Custom, Excise & Service Tax Tribunal
M/S Prabhat Zarda Factory Overseas vs Noida on 6 August, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Excise Appeal No.70638 of 2025
(Arising out of Order-in-Original No.02/Commr./C. Ex/NOIDA/2025 dated
18.06.2025 passed by Commissioner of CGST, Noida)
M/s Prabhat Zarda Factory Overseas, .....Appellant
(GSTIN: 09AAKPD7640M1ZB
E-37, Sector-8, Noida-201301)
VERSUS
Commissioner of CGST, Noida ....Respondent
(C-232-A/2, GST Bhawan, Sector-48, Noida-201301) WITH Excise Appeal No.70639 of 2025 (Arising out of Order-in-Original No.02/Commr./C. Ex/NOIDA/2025 dated 18.06.2025 passed by Commissioner of CGST, Noida) M/s Maharashtra Freight Carriers Pvt. Ltd., .....Appellant (Khasra No.49-50, Gali No.13, Siraspur, Delhi-110042) VERSUS Commissioner of CGST, Noida ....Respondent (C-232-A/2, GST Bhawan, Sector-48, Noida-201301) AND Excise Appeal No.70640 of 2025 (Arising out of Order-in-Original No.02/Commr./C. Ex/NOIDA/2025 dated 18.06.2025 passed by Commissioner of CGST, Noida) Shri Sanjiv Kumar, Manager .....Appellant (M/s Prabhat Zarda Factory Overseas, GSTIN: 09AAKPD7640M1ZB E-37, Sector-8, Noida-201301) VERSUS Commissioner of CGST, Noida ....Respondent (C-232-A/2, GST Bhawan, Sector-48, Noida-201301) APPEARANCE:
Shri Abhinav Kalra, Chartered Accountant & Shri Nishant Mishra, Advocate for the Appellant Dr. Raju Sakthivel, Authorized Representative for the Respondent CORAM: HON'BLE MR. P. K. CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. ANIL G. SHAKKARWAR, MEMBER (TECHNICAL) Excise Appeal No.70638 of 2025 2 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 FINAL ORDER NOs.- 70543-70545/2025 DATE OF HEARING : 04.08.2025 DATE OF PRONOUNCEMENT : 06.08.2025 PER BENCH:
The present appeals have been filed by the Appellants assailing the Order-in-Original No.02/Commr./C.Ex./NOIDA/2025 dated 18.06.2025 passed by the Commissioner, CGST Noida. Since all the three appeals are arising from the common Order-in-Original, all the three appeals are taken up together for hearing and disposal.
2. Briefly stated, the facts of the case are that M/s Prabhat Zarda Factory Overseas1 is a proprietorship concern and Smt. Chhaya Devi is the sole proprietor of the firm. The Appellants are engaged in the manufacturing of branded chewing tobacco under brand names of RATNA, PRABHAT, VIJAY etc., classifiable under HSN 24039910. Chewing tobacco is chargeable to Central Excise duty in addition to GST with introduction of GST with effect from 01.07.2017. The finished goods are sold in packing of 10 gms to 500 gms either in packing of carton or tins. The production of chewing tobacco was started w.e.f. December, 2017. The main raw materials for the manufacturing of chewing tobacco are tobacco flakes, fragrances, perfumes etc. Packing materials are small cartons & tin containers. The Appellants avail input tax credit (ITC) on raw materials and packing materials. The business of tobacco manufacturing by the firm was set up by Shri Vijay Kumar Arya, husband of Smt. Chhaya Devi, who unfortunately died in 2014. Smt. Chhaya Devi thereafter started looking after the business of her husband with a team of skilled persons.
3. The Officers of the Anti-evasion branch of the CGST Commissionerate, Noida visited factory of the Appellant No.1 (PZFO) on 28.10.2020 and searched the factory. Simultaneous searches were also conducted at Maharashtra Freight Carriers 1 M/s PZFO Excise Appeal No.70638 of 2025 3 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 Pvt. Ltd., at its godown at Sirsapur, Delhi and Mahalaxmi Transport/Freight Movers at its godown at Alipur village, Delhi.
At the factory, during stock taking, variation in the stock of finished goods was found but no variation in the stock of raw material or packing material was noticed. It was alleged that stock of certain variety of tobacco was short as compared to book balance and stock of certain varieties was found excess as per Annexure-B to the Panchnama dated 28.10.2020. Excess found stock was seized. Documents mentioned at Annexure-A to the said Panchnama were also resumed. Twelve numbers of loose sheets containing details of dispatches of finished goods pertaining to period 12.10.2020 to 27.10.2020 were claimed to be recovered from the factory, which are placed in File shown at Sl. No.27 of the Resumption Memo of the Panchnama drawn at the factory and described as dispatch slips. Statement of Shri Sanjiv Kumar GM of the factory was recorded on the spot on 28.10.2020 but copy of the statement was not provided with RUDs.
4. During search at godowns of the said transporters, goods said to have been manufactured by M/s PZFO and removed without payment of duty and without cover of invoices were found at the godowns of the transporters. Trucks which transported goods from the factory of M/s PZFO to the godowns of the transporters were found to be parked near the godowns of the transporter. The said goods were also seized. Documents and registers were resumed from the godowns of said transporters. Statements of the persons of the said transporters and drivers of trucks which brought goods from the factory of M/s PZFO were also obtained. On the basis of scrutiny of resumed documents from the factory and from the godowns of the said transporters and statements of various persons of the factory and transporters, it was concluded that M/s PZFO is engaged in clandestine removal without payment of duty for the period 23.11.2019 to 27.10.2020.
5. In view of the above, the Appellants were issued Show Cause Notice No.01/AE/PC/2023-24 dated 29.08.2023 for Excise Appeal No.70638 of 2025 4 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 demand of duty of Rs.7,71,44,906/- (Central Excise duty Rs.18,39,700/- + NCCD Rs.7,53,05,206/-) which was not paid on clandestinely removed goods during the period from 23.11.2019 to 27.10.2020, under Section 11A(4) of the Central Excise Act, 1944 alongwith interest at applicable rate under Section 11AA of the Central Excise Act, 1944 and to impose penalty under Section 11AC of the Central Excise Act, 1944 for willful suppression and mis-statement of the relevant facts and contraventions of the Central Excise Act, 1944 and the rules made thereunder. Penalty under Rule 29 of the Central Excise Rules, 2017 was also proposed against Smt. Chhaya Devi, proprietor of the Appellant firm, Shri Sanjiv Kumar, Manager of the Appellant firm and M/s Maharashtra Freight Carriers Pvt. Ltd2.
