TaxTMI 
TaxTMI 
2026 (5) TMI 1658
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....3. It appears that Officers of HQ's Preventive Unit, Coimbatore Commissionerate on the premise of investigation, visited the factory premises of NSPI on 10.07.2012 during which time the officers appear to have recorded statements of persons available during investigation which resulted in the issue of SCN dated 05.04.2013. In the said SCN, it was inter alia proposed to club the clearances together of various entities viz. M/s. NSPI, M/s.New Poly Packs, M/s. Veerakumar Traders and M/s. Vee Plast and determine the aggregate value of clearances for the purpose of eligibility to avail SSI exemption in respect of demand of Excise duty from NSPI for the period March 2008 to June 2012 under Section 11A(4) of the Central Excise Act, 1944, apart from applicable interest and penalty under Section 11AC of Central Excise Act, 1944 and Rule 26 of Central Excise Rules (CER), 2002. It was also proposed to impose penalties on - (i) Managing Partner, Shri N. Shanmugam, Partners of M/s.NSPI viz. Shri N.S.Veera Kumar and Smt. S. Savitri under Rule 26 of the CER, 2002 (ii) Smt. Bhuvaneswari, Proprietor of M/s.New Paper Cups and Shri T. Babu Proprietor of M/s. Thirukumaran Poly Packs ....
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....amely M/s.New Poly Packs, M/s. Vee Plast and M/s. Veera Kumar Traders with that of M/s.NSPI and demand Excise duty of Rs.2,13,47,195/-. 6. It was submitted that M/s. New Poly Packs, M/s. Vee Plast and M/s. Veera Kumar Traders were different entities situated at different addresses as stated in the SCN itself; ⮚ These three units had their own machinery and facilities during the period up to 2009 which is evident from the details of machinery and their values as disclosed in the respective IT returns; ⮚ They had independent LT connections at their premises, had their own labour, independent registrations are also obtained; ⮚ Each entity had their own independent bank accounts who have been filing separate/independent income tax returns, etc., which were never disputed. ⮚ There is a finding recorded by the Commissioner that the search conducted at the premises of M/s. NSPI and three other entities on 10.07.2012 indicated that none of the concerns except M/s. NSPI had the facility to manufacture PP Rolls and Bags; though they claimed that they possessed machinery to manufacture of goods as shown in their annual reports....
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....nity to these entities to make their case, clubbing of their clearances with that of M/s.NSPI for the impugned period is clearly in violation of principles of natural justice and contrary to the settled position of Law and hence, such clubbing is unsustainable in law. In this regard, Ld. Counsel has relied on the following decisions : (i) CGST (East) Vs Unitech Containers Pvt. Ltd. [2017 (358) ELT 99 (Del.) affirmed by Hon'ble Supreme Court in 2024 (388) ELT 681 (SC)] (ii) Premier Heavy Engineering Corporation Vs CCE [2016 (337) ELT 332 (Guj.)] (iii) CCE Kolkata Vs Diamond Scaffolding Unit-V [2011 (274) ELT 10 (Cal.)] (iv) Poly Resins Vs CCE Chennai [2003 (161) ELT 1136 (Tri.-Che.)] (v) K.R. Balachandran Vs CCE Coimbatore [2003 (151) ELT 68 (Tri.-Che.)] 9. It was submitted that the Commissioner has merely relied on statements and certain documents as listed in the SCN viz. statements of Shri N. Shanmugam, Managing Partner of M/s.NSPI recorded on 10.07.2012, 04.09.2012 & 14.12.2012; ⮚ Statement of Shri N.S. Veera Kumar, Partner of M/s. NSPI and Proprietor of M/s.New Poly Packs recorded on 10.07.2012 and 17.12.2012; ....
