TaxTMI 
TaxTMI 
2026 (4) TMI 428
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....ct] with interest and penalty. 2. Excise Appeal No. 51197 of 2025 has been filed by Madan Lal Paliwal, Managing Director of the appellant, to assail that portion of the order dated 13.03.2025 passed by the Commissioner that imposes penalty upon him under rule 26 of the Central Excise Rules, 2002 [the Central Excise Rules] 3. Excise Appeal No. 51265 of 2025 has been filed by Prakash Purohit, Executive Director of the appellant, to assail that portion of the order dated 13.03.2025 passed by the Commissioner that imposes penalty upon him under rule 26 of the Central Excise Rules. 4. Excise Appeal No. 51268 of 2025 has been filed by N.K. Harsh, Proprietor of M/s. Shrinath Agencies, to assail that portion of the order dated 13.03.2025 passed by the Commissioner that imposes penalty upon him under rule 26 of the Central Excise Rules. 5. Excise Appeal No. 51366 of 2025 has been filed by Dinesh Jain, Director of M/s. Eden Hi Tech Films Pvt. Ltd. to assail that portion of the order dated 13.03.2025 passed by the Commissioner that imposes penalty upon him under rule 26 of the Central Excise Rules. 6. Excise Appeal No. 51649 of 2025 has been filed by Chetan Jain, Vice President....
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....dger accounts maintained for such raw tobacco suppliers in the books of the appellant have been enclosed with the Appeal Memo. 12. Raw tobacco was transported from Gujarat to Unit-I of the appellant in trucks owned by Madan Lal Paliwal that were run on contract basis by other persons. The goods were cleared under cover of bilties/ GRs and invoices. 13. The raw tobacco was transported to Unit-II at Nathdwara via Ratanpur check post. At the check post, one copy of each bilty or GR along with corresponding invoice was submitted to the Commercial Tax department. The truck offloads the raw tobacco in the processing Unit of the appellant i.e., Unit-II. As soon as the raw tobacco/raw materials are received in the factory, the same are recorded in RG-12 register. 14. At Unit-II, the raw tobacco and lime are mixed with the help of mixer and then left open for drying. The lime is mixed to the extent of 40% of weight of tobacco i.e. to say with 100 kg of raw tobacco and 40 kg of lime is mixed. Dried lime mixed tobacco is filled in gunny bags and brought to the vibrator machine for dusting out extra dust and lime from lime mixed tobacco. Dust free lime mixed tobacco is moistened with ....
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....to the appellant was M/s. Eden Hi-tech Films Pvt. Ltd. Upon investigation it was found that M/s. Eden Hi-tech Films Pvt. Ltd. had shown clearance of material to some other firms, but the goods were ultimately received by the appellant; (c) The appellant had received 925536.781 Kg. of unaccounted flexible printed laminated sheets/films for packing of their finished goods, from which 132,21,95,401 pouches of 6gm Miraj Tobacco could be packed; (d) The appellant has a installed capacity of making 54,52,800 pouches in a day; (e) For clearance and onward sale of finished goods, the appellant had created a firm in the name of M/s. Bhagyadeep Agency and appointed various other dealers; and (f) The clandestine clearance by the appellant is established from the fact that the dealer of appellant M/s Srinath Agencies made cash sales of Miraj Tobacco without recording and accounting the same. Another dealer, namely, Manohar Lal Bhatia used to send Miraj Tobacco to various sub-dealers without documents. 20. The appellant filed an interim reply dated 11.08.2008 to the show cause notice. Thereafter, additional submissions were filed on 10.02.2009. A letter da....
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.... Neeraj Bhagat (2003), has clarified that the department is not required to establish every minute detail with empirical data in all cases, as long as the basis for the demand is reasonable and founded on concrete information. The proceedings are thus not liable to be quashed on this ground. 19.18 I further observe that while the taxpayer admits to receiving tobacco, their defense that discrepancies arose due to clerical errors at check posts is not substantiated by credible documentary evidence.***** ***** 19.20 Further, the reliance on retracted statements by the taxpayer is a flawed defense. As established in Union of India v. Kamtakshi Finance Corporation Ltd. (1991), even retracted statements hold weight unless proven to have been made under duress, which has not been demonstrated here. The department has provided sufficient evidence that the taxpayer failed to account for all packing materials, and this failure to substantiate purchases through proper invoices cannot be dismissed. Further, the taxpayer's claim of denial of cross-examination is without merit. As per the ruling in M/s. Kisan Samrat Ltd. v. CCE (2008), cross-examination is....