6. The Show Cause Notice3 was adjudicated vide the impugned order after following the due process of law. Demand of duty as proposed in the SCN was confirmed and equal amount of penalty was imposed. Penalty proposed on Smt. Chhaya Devi was dropped. Penalty of Rs.75,00,000/- each was imposed on Shri Sanjiv Kumar Manager of M/s PZFO and M/s MFC under Rule 29 of the Central Excise Rules, 2017. Being aggrieved with the said order, these appeals have been filed before the Tribunal
7. Shri Abhinav Kalra, Chartered Accountant and Shri Nishant Mishra, Advocate, Counsels for the Appellants appeared to plead the case. Ld. Counsel for the Appellants argued the case elaborately and prayed that the appeals may be allowed with consequential relief by setting aside the impugned order. The main arguments are listed below:-
i. The products of the Appellant are high value items and also attracting a very high rate of duty. According to the Department, the Appellant had made clandestine removal of goods of the value of approximately Rs.37 Crores and duty evaded thereon was Rs.8 Crores. Similarly, there is allegation of evasion of GST of Rs.50 Crores during the same period as 2 M/s MFC 3 SCN Excise Appeal No.70638 of 2025 5 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 alleged in a separate SCN. In total, if the allegation is presumed to be true, the Appellant had received payment of Rs.100 Crores in cash during the period of approximately 11 months, i.e., approximately Rs.9 Crores per month. However, it is significant to note that during search operation and also subsequently, no cash was recovered from the proprietor and also from the factory. There is also no evidence that any doubtful deposit has been made in the bank accounts of the proprietor or the factory. It shows that flow of money is not established. It is also alleged that act of clandestine removal was going on for last one year and huge quantity of finished goods were cleared without payment of duty, but no consignment was ever intercepted by the mobile parties of CGST and SGST Department. Thus, the charge of clandestine removal is on presumption basis only. ii. Copy of all RUDs was not supplied. Copy of statement of Shri Sanjiv Kumar, Manager was not given. Similarly copy of „loading register‟, RUD -25, showing entries of loading from 06.01.2020 to 02.10.2020 was not provided, while for quantification of evasion the said entries were taken into account. In lack of RUD, the reply could not be submitted properly. Reliance was placed on the judgment of the Hon‟ble Supreme Court in the case of Natwar Singh Vs. Enforcement Directorate [2010 (13) SCC 255] where it has been held that supply of relied upon documents to the noticee in quasi-judicial proceeding is an essential requirement for adjudication. Similarly in the case of Khudi Ram Das Vs. State of Bengal [1975 (25) SCC 81], the Hon‟ble Supreme Court has observed that in case notice has been issued based on certain relied upon documents, their supply must be ensured to the noticee. The adjudication order without supply of RUDs in the present case would be invalid and illegal.
iii. Incoming and outgoing materials are properly controlled by security deployed at entry and exit gate of the factory with proper record for outgoing and incoming materials but the record was not considered nor resumed by the visiting officers where details of materials are recorded with tax invoices. Without tax Excise Appeal No.70638 of 2025 6 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 invoices, trucks of incoming or outgoing materials cannot be allowed by the security personnels. It is evident that physical movement of goods from the factory and to the factory are authentically monitored at gate and entry is made in the register maintained by the security personnels. No statement of security guard was knowingly recorded with an intent to implicate the Appellant in false charges of clandestine removal. iv. In the SCN, it is stated that the visiting officers conducted stock taking of finished goods and raw materials. However, in the Panchnama dated 28.10.2020 it is stated that stock of finished goods was obtained from the staff of the factory. It is a strong indication that no physical stock taking was conducted. The view of the Department that there was stock difference noticed consequent to stock taking is only based on presumption on the face when no such physical stock taking was conducted. v. There is mismatch between description of goods shown in Panchnama drawn at premises of M/s MFC at Gali No.13, Siraspur, Delhi on 28.10.2020 and description shown in GST INS-02. In the Panchnama, Ratna Chhap and Prabhat brand goods were shown to have been found but in GST INS-02, only Ratna Chhap tobacco was shown to have been found. The Panchnama is, therefore, vague and does not reflect actual picture of proceeding. Similarly, as per Panchnama dated 28.10.2020, drawn at Maharashtra Freight Carrier, the goods were found in carton boxes on which HN Marka, KT-Marka, MB- Marka and KGF Marka were shown but in Panchnama dated 28.10.2020 drawn at the factory, no carton carrying above marka were found as is evident from the stock taking report. However, in dispatch slips there is no mention of above said Marka on cartons. Shri Mukesh Kumar, Manager, M/s Maharashtra Freight Carrier stated that every carton received from M/s PZFO carried marka like, HN, MB, KGF, KT. The statement of Shri Mukesh Kumar claiming that cartons received from the factory were carrying aforesaid marka is incorrect and contrary to the fact. Thus, the whole proceedings at M/s MFC are fabricated and fake. It has no evidentiary value.
Excise Appeal No.70638 of 2025 7 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 vi. Panchnama under which search was conducted at the premises of one another transporter namely Mahalaxmi Transport/Freight Movers, Alipur, New Delhi on 28.10.2020 is confusing and vague inasmuch as the panchas presented themselves at the premises of Mahalaxmi and in next line it says that panchas thereafter reached the locality of the premises of Mahalaxmi. When panchas were already present at the premises of Mahalaxmi, how can it be said that panchas reached the locality of premises thereafter. It shows that Panchnama was fabricated because no search was conducted before the said panchas.
vii. In the instant case, the Department has placed hundred percent reliance on three documents to prove allegation of clandestine removal, which are given as below:-
i. Loose Papers named as „dispatch slips‟ placed in a file referred as RUD 14, ii. Loading Register RUD -25, and iii. Stock Register RUD-27.
-Loose papers- RUD-14:- It was not enquired by the department as to who was preparer of said slips and purpose of preparing such slips. As per hand writing it was prepared by the same person for all dates. It is also not clear from the panchnama, from where and from whose possession said slips were recovered. Only Shri Ajay Kumar Saha in statement dated 18.01.2021 stated that said slips were prepared by either Vipin or by someone else on his direction. However, no statement of Shri Vipin was recorded for interrogation relating to said slips.
What was the purpose for preparing said slips was not explained by any one in subsequent statements.
- Loading Register RUD -25:- This register has been resumed as per Sl. No.08 of Annexure-A to the Panchnama dated 28.10.2020 drawn at M/s MFC. Shri Mukesh Kumar, Manager, M/s MFC stated in his statement dated 30.12.2020 that the aforesaid register is maintained regarding entries of loading of goods from the godown of the transporter. The details in the said register were available from 06.01.2020. However, from Excise Appeal No.70638 of 2025 8 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 perusal of the said register, as provided by the Department, entries of loading of goods were from 03.10.2020. There is no record provided by the Department showing loading details from 06.01.2020. The chart prepared and enclosed as Annexure-B to the statement dated 30.12.2020 of Shri Mukesh Kumar is without support of any document. On the basis of entries made in loading register (RUD-25) and as per Chart Annexure-B enclosed with SCN, a chart has been prepared on sample basis as below:-
Goods loaded as per loading Goods loaded as per Chart register enclosed as Annexure-B Date Truck Ma Quantity Date Truck Ma Quantity No rka loaded(C No. rka loaded(C artons) artons) 03.1 HR38Y5 KT 13 03.1 HR55A KG 65 0.20 266 0.20 H2762 F 03.1 HR55Y5 KT 13 0.20 266 05.1 HR55A KT 64 05.1 HR55AJ HN 50 0.20 H3730 0.20 3730 05.1 HR55A HN 50 05.1 HR55A KT 22 0.20 H3730 0.20 H3730 05.1 HR55A KT 22 05.1 HR55A HN 31 0.20 E2273 0.20 H3730 05.1 HR55A HN 31 0.20 E2273 06.1 HR38Y1 KT 64 06.1 HR38Y1 KT 64 0.20 571 0.20 571 06.1 HR38Y1 HN 18 06.1 HR38Y1 HN 18 0.20 571 0.20 571 The above Table shows visible mismatch between entries made in loading register and chart enclosed as Annexure-B.
