Custom, Excise & Service Tax Tribunal
Miraj Products P Ltd vs Commissioner Of Central Excise & ... on 6 April, 2026
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. I
EXICSE APPEAL NO. 50988 OF 2025
(Arising out of Order-in-Appeal No. UDZ-EXCUS-000-COM-49/2024-25/Commissioner
dated 13.03.2025 passed by the Commissioner, Central Excise & CGST Commissionerate,
Udaipur)
M/s. Miraj Product (P) Ltd. .....Appellant
Upali Oden,
Nathdwara, Distt. Rajsamand
VERSUS
The Commissioner .....Respondent
Office of the Commissioner,
Central Excise & CGST Commissionerate,
GST Bhawan, H-Block, 100 ft Road,
Sector-14, Hiran Magri, Udaipur (Raj)
WITH
E/51197/2025 E/51265/2025 E/51268/2025
E/51366/2025 E/51649/2025 E/51650/2025
APPEARANCE:
Shri B.L. Narasimhan, Shri S.C. Vaidyanathan and Shri Dhruv Tiwari, Advocates
for the Appellant
Shri Gurdeep Singh, Special Counsel and Shri Din Dayal Mangal, Authorized
Representative for the Department
CORAM: HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL)
Date of Hearing: 19.01.2026
Date of Decision: 06.04.2026
FINAL ORDER NO's. 50672-50678/2026
JUSTICE DILIP GUPTA:
Excise Appeal No. 50988 of 2025 has been filed by M/s. Miraj
Product (P) Ltd. 1 to assail that portion of the order dated 13.03.2025
passed by the Commissioner, Central Excise & CGST Commissionerate,
1. the appellant
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Udaipur 2 that confirms the demand of central excise duty under the
proviso to section 11A(1) of the Central Excise Act, 1944 3 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 4.
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 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.
7. Excise Appeal No. 51650 of 2025 has been filed by Manohar Lal
Bhatia, Key person of M/s. Bhatia Agencies, M/s. Manohar Lal & Sons and
2. the Commissioner
3. the Central Excise Act
4. the Central Excise Rules
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M/s. Asha Tobacco Company, 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.
8. The appellant is engaged in the packing and clearance of branded
lime mixed chewing tobacco falling under Customs Excise Tariff Item5
2403 99 10 of the First Schedule of the Central Excise Tariff Act, 1985.
9. During the period of dispute, the appellant had the following two
manufacturing units:
(a) Unit-I, located at Puar ki Oden, Nathdwara that packaged
processed chewing tobacco pouches; and
(b) Unit-II, located at Khetan Road, Rabha, Nathdwara that
mixed lime and tobacco upon receipt of raw tobacco and
processed tobacco by drying, grading and coating and
then sold the entire processed tobacco to Unit-I.
9. The present appeal pertains to Unit-I of the appellant. The processed
tobacco from the processing Unit-II was cleared to the packing Unit-I upon
payment of central excise duty. At the packing unit, the appellant availed
CENVAT credit of excise duty paid at the processing unit and utilized it for
payment of duty on finished goods cleared as Miraj Tobacco. At both the
Units, the appellant was maintaining statutory records separately and
furnishing statutory returns.
10. According to the appellant, the manufacture of chewing tobacco
involves the following steps:
(a) Procurement of raw materials such as raw tobacco, lime,
essence and flavour.
(b) Process of sorting, filtering, mixing and grading;
5. CETI
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(c) Packing of processed tobacco in pouches, namely, small
pouch or zipper pouch in 6 gms or 15 gms pack; and
(d) Selling and distribution of finished goods through dealers.
11. During the period of dispute from 2002-2003 to 2005-2006, raw
tobacco was mainly procured from M/s. Pinakpani Traders, M/s. Ashit
Kumar and Co. and M/s. Jalaram Trading Co., all based out of Gujarat.
According to the appellant, payments to the said suppliers were made
through cheques or demand drafts. Copy of ledger 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 water
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and peppermint oil which increases the weight of product. Product is
thereafter filled in 35kg gunny bags and cleared from Unit-II on payment
of duty to the packing Unit-I under proper cover of invoices.
15. Packing of lime mixed tobacco is done at Unit-I. Lime mixed tobacco
under the brand name MIRAJ or MIRAGE is sold by the appellant in plastic
pouches. During the relevant period, appellant supplied the finished goods
in two types of packing, namely, 6 gm pouch packing and 15 gm zipper
packing.
16. At the packing Unit-I, 142 packing machines are installed for
producing 6 gm pouches and 6 machines are installed for producing 15 gm
zipper pouches. During the period in question, price of 6gm pouch was
Rs.1 and 15 gm zipper pouch was Rs. 3. 35. Pouches of 6gm pack are put
in one packet and such 100 packets are put in one HDPE bag and cleared
on payment of duty. Thus, one bag contains 3500 pouches or 6 X 35 X
100 = 21000 gm or 21 Kg. of tobacco.
