CESTAT Affirms Seizure Of Unaccounted Gutka Stored In Godowns Without Any Documentation And Declaration

The Delhi bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has affirmed the seizure of unaccounted gutka and stock of raw material stored in these godowns without any documentation or declaration.

The bench of Binu Tamta (Judicial Member) has observed that it is not necessary to establish mens rea in tax matters as non-compliance with statutory provisions is sufficient. The authorities below are justified in imposing a penalty under the provisions of Section 11 AC of the Central Excise Act, 1944.

The appellants/assessee are in the business of manufacturing Pan Masala containing tobacco, i.e., Gutkha, falling under C.T.H. No. 24039990 of the Schedule to the Central Excise Tariff Act, 1985, at their factory at Banar, Jaipur-Jodhpur Highway, Jodhpur, Rajasthan. The officers of Central Excise, Division Jodhpur, searched four godown premises. The search of the four godown premises resulted in the seizure of raw materials for the manufacture of gutkha and some quantities of manufactured gutkha in loose condition. The search party also found an assortment of packing material bearing the name of the appellant and several other gutkha manufacturers, such as Yogesh Associates, Silvassa, Anand Tobacco Products, Thane, and Sunrise Food Products, to name a few, which showed that the raw materials, etc. that were not being used were stored in the godown.

A show cause notice was issued demanding Central Excise duty to the tune of Rs. 21,48,30 and resultant penalties on the appellant and several others. The adjudicating authority's order and the appellate authority's order being against the appellant, the matter travelled in appeal up to CESTAT in the first round, and vide order dated May 20, 2015, it was remanded to the original authority for compliance with natural justice.

In the second round, the matter travelled up to the Commissioner (Appeals) and was again remanded on account of non-compliance with natural justice. In the third round, the order was passed against the appellant, and the order in appeal was passed.

The assessee contended that where a statement is relied upon in the adjudication proceedings, it would be required to be established through the process of cross-examination if the noticee makes a request for cross-examination of the person whose statement is relied upon in the show cause notice.

The department contended that where a statement is relied upon in the adjudication proceedings, it would be required to be established through the process of cross-examination if the noticee makes a request for cross-examination of the person whose statement is relied upon in the show cause notice.

The department contended that if the party alleges the absence of cross-examination of the statements, they need to show what prejudice has been caused and there is no absolute right of cross-examination.

The tribunal noted that the goods so seized are liable for confiscation under Rule 25 of the Central Excise Rules, 2002, and the excise duty was recoverable along with interest and penalty. This is a clear case of wilful suppression, misstatement, and fraud with the intent to evade payment of duty, and hence the penalty imposed is justified and does not call for any interference.

The ITAT stated that it is a settled law that it is not necessary to establish mens rea in tax matters as non-compliance with statutory provisions is sufficient. The authorities below are justified in imposing penalties under the provisions of Section 11 AC.

Counsel For Petitioner: Stebin Mathew

Counsel For Respondent: Gopi Raman

Case Title: M/s. Shreeraj Panmasala Pvt. Ltd. Versus Commissioner of Central Goods & Service Tax and Central Excise

Case No.: Excise Appeal No.51213 of 2022 (SM)

Click Here To Read The Order