-Stock Register-RUD-27- This register was resumed from M/s MFC on 28.10.2020 as per Sl. No.04 of the Resumption Memo, Annexure-A, to the Panchnama dated 28.10.2020. Shri Mukesh Kumar, Manager, M/s MFC in his statement dated 30.12.2020, stated that goods received from M/s PZFO were accounted for at page 9 to 16 and 111 of the said register. He further stated that goods received from M/s PZFO and dispatched from the transport were recorded in the aforesaid stock register. It indicates that goods removed from the factory of M/s PZFO as Excise Appeal No.70638 of 2025 9 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 shown in dispatch slips must have been shown in stock register as receipts. A comparative chart of goods dispatched as per dispatch slips and goods received as per Stock register, date-
wise, is prepared as below:-
As per Dispatch slip, material As per stock register, material dispatched from the factory received at transporter‟s end Date Total quantity Date Total quantity dispatched received 27.10.20 320 box 27.10.20 80 box 26.10.20 277 box 26.10.20 178 box 23.10.20 232 box 23.10.20 104 box 22.10.20 177 box 22.10.20 40 box 21.10.20 213 box 21.10.20 80 box 20.10.20 225 box 20.10.20 40 box 19.10.20 194 box 19.10.20 120 box 17.10.20 280 box 17.10.20 120box 18.10.20 18.10.20 79 box 14.10.20 200 box 14.10.20 290 box 12.10.20 40 box 12.10.20 --
16.10.20 157 box 16.10.20 80 box 15.10.20 348 box 15.10.20 69 box It may be seen from the above that there is variation in figures of dispatch of goods from the factory and goods received by the transporter. It clearly shows that dispatch quantity which has been taken by the Department from „dispatch slips‟ is bogus and baseless. By no stretch of imagination, it can be considered as authentic removal of goods. There are series of decisions where it has been held that clandestine removal cannot be established only on the basis of resumption of some loose papers showing some entries related to removal of goods.
Further, on the basis of entries made in stock register and loading register a comparative chart, date-wise, relating to removal of goods, has been prepared as below:-
Date Dispatch quantity as per Dispatch quantity as stock register per loading register 27.10.20 Nil box 164 box 26.10.20 42 box 161 box 25.10.20 Nil box Nil 24.10.20 Nil box 128 box 23.10.20 83 box Nil 22.10.20 nil 24 box 21.10.20 77 box 146 box 20.10.20 65 box 134 box Excise Appeal No.70638 of 2025 10 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 19.10.20 170 box 170 box 18.10.20 Nil Nil 17.10.20 nil Nil 16.10.20 nil Nil 15.10.20 nil Nil 14.10.20 nil Nil 13.10.20 131 box 47 box 12.10.20 66 box 66 box 11.10.20 95 box 80 box 10.10.20 109 box 181 box The above analysis indicates that entries of dispatch made in stock register and in loading register are at variance. It clearly shows that the said documents are not authentic documents for determination of removal of goods.
-Slips issued by Om Sai Cargo, RUD-26: During search of Maharashtra Freight, slips issued by Om Sai Cargo were recovered as per Sl. No.13 of the Resumption Memo, Annexure- A to the Panchnama. The quantity of goods manufactured by M/s PZFO and transported by M/s MFC was shown on the slips of Om Sai Cargo issued by M/s MFC. Shri Mukesh Kumar Manager of M/s MFC in his statement dated 19.11.2020 has stated that for transportation of goods of M/s PZFO, they issue slips of Om Sai Cargo. There was mismatching among figures of dispatch drawn out from documents /records maintained by M/s MFC. In view of the above analysis, no conclusion can be drawn regarding clandestine removal.
It is legally settled in a number of cases that no evasion case can be built up on the basis of records maintained by third party. Transporters are third party. So, records maintained by them cannot be taken for establishing case of clandestine removal. vii. The Department has made case of clandestine manufacturing and removal of goods. The goods manufactured by the Appellants are various kinds of chewing tobacco and sold them in packing of tin containers or paper boxes. Main raw materials used for manufacturing of chewing tobacco are tobacco flakes, menthol, spices, herbs, saffron, silver foils etc. All items are covered under GST. In the instant case, charge of clandestine manufacturing and removal of chewing tobacco is Excise Appeal No.70638 of 2025 11 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 made by the Department but no enquiry was made as to how raw materials were clandestinely purchased. For manufacturing huge quantity of goods alleged to be cleared clandestinely, a huge quantity of raw material, extra man power for manufacturing, additional electricity, packing materials were required. The Department did not make any investigation in the said aspects. In the factory, during stock taking, no discrepancies were found in the stock of raw materials and in packing materials. It is strong proof that no goods were manufactured clandestinely. Even no statement was recorded from the personnel of the factory as to how goods said to be cleared without payment of duty were manufactured clandestinely. Without deployment of extra man power, it is not possible to manufacture such huge quantity of clandestinely cleared goods. It is undisputed fact that finished goods were cleared in packaging of tin containers or paper boxes which are tailor made items as they are carrying brand name, manufacturer‟s name of the Appellant-1. Such packaging materials must have been manufactured by a factory on specific order of the Appellant. The Department did not make any effort to find out manufacturer of packing materials who supplied them in unaccounted manner. In absence of above, charges of clandestine removal is based on only assumption and presumption and as such are not sustainable. In catena of judicial decisions, it has been categorically held that for proving clandestine manufacture and removal of goods, all above facts are necessary to be proved.
viii. As per Panchnama dated 28.10.2020 drawn at Maharashtra Freight, physical stock taking of goods received from M/s PZFO was carried out and as per Annexure-B to the Panchnama, total 889 cartons of various brands of chewing tobacco were found. As per stock register RUD-27 and goods received through two trucks on 28.10.2020, the stock position at M/s MFC is as below:-
Excise Appeal No.70638 of 2025 12 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 Date Balance as per Goods Total book Stock Register received on balance 28.10.20 28.10.20 919 Cartons 77 Cartons 996 Cartons Physically found stock is 889 Cartons. There is difference of 107 Cartons between balance as per Stock Register and physically found stock. It shows that entries of stock register are not authentic and genuine. Its entries have no evidentiary value.
ix. During investigation of the case, statements of various persons of the factory, transporters, truck drivers and dealer of M/s PZFO were recorded. In the SCN, allegation of clandestine removal is based on the statements of the persons. Not even single clinching documentary evidence was discussed in support of the allegation of clandestine removal. It is a settled law that statements recorded under Section 70 have no evidentiary value if they are not corroborated with documentary evidences. In lack of corroborative evidence, it would be treated that the department has not discharged burden to prove allegation conclusively.
x. As per the SCN, stated in para-4.8 of the impugned order, quantum of various brands of goods carrying different values which were alleged to have been cleared clandestinely was ascertained on estimation basis.