17. The duty paid normal and zipper pouches of tobacco in 6 gm or 15
gm pack are sold to dealers of the appellant located at various places in
the country. The appellant contends that there was no dealership
agreement in writing between the appellant and the dealers. The dealers
placed the orders on the appellant over phone and same was noted by the
appellant and the clearances were made to the dealers as per the orders.
In most of the cases, the dealers themselves arranged for the
transportation. However, in some cases the appellant cleared the goods in
trucks hired from the transporters or trucks run on contract basis
belonging to Madan Lal Paliwal.
18. Dealers made payments to the appellant either by cheque or
demand draft in favour of the appellant. According to the appellant, no
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cash sales were made by the dealers as a matter of policy and for
accounting purposes.
19. A show cause notice dated 22.05.2007 was issued by the Directorate
General of Central Excise Intelligence alleging that the appellant made
clandestine clearance of pouches for the following reasons:
(a) The appellant had received 29,91,813 kgs of raw tobacco
through firms namely, M/s. Raghunayak, M/s. Shelraj and
M/s. Stonic Marble but it was not accounted for by the
appellant. From the said quantity, the appellant could
have manufactured 94,74,07,450 pouches of 6 gm;
(b) The major supplier of packaging material 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,
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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 dated 22.01.2025 was also filed by the appellant with
submissions. In all the replies/submissions, the appellant requested for
cross-examination of various individuals whose statements had been
recorded. However, the Commissioner rejected such requests and the
same was communicated by the Superintendent of Central Excise by a
letter dated 17.11.2008.
21. The submissions made by the appellant did not find favour with the
Commissioner. The impugned order dated 13.03.2025 passed by the
Commissioner confirms the demand of central excise duty to the extent of
Rs. 20,41,74,584/-. However, in view of the judgment of the Supreme
Court in Commissioner of Central Excise, Jaipur-II vs. M/s. Miraj
Products Pvt. Ltd. 6, the demand to the extent of Rs. 3,20,76,414/- was
dropped on account of valuation under section 4 of the Central Excise Act
instead of section 4A as alleged in the show cause notice. The impugned
order records the following findings:
"19.4 In this regard, I observe that in legal
investigations, retraction of statements requires
clear justification, as retractions aren't
automatically valid. The individual retracting
must provide proof of its legitimacy. Case law
affirms that statements made to authorities, like
under the Customs Act and GST, retain
evidentiary value even if retracted. A retraction
must be prompt and supported by evidence,
delays or lack of substantiation make it
6. Civil Appeal Nos. 143-147 of 2010 decided on 08.07.2024
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questionable. In this case, the retraction lacked
evidence, and the noticees failed to prove
coercion. Therefore, their statements remain
voluntary. Further, regarding cross-examination,
there is no inherent right to cross-examine
witnesses during quasi-judicial proceedings.
***** As cross-examination is not an absolute right,
and given the circumstances and principles established
in the case law, the request for cross-examination is
hereby rejected.
*****
19.17 I further observe that the Noticee's
contention that the SCN is based on assumptions and
conjecture is misplaced. The SCN is grounded on
credible evidence and facts substantiated by
reliable data, such as the statements of
transporters and suppliers, and the investigation
findings. The taxpayer's reliance on the assertion that
80% of the demand is based on theoretical calculations
without evidence is inadequate. The Supreme Court, in
CCE vs. 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
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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 not an absolute right but must be
granted where the evidence heavily relies on oral
testimony. In this case, the statements from
transporters and suppliers were corroborated by
documentary evidence, making the denial of cross-
examination irrelevant.
19.21 Further, I observe that the
department's reliance on third-party statements,
which the taxpayer claims were not cross-
examined, is justified as per CCE v. Swadeshi
Polytex Ltd. (2001), where it was held that third-party
statements, though untested, can form the basis of a
demand if they are corroborated by other evidence. The
repeated transportation allegations and discrepancies in
stock registers further support the clandestine activity
charge. The taxpayer's argument that no physical stock
discrepancies were found is inconsequential, as the
absence of physical evidence does not negate other
forms of evidence, such as records, transport data, and
supplier statements.
The taxpayer's argument that the extended
limitation and penalties are unjustified is legally
incorrect. As per CCE v. Chemphar Drugs (1989) and
Gopal Zarda Udyog v. CCE (2005), penalties are
applicable where there is evidence of willful suppression
or misstatement. The taxpayer's failure to disclose
material facts in the face of clear evidence of
clandestine activity justifies the extended period of
limitation and penalties.
19.22 In view of the discussion as above, the
submissions made by the Noticee are rejected.
The SCN is based on proper investigation,
sufficient evidence, and correct legal principles.
The allegations against the taxpayer regarding
clandestine procurement, production, and packing
material shortages are well-substantiated.
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Additionally, the demand for duty and penalties,
including the extended limitation period, is legally
sound and justified."
(emphasis supplied)
23. The present appeals have, accordingly, been filed to assail the order
dated 13.03.2025.
