TaxTMI 
TaxTMI 
2026 (8) TMI 1595
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....e Appeal, the impugned Order gives rise to the following four substantial questions of law:- (A) Whether, in the facts and circumstances of the case and in law, the CESTAT erred in remanding the matter to the adjudicating authority and allowing the appeals without properly appreciating the facts, evidence, and findings recorded in the Order-in-Original, as well as the well-established, organized involvement of the Respondent and others in the clandestine removal of excisable goods (Gutkha) and evasion of Central Excise Duty of 156,80,70,098/- as revealed by a thorough investigation? (B) Whether, in the facts and circumstances of the case and in law, the CESTAT was justified in remanding the case to the adjudicating authority, inter alia, on the ground of incomplete cross-examination, when (i) no cross-examination was warranted in respect of certain witnesses whose statements were neither retracted nor disputed, and (ii) in other cases, cross-examination could not be conducted despite issuance of repeated summons as the witnesses failed to appear? (C) Whether, in the facts and circumstances of the case and in law, the CESTAT erred in holding that once duty....
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....ogesh Associates in clandestine clearance of its products i.e. "Goa 1000" gutka, without payment of duty. Therefore, the Revenue contends that this contravention of the Rule 11(2) of the Central Excise Rules, 2002 by these Respondents, makes them liable to pay penalty under Rule 25 of the Central Excise Rules, 2002. The Tribunal has set aside the penalty imposed by the Commissioner of Central Excise under Rule 25. The learned counsel for the Appellant has vigorously argued that such deletion of penalty by the Tribunal is erroneous. 5. The learned counsel for the Appellant has taken us through the provisions of Section 11AC of the Central Excise Act, 1944 and Rule 25 of the Central Excise Rules 2002, and has attempted to draw an inference that the penalty under Rule 25 would be imposable even if the Respondents have discharged their obligation of paying the requisite excise duty on their finished goods, as there is an alleged evasion of Central Excise Duty in the finished goods manufactured by Yogesh Associates using the raw materials/packing material supplied by the Respondents. 6. On the other hand, the learned counsel for the Respondents took a strong stand that if a person....
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.... shall also be liable to pay a penalty equal to the duty so determined: Provided that in respect of the cases where the details relating to such transactions are recorded in the specified record for the period beginning with the 8th April, 2011 up to the date on which the Finance Bill, 2015 receives the assent of the President (both days inclusive), the penalty shall be fifty per cent of the duty so determined; (d) where any duty demanded in a show cause notice and the interest payable thereon under Section 11AA, issued in respect of transactions referred to in clause (c), is paid within thirty days of the communication of show cause notice, the amount of penalty liable to be paid by such person shall be fifteen per cent. of the duty demanded, subject to the condition that such reduced penalty is also paid within the period so specified and all proceedings in respect of the said duty, interest and penalty shall be deemed to be concluded; (e) where any duty as determined under sub-section (10) of Section 11A and the interest payable thereon under Section 11AA in respect of transactions referred to in clause (c) is paid within thirty days of the da....
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....ill, 2015 receives the assent of the President; (iii) any case of non-levy, short-levy, non-payment, short-payment or erroneous refund where an order determining duty under sub-section (10) of Section 11-A is passed after the date on which the Finance Bill, 2015 receives the assent of the President shall be eligible to payment of reduced penalty under clause (b) or clause (e) of sub-section (1), subject to the condition that the payment of duty, interest and penalty is made within thirty days of the communication of the order. Explanation 2.- For the purposes of this section, the expression "specified records" means records maintained by the person chargeable with the duty in accordance with any law for the time being in force and includes computerised records.]" Rule 25:- "25. Confiscation and penalty:- (1) Subject to the provisions of section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse [or an importer who issues an invoice on which CENVAT credit can be taken] or a registered dealer, - (a) removes any excisable goods in contravention of any of the provisions of these rules or the notificatio....
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....terials and packing materials were supplied on payment of appropriate duties. The Tribunal while setting aside the penalty has held:- 4.2 At this juncture, it is observed that, the appeals of other appellants namely, Balaji, Montage, Arihant and Sachin who have cleared goods on payment of duty and on whom penalty under Rule 25(1) of Rules is imposed, can be taken up as it appears that the same can be decided irrespective of alleged clandestine removal of goods by Yogesh is established. In respect of these appellants, it has been held by the Commissioner that although investigation has not alleged offence of any clandestine removals against the said packing and raw material suppliers of Yogesh but as these units had supplied their finished goods without showing the name(s) of actual recipient of their materials i.e. M/s. Yogesh on their invoices in contravention of the provisions of Rule 11(2) of Central Excise Rules, 2002 in as much as they failed to issue invoice in the manner as prescribed in respect of the goods so removed and have thus helped M/s. Yogesh in clandestine manufacture and clearance of Gutka without payment of duty, with the help of diverted goods. On that ....
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.... Section 11AC cannot be levied. Since Rule 25 can be invoked subject to the provisions of Section 11AC of the Act, as a natural corollary, the ingredients mentioned in Section 11AC are also required to be considered while determining the question of levying of penalty under Rule 25 of the Central Excise Rules." 4.4 The said judgement of Saurashtra Cement was considered and followed by Hon'ble Delhi High Court in the case of Commissioner of Central Excise Delhi-II Vs. Ganpati Rollings - 2016 (338) ELT 587 (Del.) the relevant paras are as under: 9. The opening words of Rule 25 is "Subject to the provisions of Section 11AC of the CE Act" and not an non obstante clause which would have begun with the words "Notwithstanding the provisions of Section 11AC of the CE Act". It is plain that the CE Rules are subordinate legislation and have to abide the discipline of the statute under which they are made. Where Rule 25(1) expressly begins with "Subject to the provisions of Section 11AC of the CE Act", obviously the requirements of Section 11AC will have to constitute a condition subject to which the power under Rule 25 can be exercised. Rule 25 of the CE Rules itself came u....
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....Supreme Court in S.N. Chandrashekhar v. State of Karnataka, (2006) 3 SCC 208 and Ashok Leyland v. State of Tamil Nadu, (2004) 3 SCC 1, the Gujarat High Court interpreted Rule 173Q as under : "20. Thus as laid down by the Supreme Court the use of the words "subject to" has reference to effectuating the intention of the law and the correct meaning, is "conditional upon". Rule 173Q opens with the words "subject to the provisions contained in Section 11AC of the Act and sub-rule (4) of Rule 57-I and sub-rule (6) of Rule 57- U". Thus, confiscation of goods and levy of penalty under Rule 173Q of the Rules is conditional upon the requirements of Section 11AC and sub-rule (4) of Rule 57-I and sub-rule (6) of Rule 57-U being satisfied. Thus, the words "subject to" used in the said rule express a limitation on the power to confiscate goods and levy of penalty under the said rule." 4.5 Respectfully following the aforesaid judgments, we hold that since goods were cleared on payment of duty, the first condition of section 11AC which is non-payment of duty itself is not fulfilled and hence section 11AC is not invocable, consequently, goods are not liable to confiscation under R....