding to the Tribunal's incorrect application in this particular instance. Issue 2 - Conclusion: The Court held the Tribunal unjustified in relying on the precedent without appreciating distinguishing factors and, coupled with its failure to consider the record, set aside the Tribunal's order and remitted the matter for fresh decision in accordance with law. Cross-reference (Issues 1 & 2): The Court linked both issues: the Tribunal's failure to engage the record (Issue 1) and its uncritical reliance on a precedent without distinguishing facts (Issue 2) together rendered the appellate order unsustainable. The remedy invoked was setting aside the impugned order and remittal for fresh adjudication with directions to frame points, consider evidence and precedents with reasons. Remedial direction and limitation: The Court remitted the appeal to the Appellate Tribunal for fresh decision on merits after hearing parties and considering material on record within three months, and made clear it did not express any opinion on the substantive merits of clandestine removal or on the sufficiency of particular items of evidence.