24. Shri B.L. Narasimhan, learned counsel for the appellant assisted by
Shri S.C. Vaidyanathan and Shri Dhruv Tiwari made the following
submissions:
(i) The adjudicating authority has not complied with the
provisions of section 9D of the Central Excise Act in
respect of witnesses whose statements were relied upon
in the show cause notice. In support of this contention,
learned counsel placed reliance on the following decisions:
(a) M/s Surya Wires Pvt. Ltd. vs. Principal
Commissioner, CGST, Raipur 7;
(b) Commissioner of Central Excise & CGST,
Jodhpur vs. M/s. Paradise Steels Pvt. Ltd. 8;
(c) Ambika International vs. Union of India 9;
(d) Hi Tech Abrasives Ltd. vs. Commissioner of C.
Ex. & Cus., Raipur 10;
(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
7. Excise Appeal No. 51148 of 2020 decided on 01.04.2025 (Tri.-Del.)
8. Excise Appeal No. 51315 of 2019 decided on 27.06.2025 (Tri.-Del.)
9. 2018 (361) E.L.T. 90 (P&H)
10. 2018 (362) E.L.T. 961 (Chhattisgarh)
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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. The case of
the department in respect of raw tobacco procurement is
based on the statements made under section 14 of the
Central Excise Act during investigation and there is no
corroborative or documentary evidence to suggest that
the goods invoiced in the name of M/s. Shelraj Tobacco or
M/s. Raghunayak Traders were actually delivered to the
appellant;
(v) Entire demand is based on mere assumptions and
surmises. It is a settled legal position that the onus is on
department to prove charges of clandestine manufacture
and removal with positive and clinching evidence. In this
connection, reliance has been placed on the following
decisions of the Tribunal:
(a) Commissioner, Central Excise, Jaipur vs.
Bansiwala Iron & Steel Rolling Mills and
Others 11;
(b) M/s. Rathi TMT Saria (P) Ltd. vs. Commissioner,
Central Goods and Service Tax
Commissionerate 12;
(vi) The extended period of limitation could not be invoked;
and
11. Excise Appeal No. 50072 of 2016 decided on 28.01.2022 (Tri.-Del.)
12. Excise Appeal No. 52005 of 2018 decided on 15.07.2019 (Tri.-Del.)
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(vii) Penalties could not have been imposed upon the
appellants nor is interest is recoverable.
25. Shri Gurdeep Singh, learned special counsel and Shri Din Dayal
Mangal, learned authorized representative appearing for the department,
however, supported the impugned order and made the following
submissions:
(i) The investigation carried out by the department covers
various aspects of the entire chain of procurement of raw
materials and packing materials, manufacturing capacity
and actual weight addition during the manufacturing
process as well as clearance of goods to dealers and
buyers;
(ii) From the transporter Jai Maharaj Transport Service,
Nadiad number of GRs were found under which raw
tobacco was transported from M/s. Pinakpani Traders to
the appellant. Similarly, other transporters, namely,
Rajpurohit Transport, Vijay Goods Carrier, Haryana Punjab
Roadlines confirmed that they only provided blank GRs
and no vehicles were provided for transportation of raw
tobacco to the appellant;
(iii) The main supplier of packing materials to the appellant
was M/s. Eden Hi Tech Films, Udaipur. This supplier had
also created various dummy firms. These dummy firm
owners were not even aware of the activities of their so-
called firms. Sale of printed packing material 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;
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(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, reveals that total 36035 bags of Miraj Tobacco
were clandestinely removed by the appellant during the
period from 2002-2003, 2003-2004 and 2004-2005
through Manohar Lal Bhatia.
26. The submissions advanced by the learned counsel for the appellant
and the learned authorized representative appearing for the department
have been considered.
27. Before appreciating the contentions that have been advanced, it will
be useful to examine the essential ingredients that are required to be
established to prove clandestine removal of goods.
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28. This issue was examined by the Tribunal in Arya Fibers Pvt. Ltd.
vs. Commissioner of C. Ex., Ahemdabad-II 13 and it was observed:
"40. After having very carefully considered the law laid
down by this Tribunal in the matter of clandestine
manufacture and clearance, and the submissions made
before us, it is clear that the law is well-settled
that, in cases of clandestine manufacture and
clearances, certain fundamental criteria have to
be established by Revenue which mainly are the
following :
(i) There should be tangible evidence of
clandestine manufacture and clearance and
not merely inferences or unwarranted
assumptions;
(ii) Evidence in support thereof should be of :
(a) raw materials, in excess of that contained as
per the statutory records;
(b) instances of actual removal of unaccounted
finished goods (not inferential or assumed)
from the factory without payment of duty;
(c) discovery of such finished goods outside the
factory;
(d) instances of sale of such goods to identified
parties;
(e) receipt of sale proceeds, whether by cheque
or by cash, of such goods by the
manufacturers or persons authorized by
him;
(f) use of electricity far in excess of what is
necessary for manufacture of goods
otherwise manufactured and validly cleared
on payment of duty;
(g) statements of buyers with some details of
illicit manufacture and clearance;
(h) proof of actual transportation of goods,
cleared without payment of duty;
(i) links between the documents recovered
during the search and activities being
carried on in the factory of production; etc.