xi. On the basis of „dispatch slips‟ resumed from the factory on 28.10.2020 and „stock register‟, differential duty was determined as per para 9(5) of the SCN. As per Annexure -D to the SCN which is prepared on the basis of Stock Register, excise duty and NCCD has been worked out in respect of goods cleared from M/s PZFO and received at M/s MFC. Stock Register is showing receipt of goods from 23.11.2019 to 27.10.2020. It shows that goods cleared from the factory from 12.10.2020 to 27.10.2020 as per „dispatch slips‟ recovered from the factory were already included in the Stock Register. However, demand of duty on goods shown on „dispatch slips‟ was separately worked out as per Annexure-B to the SCN. Duty demanded as Excise Appeal No.70638 of 2025 13 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 per the SCN is sum of Annexure-B & Annexure-D. It is thus double demand on the goods mentioned on „dispatch slips‟. One by way of receipts shown in Stock Register‟ and other by determination of duty on the basis of entries show on dispatch slips. Demand of duty & NCCD on the basis of dispatch slips, amounting to Rs.1,85,97,560/-, is liable to be dropped. Further, in stock register, entry of receipt of goods was shown in cartons without disclosing as to how much goods were received brand - wise and variety wise. In Annexure-D, duty has been worked out variety-wise on the basis of stock register which is based on presumption basis. Thus, the duty determination is patently incorrect and has been made in such a way to inflate the demand figures. Thus, the demand of duty and NCCD on the basis of stock register is incorrect.
xii. As demand of duty and NCCD is not sustainable, no interest is payable by the Appellant. Even if the demand survives, no interest is chargeable on the amount of NCCD Which is a surcharge leviable on specified goods as excise duty in terms of Section 136 of the Finance Act, 2001. Levy and collection of NCCD would be as per provisions of the Central Excise Act and rules made thereunder. The provision is applicable only to the extent of levy and collection. Charging of interest is governed by the provisions of Section 11AA of the Central Excise Act, 1944 which is not applicable for NCCD. In this context, reliance is placed on the decision of the Hon‟ble Andhra Pradesh high Court in the case of Cairn Energy India Pvt. Ltd. [2005 (183) E.L.T. 3 (AP)] where issue relating to charging of interest on oil cess has been considered and it has been held that no interest is chargeable on the cess. The ratio of the said decision is squarely applicable to the facts of the present case. It is further submitted that as no demand is sustainable, no penalty under Section 11AC of the Central Excise Act, 1944 would be imposable.
xiii. Penalty imposed on Shri Sanjiv Kumar and M/s MFC was also opposed by the Ld. Counsel of the Appellants.
Excise Appeal No.70638 of 2025 14 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025
8. Ld. Authorized Representative of the Department rebutted the submissions and arguments forwarded by the Ld. Counsel of the Appellants. He submitted that there were abundance of evidences showing clandestine manufacturing and removal of goods. He pointed out that recovery of dispatch slips, statements of drivers who transported goods which were clandestinely removed, confession of dealer for receiving clandestinely removed goods etc., were sufficient proof to establish clandestine removal. He also reiterated findings given by the Ld. Commissioner in the impugned order.
9. We have carefully gone through the SCN, defence reply, grounds of appeal and contentions made by both sides. We find that the Ld. Commissioner has concluded in para -26 of the impugned order that the Appellant No.1 in association with Sanjiv Kumar and M/s MFC have been clandestinely removing the goods without proper analysis of evidences. It is found that the Appellant has vigorously raised the issue of money trail which was said to have been received through cash from the recipients of clandestinely removed goods. As per the allegation, huge amount to the tune of Rs.100 crores was taken in cash by the Appellants but the Department could not prove as to where such amount had gone. Such huge amount of cash cannot be hidden by anyone. It is an important factor which was required to be investigated but was not done at all. In case, the goods are sold by way of evading duty, it is logical that amount equal to duty which was to go to the Government exchequer was retained by the seller. To avoid the disclosure of clandestinely removed goods, payment is always received in cash. So, non-recovery of cash received from such alleged sale of clandestinely removed goods indicate that allegation of clandestine removal is based on assumption and presumption only. Evasion of duty cannot be established. Ld. Commissioner has given finding on the said issue as below:-
"I note that the allegation of clandestine removal from the factory of the noticee is not based on recovery of cash but is based on overwhelming evidence in the shape of Excise Appeal No.70638 of 2025 15 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 physical seizure of goods not only from the godowns of transporters but also found loaded in various trucks."
It is also noticed that the Department has alleged that transportation of goods without invoice was going on from last eleven months. Full truck goods were transported without invoice from the factory to transporters at Delhi and from transporters to Karnataka crossing three different states but they remained unchecked by the mobile checking squads of state tax authorities and central tax authorities. It is not possible at all. The allegation of clandestine removal is therefore not without any clinching evidence and based on conjectures and surmises.
10. We further find that allegation of clandestine removal is principally based on the recovery of 12 dispatch slips recovered during search of the factory. Such slips were placed in a file after their recovery and shown to have been resumed at Sl. No.27 of the Resumption Memo and was made RUD-14 to the SCN. On the slips name of „Ajai Ji‟, „Udai Ji‟, „Manoj Ji‟ was mentioned. It was found that statement of only Ajay Kumar Saha was recorded on 18.01.2021 who denied to be author of the said slips. He said that the said slips were prepared by some Vipin but no statement of Vipin was recorded to find out actual reason of preparing such slips. The said slips were loose sheets and even do not carry the name of the factory and description of goods. It is also not clear as to from where such slips were recovered. As per the SCN, the said slips were prepared for planning of removal of goods on a particular date but it is evident that no slips were found in regard to removal of goods made on 28.10.2020, i.e., date of search in the factory. Thus, dispatch slips which are showing merely some entries on loose papers cannot be taken as cogent evidence for proving clandestine removal. Ld. Commissioner in para -36.1 of the impugned order, has observed that it is upto the noticee to explain as to why such slips were being prepared.... In this context, we find that onus lies on the Department to prove clandestine removal. Entries in Excise Appeal No.70638 of 2025 16 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 such loose sheets have no evidentiary value to prove clandestine removal when preparer of such slips could not be ascertained. Only on the basis of statements of some truck- drivers, clandestine removal of finished goods cannot be established particularly when drivers were not aware as to what kind of goods were being transported by them. In this context, reference is made to the following judicial decisions:-
Portland Cement (I) Ltd [2015 (326) E.L.T. 304 (Tri.- Del.)] wherein it has been held by the Tribunal that clandestine removal is a very serious allegation and the same cannot be proved on the basis of recovery of some loose papers where name of the factory and description of goods were not shown, Clandestine removal is not established. The Tribunal in the case of Shivam Steel Corporation [2016 (339) E.L.T. 310 (Tri. - Kolkata] has observed that demands are not sustainable on the basis of loose papers/loading slips unless corroborated appropriately by other independent evidence. In the case of New India Dyeing vs. CCE [2004 (165) E.L.T. 316] the Tribunal had held that demand based on recovered sale bills and recorded statements without any other evidence is not sustainable.We find that in Shivalya Ispat and Power Ltd. [2017 (357) E.L.T. 742 (Tri.
- Del.)], it has been held that demand cannot be made against them merely on the basis of some loose papers showing some raw material and assuming that the goods were produced and removed without payment of duty.
11. In the SCN, „Loading Register‟, RUD-25 recovered from the premises of M/s MFC was also made evidence to prove the clandestine removal by the Appellant. It has been explained that the said register contained entries of loading of goods received from the factory of M/s PZFO, date-wise, in trucks for further transportation. Entries made in the said register regarding transportation of tobacco received from the Appellant‟s factory were compared with entries made in the chart prepared by Shri Mukesh Kumar, Manager of M/s MFC and it was found that there was vast variation in the figure of loading shown in Loading Excise Appeal No.70638 of 2025 17 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 Register and loading shown in the chart. The chart prepared and enclosed as Annexure-B to the statement dated 30.12.2020 of Shri Mukesh Kumar is without support of any document.
