BHAGWATI TRADERS vs PRINCIPAL COMMISSIONER OF CENTRAL EXCISE & CGST-RAIPUR

1 E/51182 of 2025



CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH- COURT NO. I
Excise Appeal No. 51182 of 2025

(Arising out of Order-in-Appeal No. RPR-EXCUS-000-APP-26-25-26 dated
16.04.2025 passed by the Commissioner of Central Excise (Appeals), Central GST



M/s Bhagwati Traders ....Appellant
(prop Krishna Kumar Sahu),
Near Bus Stand, Village- Megha, Block-Magarlod,
Distt. Dhamtari (C.G.) 493773 Versus

Commissioner of Central GST &
Central Excise, Central GST
Tikrapara Raipur .... Respondent


APPEARANCE:
Shri Abhas Mishra Advocate for the Respondent
Shri Anuj Kumar Neeraj , Authorized Representatives of the Department


CORAM:
HON'BLE DR. RACHNA GUPTA, MEMBER JUDICIAL

DATE OF HEARING: 05.05.2026
DATE OF DECISION: 02.09.2026

FINAL ORDER NO. 51419/2026

DR. RACHNA GUPTA

The present appeal is filed to assail the order in Appeal No. 26-
25- 2026, dated 16-04-2025. The facts and brief which culminated into
the said order are as follows.
1
Bhagwati Traders , being the trader of iron and steel, was
engaged in trading activity of TMT/ CTD bar and cements, etc.
Department got an intelligence that the appellant was receiving the
goods without invoices and without payment of central excise duty.
Accordingly, the premises of appellant were visited by the officers of

1
Apellant

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Central Excise Preventive on 14-02-2013, when the statement of the
proprietor of appellant namely shri. Krishna Sahu was got recorded
under Section 14 of Central Excise Act, 1944. He acknowledged to
have entered all the purchasing details of TMT/CTD bars into a diary.
The said diary got seized. On scrutiny thereof, it was noticed that the
appellant had purchased TMT/CTD bars from different persons,
namely, Shri Rao, Raipur, Maharaj Mishra, Bhilai Raipur, New Balaji,
Raipur, Parihar, Raipur; during the period 22.05.2011 to 09.02.2013.
1.1 In his subsequent statement dated 21.02.2013, the
appellant acknowledged purchasing the CTD/TMT bars from Shri Rao,
Raipur, who is the proprietor of M/s Shri Sai Deva Steels, Raipur, a
steel broker in Raipur. Therefore, Rao's premises were also got
searched on 18.02.2013, under panchnama of 18.02.2013, drawn in
presence of Shri Tirupati Rao, the proprietor of M/s Sai Deva Steels,
and one another. A notebook was got seized, showing sale of total
2

643.195 metric tons of CTD/TMT bars of different dimensions to
different parties during period 09.11.2012 to 11.02.2013. Shri.
Tirupati rao vide subsequent statement dated 19-02-2013 again
recorded in terms section 14 of Central Excise Act, 1944, stated that
mainly the purchases were made from M/s Swastik Rolling Mill, Rawa
Bhata, Raipur and he himself acted only as the broker who used to get
Rs.100 per MT as commission. Statement of Ghasiram Sahu, the driver
of the appellant, was also got recorded on 21-02-2013.
1.2. Based on the aforesaid statements and the diary obtained
from Shri. Krishna Kumar Sahu the proprietor of appellant and the bill
book/notepad obtained from Shri. Tirupathi Rao, proprietor of M/s Sai
deva Steel, Raipur it appeared to the department that the details of