Needless to say, a precise enumeration of all situations
in which one could hold with activity that there have
been clandestine manufacture and 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
13. 2014 (311) E.L.T. 529 (Tri.-Ahmd.)
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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 should be
corroborative evidence by way of statements of
purchasers, distributors or dealers, record of
unaccounted raw material purchased or
consumed and not merely the recording of
confessional statements. A co-ordinate Bench of this
Tribunal has, in another decision, reported in the E.L.T.
issue of 5-8-2013 (after hearings in the present appeals
were concluded), once again reiterated the same
principles, after considering the entire case-law on the
subject [Hindustan Machines v. CCE [2013 (294) E.L.T.
43]. Members of Bench having hearing initially differed,
the matter was referred to a third Member, who held
that clandestine manufacture and clearances were not
established by the Revenue. We are not going into it in
detail, since the learned Counsels on either side may
not have had the opportunity of examining the decision
in the light of the facts of the present case. Suffice it to
say that the said decision has also tabulated the entire
case-law, including most of the decisions cited before
us now, considered them, and come to the above
conclusion. In yet another decision of a co-ordinate
Bench of the Tribunal [Pan Parag India v. CCE, 2013
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(291) E.L.T. 81], it has been held that the theory of
preponderance of probability would be applicable only
when there are strong evidences heading only to one
and only one conclusion of clandestine activities. The
said theory, cannot be adopted in cases of weak
evidences of a doubtful nature. Where to manufacture
huge quantities of final products the assessee require
all the raw materials, there should be some evidence of
huge quantities of raw materials being purchased. The
demand was set aside in that case by this Tribunal."
(emphasis supplied)
29. This decision of the Tribunal in Arya Fibers was also considered by
the Delhi High Court in Flevel International vs. Commissioner of
Central Excise 14. In Sakeen Alloys Pvt. Ltd. vs. Commissioner of
Central Excise, Ahmedabad 15, the Tribunal observed that to establish
clandestine removal there has to be positive evidence and suspicion
cannot take place of evidence regarding clandestine removal of export
goods. This is also what was held by this Tribunal in Commissioner of
Central Excise, Jaipur vs. Bansiwala Iron & Steel Rolling Mills 16.
30. The first submission 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-
14. 2016 (332) E.L.T. 416 (Del.)
15. 2013 (296) ELT 392 (Tri.-Ahmd.)
16. Excise Appeal No. 50072 of 2016 decided on 28.01.2022
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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.
32. Section 9D of the Central Excise Act deals with relevancy of
statements under certain circumstances and it is reproduced below:
"9D. Relevancy of statements under certain
circumstances.
(1) A statement made and signed by a person before
any Central Excise Officer of gazette rank during the
course of any inquiry or proceeding under this Act shall
be relevant, for the purpose of proving, in any
prosecution for an offence under this Act, the truth of
the facts which it contains, --
(a) when the person who made the
statement is dead or cannot be found, or is
incapable of giving evidence, or is kept out of
the way by the adverse party, or whose
presence cannot be obtained without an
amount of delay or expense which, under the
circumstances of the case, the court considers
unreasonable; or
(b) when the person who made the
statement is examined as a witness in the case
before the court and the court is of opinion
that, having regard to the circumstances of the
case, the statement should be admitted in
evidence in the interests of justice.
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(2) The provisions of sub-section (1) shall, so far as
may be, apply in relation to any proceeding under this
Act, other than a proceeding before a court, as they
apply in relation to a proceeding before a court."
33. It would be seen that section 14 of the Central Excise Act enables
the concerned Officer to summon any person whose attendance he
considers necessary to give evidence in any inquiry which such Officer is
making. The statements of persons so summoned are then recorded under
these provisions. It is these statements which are referred to in section 9D
of the Central Excise Act. A bare perusal of sub-section (1) of section 9D
makes it evident that the statement recorded before the concerned Officer
during the course of any inquiry or proceeding shall be relevant for the
purpose of proving the truth of the facts which it contains only when the
person who made the statement is examined as a witness before the
Court and such Court is of the opinion that having regard to the
circumstances of the case, the statement should be admitted in evidence,
in the interests of justice, except where the person who tendered the
statement is dead or cannot be found. In view of the provisions of sub-
section (2) of section 9D of the Central Excise Act, the provisions of sub-
section (1) of section 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
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6 others
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 17 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 the Customs Act.
