The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has dismissed the Revenue’s appeal against the dropping of a ₹69.86 lakh central excise duty demand, holding that a person placing orders for both his own business and his father’s firm does not establish that the latter is a dummy unit.
The bench of Dr. Rachna Gupta (Officiating President) and P.V. Subba Rao (Technical Member) found that the suppliers whose statements were relied upon had not been examined as witnesses by the adjudicating authority. It held that the Revenue’s claim of compliance with Section 9D of the Central Excise Act was therefore incorrect, and this deficiency alone justified dismissal of the appeal.
Buy Now: 80+ Judgements Indirect Tax – September 2026 E-Magazine
The appellant/assessee is a proprietorship of Gagan Bhatia, manufactured galvanised iron channels and claimed the small-scale industry exemption under Notification No. 08/2003-CE. It was consequently not registered with the central excise department.
During a search on April 4, 2013, officers seized unaccounted finished goods valued at ₹83,600. A show cause notice proposing confiscation of those goods followed on August 20, 2013.
Further investigation allegedly revealed purchases of unaccounted raw materials, principally from Jabico Steel and Ganeev Galwa Products. The department alleged that these materials were used to manufacture and clandestinely clear excisable goods without paying duty.
The investigation also relied on data recovered from a laptop seized from residential premises, statements of suppliers, and documents including sales invoices, purchase invoices, VAT returns and balance sheets.
The adjudicating authority confirmed the ₹69.86 lakh duty demand, along with applicable interest and an equivalent penalty under Section 11AC. It also ordered confiscation of the seized goods with an option to redeem them and imposed a penalty under Rule 25.
The Commissioner (Appeals) found that the duty calculation clubbed the clearances of GYB Steel with those of M/s Snowhite Plaster Industries, owned by Gagan Bhatia’s father, Yash Bhatia.
The department relied on suppliers’ statements indicating that Gagan Bhatia placed orders and made payments for supplies to both firms. However, the Commissioner (Appeals) concluded that these statements did not establish a basis for combining their clearances.
The appellate authority also noted that both firms were separately registered with VAT and other authorities. It set aside the duty demand, interest, associated penalty and redemption fine, while reducing the penalty relating to confiscation to ₹5,000.
The Revenue challenged this decision before CESTAT, again arguing that the suppliers’ statements demonstrated that Snowhite was a dummy unit and that supplies recorded against it were actually attributable to GYB Steel.
CESTAT reproduced Section 9D, which governs the relevance of statements recorded before a gazetted central excise officer. The provision also applies, so far as may be, to proceedings under the Act other than proceedings before a court.
The tribunal found no material showing that the persons who made the statements had been examined as witnesses by the adjudicating authority.
“There is nothing on record to show that persons who made the statements were examined as witnesses by the Adjudicating Authority,” the bench observed.
It consequently rejected the Revenue’s assertion that Section 9D had been complied with and held that the appeal deserved dismissal on this ground alone.
CESTAT also rejected the Revenue’s argument on the merits. It held that a supplier’s statement that Gagan Bhatia placed orders for his father’s firm did not prove that the firm was a dummy entity.
The finding addresses the distinction between a common person handling purchases for two businesses and evidence establishing that one business is merely a façade for the other. On the material relied upon in this case, the tribunal found no basis to overturn the Commissioner (Appeals)’ decision.
CESTAT upheld the appellate order and dismissed the Revenue’s appeal, leaving the ₹69.86 lakh duty demand, interest and associated penalty set aside.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