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....owing decisions: (a) M/s Surya Wires Pvt. Ltd. vs. Principal Commissioner, CGST, Raipur [Excise Appeal No. 51148 of 2020 decided on 01.04.2025 (Tri.-Del.)]; (b) Commissioner of Central Excise & CGST, Jodhpur vs. M/s. Paradise Steels Pvt. Ltd. [Excise Appeal No. 51315 of 2019 decided on 27.06.2025 (Tri.-Del.)]; (c) Ambika International vs. Union of India [2018 (361) E.L.T. 90 (P&H)]; (d) Hi Tech Abrasives Ltd. vs. Commissioner of C. Ex. & Cus., Raipur [2018 (362) E.L.T. 961 (Chhattisgarh)]; (ii) The appellant neither procured raw material clandestinely nor cleared the finished goods without payment of duty. There is no corroborative or documentary evidence to prove clandestine production; (iii) Reliance placed on the statements made under section 14 of the Central Excise Act to substantiate that the appellant was involved in clandestine removal of the goods is not justified as the procedure contemplated under section 9D of the Central Excise Act was not followed; (iv) The appellant neither procured raw material i.e. raw tobacco and packaging material clandestinely nor cleared the finished goods without payment of duty. T....
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....ial required by the appellant for clandestine removal of finished goods was thus facilitated by M/s. Eden Hi Tech Films, Udaipur through its network of dummy units; (iv) From the speed of the pouching machines and number of machines, it could be ascertained that the appellant has the capacity of producing 5452800 pouches of 6 gms in a day by consuming 32716.800 kgs of finished goods and 3816.960 kgs of packing material which makes it obvious that the appellant has the capacity to produce the Miraj Tobacco pouch of the clandestinely received tobacco and packing material over and above the recorded quantity; (v) The installed working capacity of the machinery and statements of the contractors also point at the clandestine production over and above the recorded production. Accordingly, out of the quantity of 925536.781 kgs of film and 5684444.7 kgs of raw tobacco, a quantity of 947407450 nos. pouches of 6 gms each of Miraj Tobacco was clandestinely manufactured and cleared; and (vi) GRs resumed and submitted by Vikram Singh Rajpurohit, Proprietor of M/s. Rajpurohit Transport Co., Udaipur with the documents furnished by Manohar Lal Bhatia and the dealers, rev....
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.... clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of note books or diaries privately maintained or on mere statements of some persons, may even be responsible officials of the manufacturer or even of its Directors/partners who are not even permitted to be cross-examined, as in the present case, without one or more of the evidences referred to above being present. In fact, this Bench has considered some of the case-law on the subject in Centurian Laboratories v. CCE, Vadodara [2013 (293) E.L.T. 689]. It would appear that the decision, though rendered on 3-5-2013, was reported in the issue of the E.L.T., dated 29-7-2013, when the present case was being argued before us, perhaps, not available to the parties. However, we have, in that decision, applied the law, as laid down in the earlier cases, some of which now have been placed before us. The crux of the decision is that reliance on private/internal records maintained for internal control cannot be the sole basis for demand. There shou....
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....ion that requires to be considered is whether the statements made under section 14 of the Central Excise Act could have been relied upon to record a finding that the appellant had clandestinely removed the goods since the procedure contemplated under section 9D of the Central Excise Act had not been followed. The Commissioner has noted in paragraph 19.4 of the order that there has to be a justification for retraction of the statements and that statements made under section 14 of the Central Excise Act retain evidentially value even if retracted. The Commissioner also observed that there is no inherent right to cross-examine witnesses during quasi judicial proceedings and, therefore, rejected the contention of the appellant for cross-examination of the witnesses. 31. Section 14 of the Central Excise Act deals with power to summon persons to give evidence and produce documents. It provides that any Central Excise Officer empowered by the Central Government shall have the power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry, which such officer is making under the Central Excise Act. ....