36. In Surya Wires, a Division Bench of this Tribunal examined the
provisions of section 108 and 138B of the Customs Act as also the
provisions of section 9D and 14 of the Central Excise Act, 1944, which are
similar to the provisions of section 108 and 138B of the Customs Act, and
the observations are :
"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, then the
statements made under section 14 of the Central Excise
Act or under section 108 of the Customs Act during the
course of an inquiry under the Acts shall be relevant for
the purpose of proving the truth of the facts contained
in them only when such persons are examined as
witnesses before the adjudicating authority and the
adjudicating authority forms an opinion that the
statements should be admitted in evidence. It is
thereafter that an opportunity has to be provided for
cross-examination of such persons. The provisions of
section 9D of the Central Excise Act and section
138B(1)(b) of the Customs Act have been held to be
17. the Customs Act
20
E/50988/2025 &
6 others
mandatory and failure to comply with the procedure
would mean that no reliance can be placed on the
statements recorded either under section 14D of the
Central Excise Act or under section 108 of the Customs
Act. The Courts have also explained the rationale
behind the precautions contained in the two sections. It
has been observed that the statements recorded during
inquiry/investigation by officers has every chance of
being recorded under coercion or compulsion and it is
in order to neutralize this possibility that statements of
the witnesses have to be recorded before the
adjudicating authority, after which such statements can
be admitted in evidence."
37. In Ambika International decided on 17.06.2016, the Punjab and
Haryana High Court examined the provisions of section 9D of the Central
Excise Act. The show cause notices that had been issued primarily relied
upon statements made under section 14 of the Central Excise Act. It was
sought to be contended by the Writ Petitioners that the demand had been
confirmed in flagrant violation of the mandatory provisions of section 9D
of the Central Excise Act. The High Court held that if none of the
circumstances contemplated 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
21
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6 others
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 adjudicating
authority. The relevant portions of the judgment are reproduced below:
"15. A plain reading of sub-section (1) of Section
9D of the Act makes it clear that clauses (a) and
(b) of the said sub-section set out the
circumstances in which a statement, made and
signed by a person before the Central Excise
Officer of a gazetted rank, during the course of
inquiry or proceeding under the Act, shall be
relevant, for the purpose of proving the truth of
the facts contained therein.
16. Section 9D of the Act came in from detailed
consideration and examination, by the Delhi High
Court, in J.K. Cigarettes Ltd. v. CCE, 2009 (242) E.L.T.
189 (Del.). Para 12 of the said decision clearly holds
that by virtue of sub-section (2) of Section 9D, the
provisions of sub-section (1) thereof would extend to
adjudication proceedings as well.
*****
22. If none of the circumstances contemplated
by clause (a) of Section 9D(1) exists, clause (b)
of Section 9D(1) comes into operation. The said
clause prescribes a specific procedure to be
followed before the statement can be admitted in
evidence. Under this procedure, two steps are required
to be followed by the adjudicating authority, under
clause (b) of Section 9D(1), viz.
(i) the person who made the statement has to
first be examined as a witness in the case before the
adjudicating authority, and
(ii) the adjudicating authority has, thereafter,
to form the opinion that, having regard to the
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6 others
circumstances of the case, the statement should be
admitted in evidence in the interests of justice.
23. There is no justification for jettisoning this
procedure, statutorily prescribed by plenary
parliamentary legislation for admitting, into
evidence, a statement recorded before the
gazetted Central Excise Officer, which does not
suffer from the handicaps contemplated by clause
(a) of Section 9D(1) of the Act. The use of the
word "shall" in Section 9D(1), makes it clear that,
the provisions contemplated in the sub-section
are mandatory. Indeed, as they pertain to conferment
of admissibility to oral evidence they would, even
otherwise, have to be recorded as mandatory.
24. The rationale behind the above precaution
contained in clause (b) of Section 9D(1) is
obvious. The statement, recorded during inquiry/
investigation, by the gazetted Central Excise
Officer, has every chance 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
23
E/50988/2025 &
6 others
any adjudicating authority to straightaway rely on
the statement recorded during
investigation/inquiry before the gazetted Central
Excise Officer, unless and until he can
legitimately invoke clause (a) of Section 9D(1). In
all other cases, if he wants to rely on the said
statement as relevant, for proving the truth of the
contents thereof, he has to first admit the statement in
evidence in accordance with clause (b) of Section
9D(1). For this, he has to summon the person who had
made the statement, examine him as witness before
him in the adjudication proceeding, and arrive at an
opinion that, having regard to the circumstances of the
case, the statement should be admitted in the interests
of justice.
26. In fact, Section 138 of the Indian Evidence Act,
1872, clearly sets out the sequence of evidence, in
which evidence-in-chief has to precede cross-
examination, and cross-examination has to precede re-
examination.
27. It is only, therefore, -
(i) after the person whose statement has
already been recorded before a gazetted
Central Excise Officer is examined as a witness
before the adjudicating authority, and
(ii) the adjudicating authority arrives at a
conclusion, for reasons to be recorded in
writing, that the statement deserves to be
admitted in evidence,
that the question of offering the witness to the
assessee, for cross-examination, can arise.
28. Clearly, if this procedure, which is statutorily
prescribed by plenary parliamentary legislation, is
not followed, it has to be regarded, that the
Revenue has given up the said witnesses, so that
the reliance by the CCE, on the said statements,
has to be regarded as misguided, and the said
statements have to be eschewed from
consideration, as they would not be relevant for
proving the truth of the contents thereof."