Similarly, Stock Register-RUD-27, as explained, was maintained for recording goods received from M/s PZFO and the goods dispatched from the premises of the transporter. A comparative chart of goods dispatched as per dispatch slips and goods received as per Stock register, date-wise, indicates variation in figures of removal as shown in dispatch slips and goods received in Stock Register. It clearly shows that dispatched quantity which has been taken by the Department from „dispatch slips‟ is bogus and baseless. It is further found, as per SCN, that every carton of chewing tobacco received by the transporter, namely M/s MFC from the Appellant was carrying marka like "HN", "KT", "KGF" & "MB‟‟ but in „dispatch slips‟ removal of goods carrying such marka was not found. Thus, „dispatch slips‟ cannot be considered as authentic documents establishing removal of goods. As per Panchnama dated 28.10.20 drawn at M/s MFC, physical stock taking of goods received from M/s PZFO was carried out and as per Annexure-B to the Panchnama, total 889 cartons of various brands of chewing tobacco were found. As per stock register RUD-27 and goods received through two trucks on 28.10.2020, the stock position at M/s MFC is as below:-
Date Balance as per Goods Total book
Stock Register received on balance
28.10.20
28.10.20 919 Cartons 77 Cartons 996 Cartons
There was difference of 107 Cartons between balance as per Stock Register and physically found stock. It shows that entries of stock register are not authentic and genuine. The entries have no evidentiary value and on the basis of entries made in such register, no case of clandestine removal is established.
12. It has been stated in the SCN that slips issued by Om Cargo which accompanied consignments dispatched from the Excise Appeal No.70638 of 2025 18 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 premises of M/s MFC shown as RUD-26, wherein quantity of goods being transported from the premises of transporter was shown. On comparison the figures of quantity of goods shown as dispatched in Stock Register, Loading Register and Slips issued by Om Sai Cargo, mismatch was observed as per details given below:-
Date Quantity Quantity Quantity
dispatched as dispatched as dispatched as
per stock per loading slips of Om Sai
register register Cargo
13.10.20 131 47 130
14.10.20 nil nil 69
15.10.20 nil nil -
18.10.20 nil nil 79
19.10.20 170 170 91
20.10.20 65 134 65
21.10.20 77 146 77
22.10.20 nil 24 24
23.10.20 83 nil -
24.10.20 nil 128 59
25.10.20 nil nil -
26.10.20 42 161 132
27.10.20 nil 164 55
The above chart indicates that there was mismatching among figures of dispatch drawn out from documents /records maintained by M/s MFC. In view of the above analysis, no conclusion can be drawn regarding clandestine removal on the basis of said documents. The above records were maintained by the transporter as per his convenience. It is legally settled in a number of cases that no evasion case can be built up on the basis of records maintained by third party. Transporters are third party. So, records maintained by them cannot be taken for establishing case of clandestine removal. The demand of duty on the basis of said records is not sustainable. In this regard, following decisions are being referred to:-
a. Shree Rolling Mill [2021 (377) E.L.T. 883 (Tri. - Del.)]- Clandestine removal cannot be held only on the basis of third party‟s records b. Continental Cement Company v. Union of India -[ 2014 (309) E.L.T. 411] -The Hon‟ble Allahabad High Excise Appeal No.70638 of 2025 19 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 Court has held that third party‟s records cannot be adopted as an evidence for arriving at the finding of clandestine removal.
c. P.D. Industries Pvt. Ltd. - 2016 (340) E.L.T. 249 (Tri.
- Del.)- If Department wanted to rely upon entries made in documents seized from the premises of third party, it was for them to prove genuineness of these entries with corroborative evidence - Since, Department has not conducted physical verification of stock of assessee, purchase of raw materials, consumption of electricity, flow of cash from buyers, issuance of parallel invoices or maintenance of other documents by assessee corroborating entries made in documents seized from third party, allegation of clandestine removal cannot be upheld d. Vishnu & Company Pvt. Ltd. [2016 (332) E.L.T. 793 (Del.)]- Hon‟ble Delhi High has held that- Clandestine removal - Proof of - Gutka - Documents seized from transporters showing entries for pan masala and not gutka - Loading register also showed only some private marks and numbers without any mention of description of goods - Persons who wrote loading registers and day book were not identified and their statements were not recorded
- HELD : Such evidence cannot be relied on to prove charge of clandestine removal - It was for the department to explain why entries in documents were not further investigated by them and why someone in responsible position did not examine the transporter - It was for department to establish link between such evidence and assessee - Rules 11 and 25 of Central Excise Rules, 2002. [para 50] e. Synergy Steels Ltd [2020 (372) E.L.T. 129 (Tri. - Del.)]- The Tribunal in this case held that- Third Party Evidence - Said demand has been confirmed only on basis of certain loose slips/pages resumed from third party i.e. consignment agent - No reliance can be placed on these Excise Appeal No.70638 of 2025 20 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 loose sheets as name of appellant is not mentioned on them.
13. We find that there is no investigation in regard to procurement of raw material and packing material used in the manufacture of finished goods. For manufacturing huge quantity of goods alleged to be cleared clandestinely, a huge quantity of raw material, extra man power for manufacturing, additional electricity & packing materials were required but there is no evidence regarding procurement of raw material or packaging material. It shows that the Department could not prove clandestine procurement of raw material and packaging material. Packing material used by the Appellant has printing of name of the brand, factory along with address and other particulars. It means packing materials are tailor made items. Such packaging materials must have been manufactured by a factory on specific order of the Appellant but no enquiry was made as to how such packing materials were clandestinely procured. Thus, charges of clandestine removal are based on only assumption and presumption and as such not sustainable. In the case of Continental Cement Co. Vs. Union of India reported as [2014 (309) E.L.T. 411 (Allahabad)] Hon‟ble Allahabad High Court had earlier laid down the criteria of investigation to prove the allegation of clandestine sale in following words:-
"Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects:
(i) To find out the excess production details.
Excise Appeal No.70638 of 2025 21 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025
(ii) To find out whether the excess raw materials have been purchased.
(iii) To find out the dispatch particulars from the regular transporters.
(iv) To find out the realization of sale proceeds.
(v) To find out finished product receipt details from regular dealers/buyers.