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....tion 9D shall apply to any proceedings under the Central Excise Act as they apply in relation to proceedings before a Court. What, therefore, follows is that a person who makes a statement during the course of an inquiry has to be first examined as a witness before the adjudicating authority and thereafter the adjudicating authority has to form an opinion whether, having regard to the circumstances of the case, the statement should be admitted in evidence, in the interest of justice. Once this determination regarding admissibility of the statement of a witness is made by the adjudicating authority, the statement will be admitted as an evidence and an opportunity of cross-examination of the witness is then required to be given to the person against whom such statement has been made. It is only when this procedure is followed that the statements of persons making them would be of relevance for the purpose of proving the facts which they contain. 34. Section 138B of the Customs Act, 1962 [the Customs Act] is identical to section 9D of the Central Excise Act. 35. It would now be appropriate to examine decisions interpreting section 9D of the Central Excise Act and section 138B of....
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....mplated by clause (a) of section 9D(1) exist, then clause (b) of section 9D(1) comes into operation and this provides for two steps to be followed. The first is that the person who made the statement has to be examined as a witness before the adjudicating authority. In the second stage, the adjudicating authority has to form an opinion, having regard to the circumstances of the case, whether the statement should be admitted in evidence in the interests of justice. The judgment further holds that in adjudication proceedings, the stage of relevance of a statement recorded before Officers would arise only after the statement is admitted in evidence by the adjudicating authority in accordance with the procedure contemplated in section 9D(1)(b) of the Central Excise Act. The judgment also highlights the reason why such an elaborative procedure has been provided in section 9D(1) of the Central Excise Act. It notes that a statement recorded during inquiry/investigation by an Officer of the department has a possibility of having been recorded under coercion or compulsion and it is in order to neutralize this possibility that the statement of the witness has to be recorded before the adjudi....
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....e of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D(1) mandates that the evidence of the witness has to be recorded before the adjudication authority, as, in such an atmosphere, there would be no occasion for any trepidation on the part of the witness concerned. 25. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a gazetted Central Excise Officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry befo....
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....sions of sub-sections (1) and (2) of section 9D of the Central Excise Act, and after placing reliance on the judgment of the Punjab and Haryana High Court in Ambika International, the Chhattisgarh High Court held: "9.3 A conjoint reading of the provisions therefore reveals that a statement made and signed by a person before the Investigation Officer during the course of any inquiry or proceedings under the Act shall be relevant for the purposes of proving the truth of the facts which it contains in case other than those covered in clause (a), only when the person who made the statement is examined as witness in the case before the court (in the present case, Adjudicating Authority) and the court (Adjudicating Authority) forms an opinion that having regard to the circumstances of the case, the statement should be admitted in the evidence, in the interest of justice. 9.4 The legislative scheme, therefore, is to ensure that the statement of any person which has been recorded during search and seizure operations would become relevant only when such person is examined by the adjudicating authority followed by the opinion of the adjudicating authority then the statement....
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.... formation of an opinion that it requires to be admitted in the interest of justice. In taking this view, we find support from the decision in the case of Ambica International v. UOI rendered by the High Court of Punjab and Haryana." (emphasis supplied) 39. In M/s. Drolia Electrosteel P. Ltd. vs. Commissioner, Customs, Central Excise & Service Tax, Raipur [Excise Appeal No. 52612 of 2018 decided on 30.10.2023] decided on 30.10.2023, a Division Bench of the Tribunal examined the provisions of section 9D of the Central Excise Act and after placing reliance upon the decision of the Punjab and Haryana High Court in Jindal Drugs Pvt. Ltd. vs. Union Of India [2016 (340) E.L.T. 67 (P & H)], observed that if the mandatory provisions of section 9D(1)(b) of the Central Excise Act are not followed, the statements cannot be used as evidence in proceedings under Central Excise Act. The relevant portions of the decision of the Tribunal are reproduced below: "14. Evidently, the statements will be relevant under certain circumstances and these are given in clauses (a) and (b) of subsection (1). There is no assertion by either side that the circumstances indicated in (a) existed in t....