(emphasis supplied)
24
E/50988/2025 &
6 others
38. In Hi Tech Abrasives decided on 04.07.2018, the Chhattisgarh
High Court also examined the provisions of section 9D of the Central
Excise Act. The allegation against the appellants was regarding clandestine
removal of goods without payment of duty and for this purpose reliance
was placed on the statement of the Director of the Company who is said to
have admitted clandestine removal of goods. The contention of the
appellants before the High Court was that the statement of the Director
could be admitted in evidence only in accordance with the provisions of
section 9D of the Central Excise Act. After examining the provisions 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 should
be admitted. The said provision in the statute
25
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6 others
book seems to have been made to serve the
statutory purpose of ensuring that the assessee
are not subjected to demand, penalty interest on
the basis of certain admissions recorded during
investigation which may have been obtained
under the police power of the Investigating
authorities by coercion or undue influence.
9.5 ***** The provisions contained in Section 9D,
therefore, has to be construed strictly and held as
mandatory and not mere directory. Therefore,
unless the substantive provisions contained in Section
9D are complied with, the statement recorded during
search and seizure operation by the Investigation
Officers cannot be treated to be relevant piece of
evidence on which a finding could be based by the
adjudicating authority. A rational, logical and fair
interpretation of procedure clearly spells out that before
the statement is treated relevant and admissible under
the law, the person is not only required to be present in
the proceedings before the adjudicating authority but
the adjudicating authority is obliged under the law to
examine him and form an opinion that having regard to
the circumstances of the case, the statement should be
admitted in evidence in the interest of justice.
Therefore, we would say that even mere
recording of statement is not enough but it has to
be fully conscious application of mind by the
adjudicating authority that the statement is
required to be admitted in the interest of justice.
The rigor of this provision, therefore, could not be
done away with by the adjudicating authority, if
at all, it was inclined to take into consideration
the statement recorded earlier during
investigation by the Investigation officers. Indeed,
without examination of the person as required under
Section 9D and opinion formed as mandated under the
law, the statement recorded by the Investigation
Officer would not constitute the relevant and admissible
evidence/material at all and has to be ignored. We
have no hesitation to hold that the adjudicating
officer as well as Customs, Excise and Service Tax
Appellate Tribunal committed illegality in placing
26
E/50988/2025 &
6 others
reliance upon the statement of Director Narayan
Prasad Tekriwal which was recorded during
investigation when his examination before the
adjudicating authority in the proceedings
instituted upon show cause notice was not
recorded nor 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 18 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 19, 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 the case. It leaves us with (b) which
requires the court or the adjudicating authority to
first examine the person who made the statement
and form an opinion that having regard to the
circumstances of the case, the statement should
be admitted in evidence. Of course, the party
adversely affected by the statement will have to
be given an opportunity to cross examine the
person who made the statement but that comes
only after the statement is, in the first place, after
18. Excise Appeal No. 52612 of 2018 decided on 30.10.2023
19. 2016 (340) E.L.T. 67 (P & H)
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E/50988/2025 &
6 others
examination by the adjudicating authority,
admitted in evidence. This has not been done in
respect of any of the 35 statements. Therefore, all the
statements are not relevant to the proceedings.
15. It has been held in a catena of judgments
including Jindal Drugs Pvt. Ltd. versus Union Of
India [2016 (340) E.L.T. 67 (P&H)] that section
9D is a mandatory provision and if the procedure
prescribed therein is not followed, statements
cannot be used as evidence in the proceedings
under Central Excise Act. *****
16. Therefore, the 35 statements relied upon in the
SCN are not relevant and hence also not admissible."
(emphasis supplied)
40. It seen from the relied upon documents that almost 90% of the
documents are statements of various persons. As the Commissioner did
not examine the persons whose statements were recorded under section
14 of the Central Excise Act and nor were such statements admitted in
evidence, the procedure contemplated under section 9D of the Central
Excise Act was not followed. This apart, the Courts have also repeatedly
held that if such statements are admitted in evidence, an opportunity is
required to be provided to the appellant to cross-examine the witnesses.
The view taken by the Commissioner in the impugned order is not only
contrary to the provisions of section 9D of the Central Excise Act but also
contrary to the view expressed by the High Courts and the Tribunal in the
aforesaid decisions.
41. The findings regarding clandestine removal of goods in so far they
are based on the statements recorded under section 14 of the Central
Excise Act cannot, therefore, be sustained.
28
E/50988/2025 &
6 others
42. The next issue that needs to be examined is as to whether the
appellant procured raw material i.e. raw tobacco and packaging material
clandestinely and whether the finished goods were also cleared without
payment of duty.
43. It needs to be noted that the show cause notice 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 Tax20
number or Rajasthan Entry Tax 21 number.