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.... (ii) Vinod Solanki Vs Union of India [2009 (233) ELT 157 (SC)] (iii) CC & CE, Nashik Vs R.K. Patel & Co., [2018 (16) GSTL 73 (Bom.)] 11. It was submitted that the investigating officers have recorded the statements of witnesses but the Commissioner without examining such witnesses admitting the statements as relevant in accordance with the provisions of Section 9D (1) ibid made applicable to the adjudication proceedings by virtue of sub-section (2). In this regard, it was submitted that had the Commissioner conducted examination-in-chief of the witnesses in terms of Section 9D ibid, the Appellants would have had an opportunity of conducting cross-examination of such persons and, in the absence of any examination-in-chief by the Authority, opportunity to cross-examine has been denied and therefore, such statements recorded by the investigating officers during investigation lack evidentiary value. In this regard, the following orders/decisions have been relied upon : (i) Surya Wires Pvt. Ltd. & Others Vs Commissioner of Central Tax and Central Excise, Raipur [2025-TIOL-736-CESTATDEL] paras 21 to 34 and paras 35 to 44]. (ii) G. Tech Industries Vs UOI [2....
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....nts of independent buyers of goods as recorded in the SCN, it was argued that Shri Rangaswamy, Partner of M/s. Poomex Clothing Company has stated that they had procured Poly Bags from M/s. NSPI; ⮚ They would place orders over phone and the materials were received from M/s. NSPI and sometimes from M/s. Vee Plast and M/s. Veerakumar Traders; ⮚ They did not purchase any material from them without proper documents and all the payments were made by cheque/s only. ⮚ Shri N.N.Sharma, Managing Partner of M/s. M.V. Exports has stated in his statement that they have been purchasing Poly Bags from M/s. NSPI, M/s. New Poly Packs and others and he had also handed over copies of party-wise ledger of M/s. NSPI for 2010-11, M/s. New Poly Packs for 2009-10 and M/s. Vee Plast for 2009-10. ⮚ Shri R. Marappan, Managing Director of M/s. Saranya Garments in his statement has stated that they procure Poly Bags from M/s. NSPI, M/s. Veerakumar Traders and many others; that they would place orders on the staff of M/s. NSPI and M/s. Veerakumar Traders, they had purchased goods without documents only on one occasion i.e. 09.04.2012 from M/s. NSPI....
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....was submitted that paragraphs 29.4, 30.2 and 39.2 and Annexure 1 to SCN state that the value of clearances as shown in ER1/ER3 Returns submitted by M/s. NSPI for the period 2007-08 to 2011-12 have been adopted; ⮚ Perusal of Annexure 1 indicates demand of duty payable for the period March 2008 to May 2011 and an amount of Rs.4599/- for August 2011. The quantification of duty as stated in para 39.2 of the SCN is to be read with the value of clearance as per ER1 returns filed with the Appellant for the period 2007-08 to 2011-12 as tabulated in para 30.2 of the SCN; ⮚ The aggregate value of clearance has been arrived at in Annexure 1 by including the value of goods allegedly manufactured and cleared in the name of 3 dummy units; ⮚ When clubbing of clearances of three units itself was not permissible to be included, the basis of demand as worked out in Annexure 1 is untenable. ⮚ Our attention was invited to RG1 maintained for production and clearance of goods and quarterly ER-3 Returns filed indicating the quantity and value of final products manufactured cleared and that in the SCN. There is no allegation made out as to su....
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....here is also no finding that the PP Rolls seized were manufactured and cleared by M/s. NSPI without payment of duty. Therefore, the confiscation of goods valued at Rs.1 Lakh under Rule 25 of the Central Excise Rules, 2002 with option to pay Redemption Fine of Rs.25,000/- are not sustainable. 19. With respect to personal penalties imposed under Rule 26 of the CER, 2002, Ld. Advocate submitted that in the absence of any material evidence for manufacture and clearance of goods without payment of duty there is no justification for imposition of personal penalties under Rule 26 ibid. 20. It is further submitted that there is no order for confiscation of the goods manufactured and cleared by M/s. NSPI. In the absence of confiscation of the goods, personal penalty is not imposable under Rule 26 ibid. Reliance is placed on several judgments in this regard as under: (i) CCE Bangalore Vs Vijaya Steels Pvt. Ltd. [2012 (282) ELT 215 (Kar.) (ii) Nicholas D'souza Garage Vs CCE Thane [2015 (320) ELT 579 (Tri.-Mum.) approved by Hon'ble Supreme Court in Commissioner Vs Nicholas D'Souza Garage [2015 (320) ELT A 251 (SC)] (iii) CCE Vs Ramesh Kumar Rajendra Kumar & Com....