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....tice relies upon a report provided by the Commercial Tax Department of Rajasthan and alleges that the appellant had during the period of dispute received 9,97,898 kgs of raw tobacco which was transported by M/s. Pinakpani Taders, M/s. Ashit Kumar and Co. and M/s. Jalaram Trading Co., though in the Check Post records of the Commercial Tax Department the name of consignee is shown as M/s. Stonic Marble. It was, therefore, alleged by the department that the raw tobacco shown to have been invoiced to M/s. Stonic Marble was actually received by the appellant and the same was unaccounted. This finding has been confirmed by the Commissioner in the impugned order. 44. It is not in dispute that when goods transported in trucks come to Rajasthan from Gujarat they have to pass through Ratanpur Check Post, where the Commercial Tax Department of Rajasthan verifies the load in the truck and defaces the duplicate copy of GR/Bilty and invoices. On the basis of the copy of GR and invoices retained by the Ratanpur Check Post for each truck, the relevant data is fed in the computer by the Check Post. This data is generally entered either on the basis of Rajasthan Sales Tax [RST] number or Rajastha....
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.... that whenever the raw tobacco was brought from Nadiad, Gujarat, it was always unloaded at the appellant factory in Rabcha i.e. Unit-II of the appellant; and (vi) Harish Bhai Mani Bhai Patel, Proprietor of M/s. Ashit Kumar & Co. and power of attorney holder of M/s. Jalaram Trading Co. and M/s. Bharti Tobacco Co. in his statement has averred that for transporting raw tobacco from their firm to the appellant, vehicles were arranged by the appellant and GRs were arranged by Prakash Purohit General Manager of the appellant and the details were filled by them. 47. These facts in respect of raw tobacco procurement are based on the statements recorded under section 14 of the Central Excise Act during the investigation. The order shows that the statements of Parmanand Maheshwari, Accountant of the appellant; Mukesh, employee of the appellant; the statements of transporters/drivers; and the statement of Harish Bhai Mani Bhai Patel, Proprietor of the M/s. Ashit Kumar & Co. have been relied upon. There is no corroborative or documentary evidence which may suggest that the goods invoiced in the name of M/s. Shelraj Tobacco and M/s. Raghunayak Traders were actually delivered at the ....
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....ared under parallel invoices were clandestinely purchased by M/s Bhagyadeep Agencies from the appellant and then cleared under parallel invoice to M/s. Shrinath Agencies is an erroneous conclusion. Mukesh in his statement dated 23.08.2025 admitted that he had prepared the aforesaid parallel invoices but this statement was retracted by a letter dated 27.08.2005. In any case, statement made under section 14 of the Central Excise Act cannot be relied upon for the reasons stated above. 51. There was, therefore, no clandestine removal of raw tobacco by the appellant to any of its dealers. The fact that during the investigation there was no difference in physical stock of finished goods and finished goods recorded in RG-I further proves that there was no clandestine production or removal by the appellant. 52. To support clandestine procurement of raw tobacco, reliance has been placed on the computerized record obtained from Ratanpur check post that showed multiple movement of same vehicle with same invoice number and that the entries appearing in the name of M/s. Stonic Marble were clandestine procurement by the appellant. 53. This aspect has been considered in the earlier part ....
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....ideration in Excise Appeal No's. 51197 of 2025, 51265 of 2025, 51268 of 2025, 51366 of 2025, 51649 of 2025 and 51650 of 2025 is regarding imposition of penalties under rule 26 of the Central Excise Rules. 58. Learned counsel for the appellant submitted that the impugned order does not confiscate the goods nor is there any finding that the goods are liable to confiscation and only while imposing penalty under rule 26 of the Central Excise Rules it has been stated that penalty has been imposed under rule 26 of the Central Excise Rules since the goods are liable to confiscation. 59. Learned special counsel appearing for the department, however, supported the imposition of penalties under rule 26 of the Central Excise Rules. 60. The submissions advanced by the learned counsel for the appellant and the learned special counsel appearing for the department on the imposition of penalty under rule 26 of the Central Excise Rules have been considered. In order to appreciate the contentions, it would be appropriate to reproduce rule 26 of the Central Excise Rules. They are as follows: "26. Penalty for certain offences (1) Any person who acquires possession of, or is ....