45. The case of the appellant in the reply to the show cause notice is
that the entire mistake of data feeding happened on account of similarity
20. RST
21. RET
29
E/50988/2025 &
6 others
in RST number of M/s. Stonic Marble (3047/0041) and RET number of the
appellant (3047/N0441). It is the contention of the appellant that because
of similarity in the RST number of M/s. Stonic Marble and the RET number
of the appellant, the concerned person who made the entry committed a
mistake in entering the name of M/s. Stonic Marble instead of the
appellant. It is for this reason that the appellant contends that the entries
in the name of M/s. Stonic Marble in the computerized sheet provided by
Check Post, actually pertain to the appellant which were duly accounted
for in their statutory records of the appellant. To support this contention,
the appellant has shown one entry in the name of M/s. Stonic Marble at
page 504 of the Appeal paper book in respect of invoice no. 16 whereas
the goods covered under invoice no. 16 dated 11.05.2003 were actually in
the name of the appellant and that the receipt of the goods was entered
by the appellant in RG-12 register, which is at page 580 of the Appeal
paper book. It cannot be said that the raw material invoiced to M/s. Stonic
Marble was actually received by the appellant and was, therefore,
unaccounted.
46. It is further the case of the appellant that it had not purchased any
unaccounted raw tobacco from M/s. Shelraj Tobacco and M/s. Raghunayak
Traders. The case of the department is based on the following facts:
(i) Work relating to M/s. Shelraj Tobacco and M/s.
Raghunayak Traders was carried out by the employees of
the appellant;
(ii) Yogesh Paliwal, the Proprietor of the firm, was not aware
about the purchase and sale of tobacco by his firm and
that the work was looked after by Parmanand
Maheshwari, Accountant of the appellant;
30
E/50988/2025 &
6 others
(iii) Parmanand Maheshwari, Accountant of the appellant,
stated that he never saw loading or unloading of tobacco
in godown of M/s. Shelraj Tobacco;
(iv) Mukesh, an employee of the appellant, who was issuing
sales bills of M/s. Shelraj Tobacco in his statement
averred that he never saw raw tobacco coming in or going
outside and that preparation of the Bill was a paper
formality;
(v) The department also relied upon statements of
drivers/transporters to support the finding 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
31
E/50988/2025 &
6 others
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
factory premises of the appellant. As noticed above, the statements made
under section 14 of the Central Excise Act cannot be considered as
relevant unless the procedure contemplated under section 9D of the
Central Excise Act is followed, which procedure was admittedly not
followed.
48. In the present case, there is no documentary or any other
corroborative evidence on record by which it can even remotely be
suggested that there had been clandestine production of lime mixed
chewing tobacco. There is also no evidence on record to suggest that the
appellant had worked over and above their normal shifts of working; or
that the appellant had engaged labour over and above the labours who are
on record and are working in the processing unit of the appellant.
49. The case set up by the department for clandestine removal of
finished goods is based on:
(i) 10 parallel invoices found during investigation which were
issued by M/s Bhagyadeep Agencies. It was concluded
that the appellant was engaged in clandestine clearances
of MIRAJ tobacco through M/s. Bhagyadeep Agencies. As
per the department, 10 invoices of same invoice number
but different date and quantity were also issued to M/s
Shrinath Agencies, Jaipur (dealer of the appellant);
(ii) Documents recovered from the premises of N.K. Harsh,
Proprietor, M/s. Shrinath Agencies, the show cause notice
alleged clandestine clearance of the 16640 bags of MIRAJ
tobacco;
32
E/50988/2025 &
6 others
(iii) The clandestinely removed goods were sold by M/s.
Srinath Agencies in cash. Reliance has been placed on the
GR's of various transporters under which it was alleged
that the clandestinely received tobacco was sold. Various
transporters/drivers stated that they had delivered the
goods under the cover of GR's available with them on
record;
(iv) The appellant was clearing goods clandestinely without
payment of duty in view of the statements of customers of
M/s Shrinath Agencies; and
(v) Statement of Girdhari Lal Dhanwani, proprietor of M/s.
Akhil Sales Agency that only 20% MIRAJ tobacco was sold
under invoice and balance 80% sales were made without
invoice and his admission in the statement that he paid
N.K. Harsh an amount of Rs.49,84,850/- in cash in
respect of 982 bags of zipper and 170 small pouch bags
which were received from M/s. Shrinath Agencies.
50. The conclusion drawn that tobacco cleared 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
33
E/50988/2025 &
6 others
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 of the order. It
was because of data entry mistake at the end of RTO check post at
Ratanpur that the entries appearing in the name of M/s. Stonic Marble
were actually the invoices in the name of appellant which data had been
recorded also in the excise records of the appellant. From multiple
movements through check post there would have to be corresponding
multiple invoices and LR physically available with the check post, but such
invoices have not been brought on record by the department. It is clearly
a data entry mistake in repeating the same entry again and again in the
same date because, in some cases, as per the data entry records there are
even 3 to 6 movement of the same truck within a day between Nadiad to
Nathdwara. The contention of the appellant is not practically possible
because at the relevant time it used to take 10 to 12 hours for a single
side journey deserves to be accepted. The allegations based on the record
of RTO check post cannot, therefore, be sustained.