2
M.T

3 E/51182 of 2025


purchase/sale of TMT CTD bars as found entered in the manner
clarified that the goods sold/purchased have been removed without
issue of sales invoices and without payment of duty by M/s Swastik
Steels, Raipur. The total 901.155 MT of CTD/TMT bars valued at Rs.
30632513 was observed to have been cleared by M/s Swastik traders
to the appellant without issuing central excise invoices and without
payment of central excise duty. It was also found that the stock
declared by M/s Swastik with the actual stock of CTD/TMT bars,
118.938 MT of CTD/TMT bars and of 65.027 MT ton of scrap was short.
With these observations that the Show Cause Notice no. 17/2012-13/P
dated 08-01-2016 was served upon the four co-noticees, namely M/s
Swastik Steels, its partner Shri. Suresh Agarwal, Shri Krishna Sahu,
the proprietor of the appellant, and Shri Tirupati Rao, the proprietor of
M/s Sai Deva Steels. The Central Excise duty amounting to Rs. 37,
86,178/- with respect to 901.155 MT of CTD/TMT bars and excise duty
of Rs. 6, 29,452/- on the shortages, stocks of 118.938 metric tons of
CTD/TMT bars and 65.027 MT scrap was proposed to be recovered
along with the interest at the appropriate rates in terms of Section
11AA of Central Excise Act, 1944 read with Rule 14 of Cenvat Credit
Rule 204. The mandatory penalty in terms of Section 11AC(1)(c) of
Central Excise Act, 1944 was proposed. The penalty under Rule 26 of
Central Excise Rule, 2002 was also proposed to be imposed on
remaining three co-noticees including the appellant. The said proposal
3
has been confirmed wide Order-in-Original number 28/2024-25 dated
31-7-2024. Appeal against the said order has been rejected vide

3
O-I-O

4 E/51182 of 2025


4

Order-in-Appeal number as mentioned above, challenged wide the
present appeal. Being aggrieved, the appellant is before this Tribunal.
2. We have heard Shri. Abhas Mishra, Advocate of the
Appellant and Shri Anuj Kumar Neeraj, Authorized Representative for
the department.
2.1. Learned counsel for the appellant, submitted that the
appellant is a small dealer engaged in trading of iron and steel
products. He had not obtained the Central Excise registration as he did
not pass the Cenvit credit of duty paid on the goods being traded by
him. He otherwise had no knowledge of rules and regulations of
Central Excise. It is further submitted that in earlier round of litigation,
the Order in Appeal number 001-20-21 dated 29-04-2021 of
Commissioner Appeals Raipur was set aside by this tribunal, vide final
order no. 50010 of 2022, dated 06-01-2022, in Excise Appeal number
51176 of 2020. The tribunal had remanded the matter for denovo
adjudication requiring the adjudicating authority to follow the
procedure prescribed in section 9 D, else to discard the statements
recorded. It is submitted, that findings of the original adjudicating
authority in the order dated 31-7-2024 are not the proper compliance
of the aforesaid direction. The order under challenge has upheld the
aforesaid wrong findings. The Commissioner Appeal has also compiled
with directions for the remand order dated 06-01-2022, passed by this
tribunal which made it incumbent on the part of adjudicating authority
to not to rely upon statements against the appellant without following
the procedure in section 9D of the Central Excise Act. The Findings in
question are liable to be set aside on this sole ground.

4
O-I-A

5 E/51182 of 2025


2.2. It is further submitted that present case is one of the
offshoots of a case of clandestine removal as was booked against M/s
Pankaj Spark Private Limited. The Show Cause Notice dated 30th June
2014 was adjudicated by the then Commissioner vide Order-in-Original
No. 030/2020-21 dated 18-03-2021. Due to insufficient evidence in
support of allegation of clandestine removal by M/s Pankaj Spark
Private Limited, that the proposal of the Show Cause Notice was
dropped. The said order has been accepted by the department in
respect to various other steel traders of Raipur including M/s Swastik
Steel Raipur through whom the appellant is purchasing CTD/TMT bars.
In the present case also, the evidence is highly insufficient to uphold
the charge of clandestine removals. With these submissions, the order
under challenge confirming the demand of Excise Duty of imposition of
penalty upon the appellant is prayed to be set aside and appeal is
prayed to be allowed.
3. While rebutting these submissions, learned AR appearing
for the department has submitted that the prosecution herein hinges
on circumstantial evidence, typical of clandestine clearance cases
where direct transport documents are absent by design. The core
evidence in the present case are seized diary/record from the
appellant’s premises, listing the quantity of the goods purchased, the
consigner and consignee details, the cash payment details, which duly
matched with the records of unaccounted production recovered from
Swastik Steels. The statements recorded are well in corroboration of
the seized records, especially the cleared transactions chain from M/s
Swastik to Sai Deva (broker), to M/s Bhagwati (appellant). Hence,
there appears no infirmity when the penalty upon appellant in terms of
Rule 26 of Central Excise Rules has been imposed. Learned DR has