(vi) To find out the excess power consumptions." In the case of Wonder Industries Pvt. Ltd. [2022-TIOL-31- CESTAT-AHM], the Tribunal has held as:-
"6.3 As regards, the shortage of finished Decorative Laminates of 18456.33 SQMT involving duty demand of Rs. 1,85,994/-, Appellant has submitted that there was no such shortage of finished goods as shown in Panchnama dated 03.05.2017; that no verification of physical stock was carried out during Panchnama; that on 31.03.2017, they had taken closing stock, which had taken 4 days with help of 20 persons; that during Panchnama on 03.05.2017, only few officers were present and they had not carried out any physical verification of all goods lying in factory on 03.05.2017. I find that Notarised Affidavit by Director Shri Ravindra Tantia is also submitted in Company's Appeal. Appellant has submitted that for manufacture of 18456.33 SQMT finished goods, they would require quantity of raw materials as shown in Appeal and investigation has not adduced any evidence of excess procurement and use of Raw materials, packing materials. I find that Appellant has also submitted that levy of duty is on actual manufacture of goods and no manufacture of goods can be proved without proving excess procurement and use of excess Raw materials, packing materials, electricity consumption, men power etc. Therefore, it is contention of Appellants that when production of goods is not proved first, alleged clandestine removal of such goods is consequently not proved. Investigation has not adduced any such evidences on record to prove their case. I find that in absence of any Excise Appeal No.70638 of 2025 22 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 such corroborative clinching, positive evidences of excess procurement and use of required Raw materials, packing materials and confirmation from buyers of receipt of such clandestinely removed goods, receipt of sale proceeds etc, and without proper verification of stock of finished goods, the case of clandestine removal is also not proved for demand of Rs. 1,85,994/-. In the case of Oudh Sugar Mills Ltd. v. U.O.I.,[ 1978 (2) E.L.T. (J 172)], the Supreme Court has held that the findings based on assumption and presumption without any tangible evidence will be vitiated by an error of law. We, therefore, set aside the demand on charge of clandestine removal. In the case of Himanshu Bhai Jagani [2021-TIOL-383- CESTAT-AHM] the Tribunal has held only on the basis of third party records, the demand cannot be confirmed alleging the clandestine removal. Despite the fact that the investigating officers recovered the diaries/ private records no effort was made to find out that whether the appellant have procured the excess raw materials to meet out the clandestinely manufactured and clearance of the goods. No excess electricity consumption was brought on record. Therefore, merely on the basis of third party evidence, case of clandestine removal cannot be established.
In the case of Paras Pan Products Pvt. Ltd. [2020-TIOL- 764-CESTAT-KOL] the Tribunal has held that the Show Cause Notice has not shown any unaccounted receipt or consumption of main raw materials i.e. Supari, Katha, Kimam, Perfume, Menthol or Tobacco which are main raw material for manufacture of "Pan Masala containing Tobacco". The packing material would come into picture only once raw materials are consumed and finished goods are produced. The Tribunal in the case of M/s. Balaji Structurals India Ltd. & J. P. Agarwal v/s CCE, Raipur reported in 2018-TIOL-754- CESTAT-DEL New Delhi held as under:-
"8. The entire allegation of clandestine removal is based on the statements of the transporters as well as the details Excise Appeal No.70638 of 2025 23 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 culled out from the ledgers of the transporters. These documents are evidently third party documents. The revenue has not produced any evidence from the assessee to support the charge of clandestine clearance. It is settled law that documents recovered from the third party cannot be used against the manufacturer to prove clandestine removal, unless they are supported by corroborative evidence. The revenue has alleged that huge quantity of finished goods have been cleared without payment of duty after manufacture. For clearance of such huge quantities of goods, corresponding quantity of raw materials ought to have been procured by the appellant. However, the revenue has not brought any evidence on record on this issue. Further, none of the customers to whom such huge quantity of finished products have been identified or questioned. From the records of the factory, no evidence has been brought on record either regarding manufacture of the finished goods or clearance of the same."
The ratio of above decisions is squarely applicable in the present case.
14. We find that during investigation of the case, statements of various persons of the factory, transporters, truck drivers and dealer of M/s PZFO were recorded. Smt. Chhaya Devi Proprietor stated in her statement dated 09.03.2021 that she did not know M/s MFC and Mahalaxmi Freight. She did not accept the allegation of clandestine removal of goods from the factory. Ajay Kumar Saha In-charge of production and transportation in his statement dated 18.01.2021 stated that he did not do work relating to issuance of invoice or e-way bills but side by side he confirmed that goods found at the transporters premises were of M/s PZFO. These are contradictory statements. It is also significant to note that no statement of Vipin was recorded whereas as per the statement of Shri Saha he was maker of dispatch slips. The reason for not recording statement of Vipin was not explained anywhere in the SCN. The above statement of Shri Saha does not seem authentic and based on correct facts.
Excise Appeal No.70638 of 2025 24 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 Shri Ganesh Prasad Gupta was Manager and looked after feeding work of bills which were prepared by Shri Keshav Kumar Khan (Clerk) on the direction of Sanjiv Kumar. He stated that purchase of raw materials and production were looked after by Shri Sanjiv Kumar and dispatch & transportation were looked after by Vipin and Ajay Kumar Saha but Ajay Kumar Saha stated that he was doing transportation of goods under the direction of Shri Sanjiv Kumar. Sanjiv Kumar in his statements dated 30.03.2022 & 04.04.2022, stated that he looked after HR matters and overall management of the factory, like workers, machines, electrical goods. He clearly stated that he did not look after dispatch and transportation of goods. He stated that he did know anything about the preparation of dispatch slips. He also stated that he did not know M/s MFC or Mahalaxmi freight. He in his statement dated 04.04.2020 stated that he did not know Shri Mukesh Kumar, Manager of M/s MFC and Shri Subhash Chandra Sharma of Mahalaxmi Freight. He stated that he did know any driver of vehicles which were alleged to have transported goods clandestinely from the factory to transporter. Statement of Rajan Shrivastava, who was looking after sale works of M/s PZFO, was also recorded on 23.02.2021. He stated that he used to receive orders from Hemant Enterprises, Karnataka and S.I. Enterprises, Karnataka and such sale orders were informed to Smt. Chhaya Devi.
From the above statements, it abundantly clear that no personnel of the factory admitted regarding clandestine production of goods. No one explained as to how raw materials and packaging materials were obtained for production of clandestinely removed goods. It was also not explained as to how and by whom services of M/s MFC and Mahalaxmi Freight were hired. What were the terms and contracts for carrying goods without bilty /invoice, what was the payment amount for rendering such illegal activities. Their statements were general type statements, not throwing light on the above issues. Statement of Shri Mukesh Kumar, Manager of M/s MFC was recorded on three different dates, i.e., on 23.10.2020, Excise Appeal No.70638 of 2025 25 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 19.11.2020 & 30.12.2020. In his statement dated 28.10.2020, he stated that on truck No. DL-1LQ 0394 & DL1LQ 3391, 40 & 37 cartons of chewing tobacco were received from M/s PZFO. It was not stated by him as to who asked him from M/s PZFO to receive the said goods for onward transmission. He further stated that every carton was marked with marka "HN", "KT", "KGF" & "MB‟ which were short form of dealers of PZFO located at Karnataka but which marka represent which dealer was not stated. In his statement dated 19.11.2020, he stated that goods received from M/s PZFO were entered in Stock Register, goods dispatched were shown in Loading Register and for transportation of goods of M/s PZFO, slips of Om Sai Cargo were issued. However, on comparison of entries of dispatch shown in loading register, stock register and slips of Om Sai Cargo, a huge variation was noticed which indicates that statement of Mukesh Kumar is not authentic but contrary to documentary evidence. In the statement dated 30.12.2020, he reiterated the earlier statement. He confirmed that 9235 cartons were transported clandestinely from 01.06.20 to 27.10.2020. As per stock register, 12221 Cartons were received from M/s PZFO from 23.11.2019 to 28.10.2020. However, comparative charts discussed in foregoing paras indicates a lot of difference in figures among various records maintained at the transport‟s end. Thus, there is no documentary corroboration of the statement of Mukesh Kumar. Statement of Subhash Chandra Sharma, Partner Mahalaxmi Freight was recorded on 06.11.2020. He stated that from M/s PZFO, they received 40 cartons vide truck No.DL1LN8586, 40 cartons vide truck No.DL1LQ6103 and 40 cartons vide DL1LL 3692 and 50 cartons through truck which was already unloaded. Thus, total materials received were 170 cartons. He further stated that invoice and other documents regarding above goods were informed to be received from the factory. He further stated that it was for the first time when his transport was transporting good of M/s PZFO. He did not disclose the name of the person of M/s PZFO who contacted him for transportation of goods. It is a general type statement. Nothing Excise Appeal No.70638 of 2025 26 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 was disclosed about the consignee and as to how the freight would be received. Statement of drivers of trucks was recorded in the same fashion as was done earlier. Statement of Shri Hemant Kumar of Hemant Enterprises, Karnataka, said to be dealer of M/s PZFO was recorded on 25.01.2021. He stated that „HN‟ marka cartons having goods of M/s PZFO were transported to Hubli Karnataka by M/s MFC and were lifted by them from godown of Om Sai Cargo. Such goods were without invoice. The payment was made through cash. It may be seen that Hemant Kumar had not stated as to what were the records maintained in regard to receipt of goods. What was the rate of payment of goods? It is a general type statement. It is also not stated as to whether retail sale price was printed on such goods. The above statements are either contradictory to each other or not supported by any documentary evidence.