54. Likewise, the charge of clandestine procurement of raw tobacco is
also based on certain supplies made by other firms for which payment
consideration has been received in cash by those firms. However, all such
cash sales have admittedly been recorded in the books of such firms and
there is no clandestine procurement and clandestine sale. Only because
34
E/50988/2025 &
6 others
such firms were selling raw tobacco in cash and were not knowing the
name and address of such buyers will not mean that such raw tobacco was
actually delivered to the factory of appellant.
55. No document or record was found at the premises of the appellant
showing or supporting clandestine manufacture or clearance of finished
goods. There was no excess or short stock either of raw material or
packing material or finished goods found during search at Unit-I of the
appellant where the pouch packing takes place and from where clearance
of finished goods was made.
56. It is, therefore, clear that the allegation of clandestine supply of
finished goods is mainly based upon the statements of dealers of
appellant. It is a settled position in law that onus is on the department to
prove charges of clandestine manufacture and removal with positive and
clinching evidence. The department has, however, not been able to
establish that the appellant was involved in clandestine removal of the
goods.
57. The next issue that arises for consideration 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.
35
E/50988/2025 &
6 others
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 in any
way concerned in transporting, removing, depositing,
keeping, concealing, selling or purchasing, or in any
other manner deals with, any excisable goods which he
knows or has reason to believe are liable to confiscation
under the Act or these rules, shall be liable to a penalty
not exceeding the duty on such goods or rupees ten
thousand, whichever is greater:
PROVIDED that where any proceeding for the person
liable to pay duty have been concluded under clause (a)
or clause (d) of sub-section (1) of section 11AC of the
Act in respect of duty, interest and penalty, all
proceedings in respect of penalty against other
persons, if any, in the said proceedings shall also be
deemed to be concluded."
61. It clearly transpires from the impugned order that there is no
discussion in the order that the goods are liable to confiscation and it is
only while imposing penalties under rule 26 of the Central Excise Rules
that it has been observed that the goods are liable to confiscation. There
has to be a discussion and a finding that the goods are liable to
confiscation. In the absence of such a finding penalties under rule 26 of
the Central Excise Rules could not have been imposed. This is clear from a
bare perusal of rule 26(1) of the Central Excise Rules.
36
E/50988/2025 &
6 others
62. The view that has been taken finds support from the decision of the
Tribunal in Shri Ramesh Garg, Chairman of M/s K.S. Oil Ltd. vs.
Commimissioner, CGST, Customs & Central Excise 22 and the relevant
portion of the order is reproduced below:
"5. In the impugned order, goods have not been
confiscated nor have any goods been held liable to be
confiscated. We, therefore find, the essential ingredient
to impose penalty under Rule 26, namely, confiscation
of the goods or goods are liable for confiscation, has
not been fulfilled in this case. Therefore, the penalty
could not have been imposed under Rule 26."
63. In this view of the matter, penalties under rule 26 of the Central
Excise Rules could not have been imposed.
64. Thus, for all the reasons stated above, the confirmation of demand
is not sustainable and is set aside. The penalties imposed under rule 26 of
the Central Excise Rules are also set aside. In the result, all Excise Appeal
No's. 50988 of 2025, 51197 of 2025, 51265 of 2025, 51268 of 2025,
51366 of 2025, 51649 of 2025 and 51650 of 2025 are allowed.
(Order pronounced on 06.04.2026)
(JUSTICE DILIP GUPTA)
PRESIDENT
(P.V. SUBBA RAO)
MEMBER (TECHNICAL)
Shreya
22. Excise Appeal No. 51760 of 2017 decided on 09.12.2024
37
E/50988/2025 &
6 others
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. I
EXICSE APPEAL NO. 50988 OF 2025
(Arising out of Order-in-Appeal No. UDZ-EXCUS-000-COM-49/2024-25/Commissioner
dated 13.03.2025 passed by the Commissioner, Central Excise & CGST Commissionerate,
Udaipur)
M/s. Miraj Product (P) Ltd. .....Appellant
Upali Oden,
Nathdwara, Distt. Rajsamand
VERSUS
The Commissioner .....Respondent
Office of the Commissioner,
Central Excise & CGST Commissionerate,
GST Bhawan, H-Block, 100 ft Road,
Sector-14, Hiran Magri, Udaipur (Raj)
WITH
E/51197/2025 E/51265/2025 E/51268/2025
E/51366/2025 E/51649/2025 E/51650/2025
APPEARANCE:
Shri B.L. Narasimhan, Shri S.C. Vaidyanathan and Shri Dhruv Tiwari, Advocates
for the Appellant
Shri Gurdeep Singh, Special Counsel and Shri Din Dayal Mangal, Authorized
Representative for the Department
CORAM: HON'BLE MS. BINU TAMTA, MEMBER (JUDICIAL)
HON'BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL)
Date of Hearing: 19.01.2026
Date of Decision: 06.04.2026
ORDER
Order pronounced.
(BINU TAMTA) MEMBER (JUDICIAL) (P.V. SUBBA RAO) MEMBER (TECHNICAL) Shreya