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....ts placed on record before us, it appears that the above 3 Units were operating for long from their own premises; had some machineries during certain periods; had independent LT power supply connections; obtained VAT Registrations operating separate Bank Accounts and filing separate Income Tax Returns, etc. Further, even the addresses as per SCN and the impugned order are also clearly different. Therefore, it is difficult to accept the case of the Revenue as to the non-existence of these 3 units to be non-existent. 26. Be that as it may, before the value of their clearances were ordered to be clubbed with that of M/s. NSPI principles of natural justice require that those 3 units ought to be put on notice indicating the intention to treat them as 'dummy units' and thereby inviting their reply, calling upon them to substantiate with evidence to prove that they were independent manufacturers and answer against clubbing the value of their clearances with the value of clearances of M/s. NSPI. The Commissioner has undeniably not complied with this legal requirement of law. We may usefully refer to the judgment of the Hon'ble High Court of Delhi in the case of Commissioner CGST (East) ....
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....without there being any corroborative evidence from independent sources. In this regard, contentions of the Appellants that the Commissioner did not examine the witnesses but admitted their statements as relevant in accordance with the provisions of Section 9D (1) of the Central Excise Act, 1944 as made applicable to adjudication proceedings in terms of sub-section (2), may be relevant, but we do not propose to pass any order on this aspect as the law is yet to settle. 29. Ld. Advocate has relied on several judgments of the High Courts and other Tribunal Benches and we have perused the same. Ld. Advocate would also take us through the judgment of the Principal Bench of the CESTAT, Delhi in the case of Surya Wires Pvt. Ltd & Others Vs Principal Commissioner of Central Tax and Central Excise, Raipur [2025-TIOL-736-CESTAT-DEL] and would take us through the following paragraphs particularly. The relevant observations are as under: "28. It, therefore, transpires from the aforesaid decisions that both section 9D(1)(b) of the Central Excise Act and section 138B(1)(b) of the Customs Act contemplate that when the provisions of clause (a) of these two sections are not applicable,....
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....es of M/s. NSPI under Mahazar on 10.07.2012. Ld. Advocate has submitted that the Appellant in their reply to the SCN enclosed as ANNEXURE-E, a comparative Statement of entries in the Note Books Nos. 6, 7, 9, 11 and 12 with the quantities manufactured and cleared as recorded in the statutory RG1 for the period from November 2009 to April 2012. The quantities of goods produced and cleared in each Month as recorded in RG1 and ER 3 Returns are far higher than the quantities recorded in the seized Note Books and therefore, the same completely goes contrary to the allegations levelled and the findings that the said Books were Production Schedules or Record of production etc. relied upon in the SCN. The Commissioner in para 55.33 of the impugned order has recorded that the Officers may not have recovered all the Note Books containing illicit production details since such note books or data may be kept elsewhere. The finding does not support the allegations in any manner since there is nothing brought out on record as to the officers being prevented from doing their job when they entered the premises of NSPI and hence, we are not at all impressed with such finding by the adjudicating autho....
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.... 34. In the present case, Revenue has not placed on record any documentary evidence to substantiate the allegations of clandestine manufacture and clearance without payment of duty. We therefore, do not approve the findings of the Commissioner with respect to clandestine manufacture and clearance by the Appellant. 35. The demand of duty of Rs.73,25,445/- in terms of ANNEXURE 1 to the SCN is for the period from March 2008 to May 2011 and for the month of August 2011; as submitted by the Ld. Advocate, the value of clearances by M/s. NSPI is tabulated in Para 29.3 of the SCN. However, the SCN has included the value of goods manufactured and cleared by the so called 'dummy units' for the purpose of determining the aggregate value in terms of Notification No.8/2003-CE [Para 30.2 of the Notice]. We have observed in earlier paragraphs of this order that the Commissioner having not issued SCNs to the said three units termed as 'dummy units', their clearances cannot be clubbed with that of M/s. NSPI. The demand of duty on the basis of such clubbing of the clearances of other nits as computed in ANNEXURE 1 to the SCN is clearly without legal basis and hence, unsustainable. 36. Further....