Hence, they cannot be accepted as tangential evidence to prove clandestine removal. In the case of UOI Vs. Kisan Ratan Singh [2020 (372) E.L.T. 714 (Bom)], Hon‟ble High Court held that Various Courts have kept all these things in mind and come to a conclusion that in the absence of any corroboration by an independent and reliable witness, a statement recorded under Section 108 in isolation could not be relied upon. In the case of Piyush Kumar Jain Vs. UOI [2022(382) E.L.T. 184 (ALL)], Hon‟ble Allahabad High Court has observed as mere statement cannot be sole basis for penalty. In the case of Commissioner of Service Tax Mumbai-V Vs. Jasper International [2019 (22) E.L.T. 29 (T)], the Tribunal has held that no liability can be fastened merely on the basis of statements recorded during investigation if the same is not supported by documentary evidence.
In the case of Commissioner of C.Ex. & Service Tax Vs. Mittal Pigment Pvt. Ltd [2018 (16) E.L.T. 41 (Raj), Hon‟ble Rajasthan High Court held that statement which is further corroborated in the form documentary evidence cannot be considered a valid evidence. In lack of corroborative evidence, it Excise Appeal No.70638 of 2025 27 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 would be treated that the Department has not discharged burden to prove allegation conclusively.
In view of the above, the demand of duty on clandestine removal is liable to be dropped.
15. As regards penalty on Shri Sanjiv Kumar Manager of M/s PZFO under Rule 29 of the Central Excise Rules, 2017, the provisions of said Rule is reproduced for ready reference:-
"Rule 29. 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 two thousand rupees, whichever is higher :
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. (2) Any person, who issues-
(i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or
(ii) any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made thereunder like claiming of CENVAT credit under the CENVAT Credit Rules, 2017 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is higher."
It can be seen from the plain reading of Rule 29 that the person who is to be penalized under this provision need to have physically dealt with the dutiable goods and have done certain Excise Appeal No.70638 of 2025 28 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 acts which have made the subject goods liable for confiscation. He is consciously in the know of this very fact that by acquiring possession of such goods, by transporting such goods and dealing with in other manners, will render the goods liable for confiscation. We notice that Shri Sanjiv Kumar was only overall in charge who was doing general supervision only. The issue of despatch of goods is separate act handled by different class of persons, therefore, the penal provision of Rule 29 of Central Excise Rules, 2017 cannot be invoked against the person who is only involved in general supervision. Reliance is placed on the judgment of Hon'ble Bombay High Court in the case of CCE Vs. M/s. Bansal Steel Corporation & Ors [2017-TIOL- 1883-HC-MUM-CX]. The relevant extract is reproduced below:-
"9. Having heard the parties, we are of the view that the only question of law which would arise for determination is whether Rule 209A of the said Rules under which the penalty has been imposed is attracted only when the person has physically dealt with the excisable goods with the knowledge or belief that the goods were liable to confiscation."
In a judgment dated 14.09.2010 passed in The Commissioner of Central Excise Vs. M/s. Ramesh Kumar Rajendra Kumar & Co. & Anr [2015 (325) E.L.T. 506 (Bom)], in paragraph 7 after extracting Rule 209A has held that:-
"The sine qua non for a penalty on any person under the above rule is: either he has acquired possession of any excisable goods with the knowledge or belief that the goods are liable to confiscation under the Act or Rules or he has been in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or has in any other manner dealt with any excisable goods with such knowledge or belief. Acquisition of possession of goods is, indisputably, a physical act i.e. the act which could not have been done without handling or movement of excisable goods as mentioned in the rule. The words "who acquires possession" would indicate that Excise Appeal No.70638 of 2025 29 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 the person sought to be penalized under this rule has to first acquire the possession and then do the activity of transportation etc. as contained in the rule. It is, thus, clear that the physical possession of the goods is a must for doing the activity of transporting referred in rule 209A. The ratio laid down by Court in Jayantilal Thakkar & Co. {2007(8) STR 312 (Bom)] covers the issue. In the said judgment, it is held that in the given situation, if the assess is only issuing invoices wherein there is no movement of the goods, they cannot be visited with penalty under rule 209A."
Though the above judgments are in relation to penalty imposable under Rule 209A of the Central Excise Rules, 1944, ratio of the said decisions would be equally applicable in the matter of Rule 29 of the Central Excise Rules, 2017 as contents and provisions of both the rules are similar. From the above judgments, it is clear that personal penalty can be invoked and the penalty imposed only when the person has physically dealt with the excisable goods with the knowledge or belief that the goods are liable for confiscation. In the present case, this is not the situation. As Shri Sanjiv Kumar was not handling matters relating to taxation, it cannot by any stretch of imagination be construed as a wilful act so as to attract the provisions of confiscation and thereby imposition of penalty under the Rule
29. Therefore, imposition of penalty under Rule 29 is neither justifiable nor warranted in the facts and circumstances of the present case. We further find that penal provision can‟t be invoked unless the specific allegations are made to justify the same. And whereas the impugned SCN has not brought any specific commission or omission on part of the Appellant. The decision of the Tribunal in the case of Shri Kamdeep Marketing Pvt. Ltd. vs. Commissioner of C. Ex., Indore reported under 2004 (165) E.L.T. 206 (Tri.-Del.) is referred in this matter where it has been held as under:-
"3.2 What remains to be considered in all these appeals is whether the penalties imposed on the appellants are Excise Appeal No.70638 of 2025 30 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 sustainable or not. The penalties are under Rule 209A which reads : "Penalty for certain offences. - 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 three times the value of such goods or five thousand rupees, whichever is greater." The sine qua non for a penalty on any person under the above rule is that either he has acquired possession of any excisable goods with the knowledge or belief that the goods are liable to confiscation under the Central Excise Act or Rules or he has been in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or has in any other manner dealt with any excisable goods with such knowledge or belief. Acquisition of possession of goods is, indisputably, a physical act, and so is each of the various ways of dealing with goods, specifically mentioned in the rule. The expression "any other manner" should be understood in accordance with the principle of ejusdem generis and would, then, mean "any other mode of physically dealing with the goods".
