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2026 Supreme(Online)(CESTAT) 1327

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
Dilip Gupta, President, P.V. Subba Rao, Technical Member
Miraj Product (P) Ltd. – Appellant
Versus
Commissioner – Respondent
EXCISE APPEAL NO. 50988 OF 2025|E/51197/2025|E/51265/2025|E/51268/2025|E/51366/2025|E/51649/2025|E/51650/2025

Advocates:
For the Appellants/Petitioners: B.L. Narasimhan, S.C. Vaidyanathan, Dhruv Tiwari
For the Respondents: Gurdeep Singh, Din Dayal Mangal

Admissibility of investigation statements in adjudication proceedings is strictly contingent upon compliance with the mandatory procedure under Section 9D of the Central Excise Act. Mere reliance on retracted statements without following this procedure or corroborative evidence is insufficient to sustain findings of clandestine manufacture and removal.

Headnote:(A) Central Excise Act, 1944 - Section 9D - Relevancy of statements - Procedure for admitting statements in evidence is mandatory - Adjudicating authority must first examine the person who made the statement and form an opinion, for reasons to be recorded in writing, that the statement should be admitted in interest of justice before giving the opposite party an opportunity for cross-examination. (Paras 33, 37, 38)

(B) Clandestine Removal - Burden of proof - Revenue must establish charges with positive and clinching evidence, not merely on assumptions or inferences or retracted statements - Absence of physical evidence of excess stock or suppressed production negates allegations. (Paras 28, 55, 56)

(C) Central Excise Rules, 2002 - Rule 26 - Penalty - Imposition of penalty requires a specific finding that the goods are liable to confiscation - In the absence of such a finding, penalty under Rule 26 cannot be sustained. (Paras 61, 62)

Facts of the case:
The Revenue alleged clandestine clearance of finished goods and procurement of raw materials based on statements recorded during investigation, computerized records from a check post, and third-party documents. The adjudicating authority confirmed the duty demand and imposed penalties under Rule 26, rejecting requests for cross-examination of witnesses whose statements were used against the appellants.

Findings of Court:
The court found that the mandatory procedure under Section 9D for admitting statements in evidence was not followed, rendering the statements irrelevant. Furthermore, no corroborative evidence existed to prove clandestine production or removal, as the department relied on assumptions and data entry errors. Additionally, no findings were recorded that the goods were liable to confiscation, invalidating the penalties imposed.

Issues: Whether statements recorded during investigation are admissible without following the procedure under Section 9D and whether the revenue established clandestine removal through positive evidence.

Ratio Decidendi: Section 9D is a mandatory provision requiring the adjudicating authority to examine witnesses before admitting their statements as evidence. Without compliance, such statements are inadmissible. Further, clandestine removal must be proven by positive evidence beyond assumptions, and penalties under Rule 26 require a prior finding that goods are liable to confiscation.

Result: Appeals allowed.

Table of Content
1. factual background of appeals regarding clandestine manufacturing and duty demands. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20)
2. burden of proof requirements for proving clandestine manufacturing and removal of goods. (Para 21 , 23 , 24 , 25 , 26 , 27 , 28 , 29)
3. mandatory adherence to section 9d procedure for witness statements to be admissible evidence. (Para 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40)
4. failure of revenue to provide corroborative evidence for clandestine activities beyond retracted statements. (Para 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56)
5. penalty under rule 26 requires a formal finding that goods are liable to confiscation. (Para 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64)

JUSTICE DILIP GUPTA:

Excise Appeal No. 50988 of 2025 has been filed by M/s. Miraj Product (P) Ltd.¹1. the appellant to assail that portion of the order dated 13.03.2025 passed by the Commissioner, Central Excise & CGST Commissionerate, Udaipur²2. the Commissioner that confirms the demand of central excise duty under the proviso to section 11A(1) of the Central Excise Act, 1944³3. the Central Excise Act 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, 2002⁴4. the Central Excise Rules.

3. Excise Appeal No. 51265 of 2025 has been filed by Prakash Purohit, Executive Director of the appellant, to assail that portion of the order dated 13.03.2025 passed by the Commissioner that imposes penalty upon him under rule 26 of the Central Excise Rules.

4. Excise Appeal No. 51268 of 2025 has been filed by N.K. Harsh, Proprietor of M/s. Shrinath Agencies, to assail that portion of the order dated 13.03.2025 passed by the Commissioner that imposes penalty upon him under rule 26 of the Central Excise Rules.

5. Excise Appeal No. 51366 of 2025 has been filed by Dinesh Jain, Director of M/s. Eden Hi Tech Films Pvt. Ltd. to assail that portion of the order dated 13.03.2025 passed by the Commissioner that imposes penalty upon him under rule 26 of the Central Excise Rules.

6. Excise Appeal No. 51649 of 2025 has been filed by Chetan Jain, Vice President 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 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 Item⁵5. CETI 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 statut

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2026 Supreme(Online)(CESTAT) 1327

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNALDilip Gupta, President, P.V. Subba Rao, Technical MemberMiraj Product (P) Ltd. – AppellantVersusCommissioner – RespondentEXCISE APPEAL NO. 50988 OF 2025|E/51197/2025|E/51265/2025|E/51268/2025|E/51366/2025|E/51649/2025|E/51650/2025

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
Dilip Gupta, President, P.V. Subba Rao, Technical Member
Miraj Product (P) Ltd. – Appellant
Versus
Commissioner – Respondent
EXCISE APPEAL NO. 50988 OF 2025|E/51197/2025|E/51265/2025|E/51268/2025|E/51366/2025|E/51649/2025|E/51650/2025