The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside an appellate order confirming central excise duty demands in a case involving alleged clandestine manufacture and clearance of “Sowbaghya” branded wet grinders without payment of excise duty.
The bench of P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has remanded the matter back to the adjudicating authority for a fresh decision after holding that the impugned order was a non-speaking order and failed to adequately address the assessee’s submissions.
The case originated from an investigation conducted by the Directorate General of Central Excise Intelligence (DGCEI), Coimbatore, into several manufacturers allegedly producing “Sowbaghya” brand stainless steel wet grinders and supplying them to M/s Sowbaghya Enterprises, Chennai/Erode, without payment of central excise duty. K.R. Engineering Works was identified as one of the manufacturers involved in the alleged activity.
Following investigations, statements were recorded from various individuals, factory premises were inspected, and enquiries were conducted with distributors, dealers, buyers and Sowbaghya Enterprises. Based on these findings, a show cause notice dated July 30, 2015 was issued alleging clandestine manufacture and removal of excisable goods and proposing recovery of duty, interest and penalties.
The assessee had contended that copies of several relied-upon documents referred to in the show cause notice were never supplied, preventing the filing of an effective defence. When an adjudication order was passed without furnishing the requested documents, the matter was challenged before the Commissioner (Appeals). The appellate authority remanded the case in February 2018 after finding that the original authority had failed to consider the assessee’s reply and had violated principles of natural justice.
However, during the second round of adjudication, the original authority again confirmed the demand. The Commissioner (Appeals) subsequently upheld the order, leading to the present appeal before the Tribunal.
The appellant primarily argued that statements recorded from one Murugesan, alleged to be the manager of the firm, could not be relied upon because he was neither authorised to represent the business nor empowered to make statements on its behalf. It was also contended that the department had failed to establish his status as manager or representative of the firm.
The Revenue, on the other hand, relied upon the investigation findings and Murugesan’s statement, which allegedly described the manner in which the wet grinders were manufactured and cleared to Sowbaghya Enterprises. The statement was never retracted.
The Tribunal observed that the appellant had consistently denied liability by questioning Murugesan’s authority but had not clearly disclosed the actual nature of the business. The Bench noted that despite denying the allegations, the appellant had not furnished supporting documents such as income tax records to establish the nature of business activities or rebut the department’s case.
At the same time, the Tribunal found merit in the contention that the adjudicating authority had failed to properly consider the appellant’s detailed reply despite a specific direction issued in the earlier remand order. It noted that the Commissioner (Appeals) had previously acknowledged that the reply was not considered, yet in the subsequent proceedings took a contrary view while upholding the demand.
The Bench held that such contradictory treatment of the appellant’s submissions rendered the appellate order unsustainable and amounted to a violation of principles of natural justice. The Tribunal specifically characterized the impugned order as a “non-speaking order.”
Setting aside the impugned order, the Tribunal remanded the matter to the original adjudicating authority with directions to pass a fresh speaking order after duly considering the appellant’s reply and any documentary evidence produced in support of her defence. The Bench also directed the assessee to furnish relevant statutory records, including income tax documents, to substantiate her claims and establish the bona fides of the business.
Considering that the dispute relates to alleged clandestine removals investigated in 2015 and the appeal has remained pending since 2018, the Tribunal directed the adjudicating authority to complete the de novo proceedings preferably within 60 days from receipt of the order. The assessee was also directed to cooperate in the proceedings and avoid unnecessary adjournments.
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