In the instant case, it is a fact that Shri Sanjiv Kumar had not dealt the impugned goods physically or in any other manner. Hence not liable to penalty under Rule 29. It has been held by various Appellate Authorities that where there is no allegation in SCN regarding particular commission or omission on part of a person which shows that there was intention to evade the duty, the personal penalty is not imposable. Reliance is placed on following case laws in this regard:-
a. COLLECTOR OF C. EX., NEW DELHI versus NEW TOBACCO COMPANY LTD. 2001 (134) E.L.T. 176 (Tri. - Kolkata)-
"Penalty - Evidence not produced to show active Excise Appeal No.70638 of 2025 31 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 involvement of the directors of appellant company - Penalty not imposable in absence of any specific role shown to have been played by them - Rule 173Q of Central Excise Rules, 1944."
b. BIJENDRA KEDIA Vs. COMMISSIONER OF CUSTOMS (P), CALCUTTA 2001 (133) E.L.T. 791 (Tri. - Kolkata)The verdict‟s of same is as follows:-
"Penalty (Customs) - Exports, over-invoicing - Partner, Partnership firm - Evidence - Penalty on assessee as a partner of a partnership firm without adverting to any evidence on record reflecting on his liability to penal action not sustainable, apart from fact penal provisions of Section 114 of Customs Act, 1962 not invokable in a charge of over-invoicing of exported goods."
c. EMCO Ltd Vs. CCE, Mumbai-II [2010-TIOL-679- CESTAT-MUM] Confessional statement regarding clandestine removal of raw material is not enough to impose penalty on General Manager - Such argument is far- fetched. If this argument is accepted, the very purpose of adjudication will be defeated - A penalty cannot be imposed on the strength of mere allegation. It will be imposed on the strength of clear finding of penal liability. - liability under Rule 209A should have been established by the lower authorities by clearly disclosing the manner in which the General Manager dealt with the goods in question. If it is shown that he dealt with the said goods in a manner indicating his knowledge or belief that the goods were liable to confiscation, he can be mulcted with a penalty under Rule 209A. Neither of the lower authorities has come anywhere near this area - Penalty imposed on the General Manager set aside."
The ratio is equally applicable in this case so the benefit of the above cited decisions should be extended to Shri Sanjiv Kumar. Smt. Chhaya Devi in her statement dated 09.03.2021, in response to Q.No.4, stated that Shri Sanjiv Kumar supervised production, sale, purchase, and marketing works of the company. It is significant to submit that taxation matters were not assigned to Shri Sanjiv Kumar. When he was not looking after the work of GST or Excise, he cannot be blamed for any Excise Appeal No.70638 of 2025 32 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 default made on the said matters. The job assigned to him was supervise work force for manufacturing of goods to achieve the target. He was also supervising marketing of the products along with marketing team to develop vendors and customers. His team also gathered market feedback on various products of M/s PZFO. The orders were collected and handed over to the dispatch section for delivery of goods after following the procedures and rules. Similarly, he also identified suppliers of raw materials and packaging materials and ordered them to supply the same as per requirement of the unit. On the basis of above submissions, it is crystal clear that the Noticee was not involved in any activities of dispatch of goods whether made following the law or otherwise. He never directed any staff to clear the goods without payment of duty. We further find that no incriminating documents were recovered showing involvement of his to any degree in transactions of clandestine removal. Only statements of Shri Ajay Kumar Saha, Shri Ganesh Prasad Gupta and Shri Rajan Shrivastava employees of M/s PZFO were relied upon to allege his involvement. The said statements were not corroborated by any documentary evidence. Not even a single documentary evidence was discussed in support of the allegation. The overall supervision does not indicate that he is involved in any illegal activities carried out by any other employee without his knowledge. It is a settled law that statements recorded under Section 70 have no evidentiary value if they are not corroborated with documentary evidences. In the case of UOI Vs. Kisan Ratan Singh [2020 (372) E.L.T. 714 (Bom)] - Hon‟ble High Court has held that Various Courts have kept all these things in mind and come to a conclusion that in the absence of any corroboration by an independent and reliable witness, a statement recorded under Section 108 in isolation could not be relied upon.
In view of the above, no penalty is imposable on Sanjiv Kumar under Rule 29 of the Central Excise Rules, 2017.
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16. As regards penalty on M/s MFC under Rule 29 of the Central Excise Rules, 2017 we find that the said company was engaged in transportation of goods without having any knowledge that the said goods are liable to confiscation. In the SCN, nowhere it was proved that the said transport company was aware of the fact that goods which were transported by them were liable to confiscation. Mensrea is an important factor which is required to be proved for imposition of penalty under Rule 29. From the investigation and statements of the representative, it could not be proved that the said company was aware of the confiscability of said goods. Therefore, the penal provision of Rule 29 of Central Excise Rules, 2017 cannot be invoked against the person without proving his conscious involvement in evasion duty. Penal provision can‟t be invoked unless the specific allegations are made to justify the same. The decision of the Tribunal in the case of Shri Kamdeep Marketing Pvt. Ltd Vs. Commissioner of C. Ex., Indore reported under 2004 (165) E.L.T. 206 (Tribunal - Delhi) is referred in this matter where it has been held as under:-
"3.2 What remains to be considered in all these appeals is whether the penalties imposed on the appellants are sustainable or not. The penalties are under Rule 209A which reads : "Penalty for certain offences. - 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 three times the value of such goods or five thousand rupees, whichever is greater." The sine qua non for a penalty on any person under the above rule is that either he has acquired possession of any excisable goods with the knowledge or belief that the goods are liable to confiscation under the Central Excise Act or Rules or he has been in any way concerned in transporting, removing, Excise Appeal No.70638 of 2025 34 Excise Appeal No.70639 of 2025 Excise Appeal No.70640 of 2025 depositing, keeping, concealing, selling or purchasing or has in any other manner dealt with any excisable goods with such knowledge or belief. Acquisition of possession of goods is, indisputably, a physical act, and so is each of the various ways of dealing with goods, specifically mentioned in the rule. The expression "any other manner" should be understood in accordance with the principle of ejusdem generis and would, then, mean "any other mode of physically dealing with the goods".
In the instant case, it is a fact that M/s MFC had not dealt the impugned goods physically or in any other manner knowingly that they were liable to confiscation. Hence not liable to penalty under Rule 29. It has been held by various Appellate Authorities that where there is no allegation in SCN regarding particular commission or omission on part of a person which shows that there was intention to evade the duty, the personal penalty is not imposable. In this context reliance is placed on the decision of the Tribunal in the case of Aditya Steel Industries [1996 (84) E.L.T. 229 (Tri.)] where it has been held as:-
"Penalty under Rule 209A cannot be imposed on partnership concern and only the person concerned could have been penalised. Therefore, penalty levied on Pioneer Re-rolling Mills is not maintainable and is set aside and their appeal allowed."
In the case of Woodmen Industries vs. CCE, Patna [2004 (164) E.L.T. 339 (Tri.-Kol.)] wherein it was held that Rule 26 is applicable only on persons and not on the firms constituted under the law. The said decision of the Tribunal stand upheld by the Hon‟ble Supreme Court when the appeal filed by the Revenue was rejected as reported in 2004 (170) E.L.T. A307. In view of the above no penalty is imposable on the transporter under Rule 29 of the Central Excise Rules, 2017.
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17. In view of the above discussion and findings, we set aside the impugned order and allow all the three the appeals with consequential relief, as per law.
(Order pronounced in open court on - 06.08.2025) (P. K. CHOUDHARY) MEMBER (JUDICIAL) (ANIL G. SHAKKARWAR) MEMBER (TECHNICAL) LKS