6 E/51182 of 2025


relied upon the decision of High Court of the State of Telangana at
Hyderabad in the case of Mr. Mohammed Muzammil and others vs
Central Board of Indirect Taxes of Customs in writ petition no.
18018 of 2020, decided on 06-11-2020 and has requested for the
present appeal to have been dismissed.
4. Having heard both the parties, it is observed that the
present is the second round of litigation with respect to Show Cause
Notice no. 8-1-2016 issued for the period 22-05-2011 to 09-02-2013,
alleging the clandestine removal of CTD/TMT bars, without the invoices
and without the payment of excise duty inviting penalty on the
appellants, the purchaser thereof. The chronology of the events is as
follows.
Key Timeline:
Date Event
14.02.2013 Preventive search at Bhagwati Traders; documents/statements seized.
SCN issued demanding duty from Swastik Steels (Rs. 37,86,178 + Rs. 6,29,452 cess +
08.01.2016

interest); penalties: Bhagwati Rs. 3 lakhs, Sai Deva Rs. 2,000 under Rule 26
30.03.2019 OIO confirms demands/penalties

29.04.2020 Commissioner (Appeals) upholds penalties.

CESTAT remands for de novo adjudication due to Section 9D non-compliance
Post-2020
(mandatory opportunity for statement retraction).
16.04.2023 Appellant replies to SCN
31.07.2024 Fresh OIO reconfirms penalty on Bhagwati (Rs. 3 lakhs)
12.08.2024 OIO received by appellant.
24.09.2024 Appeal filed (Appeal No. 15/CE/2024) with Rs. 30,000 pre-deposit (>7.5% u/s 35F
20.01.2025 Personal hearing; AR Shri Sanjay Kumar Jain argues.
16.04.2025 OIA rejects appeal.

5. The sole controversy to be adjudicated in the present case
is: Whether the appellant abetted evasion of central excise duty as

7 E/51182 of 2025


committed by the manufacturer, M/s Swastik Steel, Raipur, for
clandestinely removal of goods and, as such, is liable for penalty under
Rule 26 of Central Excise Rule of 2002.
6. We observe, that penalty under Rule 26 can be imposed if
the person concerned is found to have acquired the possession of or
otherwise physically dealt with the excisable goods with the knowledge
or belief that such goods are liable to confiscation, that such person is
liable to be penalized under Rule 26 of Central Excise Rule of 2002.
The undisputed fact on the record is that the appellant placed order for
goods, CTD/TMT bars to M/s Sai Deva Steels, without directly dealing
with the manufacturer, M/s Swastik Steels, Raipur. The payment was
also made through the same channel. We observe that, the proprietor
of Sai Deva Steels in his statement dated 19-02-2013 has
acknowledged that goods were delivered under the cover of his
invoices and it is only after the delivery of the goods that he used the
collect the payment, and after collecting the commission, at the rate of
Rs. 100 per MT, he used to make balance payment to manufacturer of
the goods.
7. In the present case, at the time of first round of litigation,
this tribunal while remanding the matter of denovo adjudication had
specifically observed as follows.
“It means that the procedure prescribed in Section 9D of the
Central Excise Act, 1944 has to be followed mandatorily in the
adjudicating proceedings and if without following the procedure stated
therein, the adjudicating authority relies upon the statements recorded
during investigation then it vitiates the adjudication process. Either he

8 E/51182 of 2025


Adjudicating Authority follow the procedure prescribed in Section 9D or
if it is not possible to follow then to discard those statements."
We also observed that while passing a fresh order past remand,
the original authority has held as follows:
Plain reading of the section 9D of the Central Excise Act, 1944
implies that before relying on clause (a) of the subsection (1) of the
section 9D ibid, if the presence of the person who made any statement
has to be examined before the court. However as per provisions of the
statement, cannot be obtained without an amount of delay or expense
which, under the circumstances of the case, the Court considers
unreasonable, statement can be relied as relevant for the sake of
proceedings. I find hat in the impugned Show Cause Notice,
statements of Partner of the Noticee No.2, Noticee No. 3 and Noticee
No. 4 have been relied as evidence. Further, find that Noticees were
requested to cause appearance on date 21.03.2024, 10.05.2024.
23.05.2024 and 25.07.2024 but none of them cause appearance The
Noticee No. 3 chose to appear through the Authorized representative
only and who at the time of their appearance, has not made any
refutation regarding averments, made by the Noticees, in their
statement recorded under section 14 of the Central Excise Act, 1944. I
find that the considerable time of four months from March-2024 to
July-2024) has already lapsed and none of the Noticees have bothered
to appear or make any communication. In view of above, I find that
the statements of the Noticees recorded under section 14 of the
Central Excise, Act, 1944 during the course of investigation, to be
relevant for the present adjudication proceedings under the provisions
of clause (a) of the subsection (1) of the section 9D ibid.

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8. The said perusal makes it abundantly clear that the
directions of remand had duly been complied with by the adjudicating
authority. Since the appellant failed to appear for being examined and
cross-examined, we do not find any infirmity in the above observation
made by the original adjudicating authority. Accordingly, it is held that
the deponents who were recorded in terms of Section 14 of the Central
Excise Act when had opted to not be examined or cross-examined
before the adjudicating authority, despite the opportunity given the
appellant cannot plead the violation of principles of natural justice.
Hon’ble High Court of Delhi in the case Devi Dayal vs Union of
India reported in 2002 (144ELT 502 Delhi) has held that when
the noticee has not specifically asked for the production of persons for
cross-examinations, even though the materials were brought to his
notice. The grievances related to non observations on principles of
natural justice would not sustainable before Court of appeal. The
special leave petition against the said judgment was also dismissed by
the Honorable Supreme Court. The apex court in the case of Kanugo
and Company vs Commissioner Customs Kolkata and others
reported in 1983 (13) ELT 1486, in Surjit Singh Chabra vs
Union of India reported in 1997 (89 ELT 646) Supreme Court
and in Laxman Export Limited vs of Collector of Central Excise
reported in 2002(143) ELT 21 Supreme Court : also High Court
Delhi , in Sushil Aggarwal vs Commissioner of Customs
reported in 2025 (30 Centex 482 Delhi) has held that it is only
when the Show Cause Noticee demands cross-examinations and the
same is not provided for by the adjudicating officer that indicate the
violation of principles of natural justice.

10 E/51182 of 2025


9. In the present case, as already observed above the
opportunity of examination/cross examination was afforded by the
departmental authority subsequent to the directions by this Tribunal
however, the appellant and the other witnesses still opted to not to
offer them for being examined. The plea of appellant alleging violation
of principles of natural justice is not sustainable in the given
circumstances, and the statements being the one recorded under
Section 14 of Central Excise Act can well be read into evidence
provided. There is sufficient corroboration to the same.
10. In the present case the only corroboration documents are
panchnamas. The only thing which gets proved is recovery of a diary
from the appellant premises and that of notepad from the premises of
M/s Sai Deva Steels. But the contents thereof doesn’t get proved. It
was also come on record that the proceedings against alleged
manufacturer M/s Swastik Steels in the common offshoots of the
impugned investigation have already been set aside. Hence, we are
not able to see any direct evidence on record supporting the
allegations of clandestine removal. Hon’ble apex court in the case of
Oudh Sugarmills Ltd vs Union of India decided on 28.03.1962 has
held that the allegations of clandestine production and removal cannot
be sustained or inferential calculation on raw material input or the
theoretical capacity/ working of machinery and that findings based on
assumption/presumption without tangible evidence are legally invalid.
It was also held that a physical shortage loan does not automatically
equate to clandestine removal unless corroborated by evidence of elicit
clearance and duty evasion. The Hon’ble apex court clarified that
Revenue must prove illicit manufacture and clearance with concrete
and tangible evidence. While following the decision of Continental

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Cement Company Vs Union of India, 2014 and also in the case of
M/s Arya Fibres Pvt Ltd vs CCE this tribunal has held that the
revenue must produce affirmative evidence addressing the entire chain
of production and supply of following.
(i) Raw material procurement i.e. evidence of excess on
unaccounted purchase of raw material required to make
final goods.
(ii) Unaccounted production i.e. evidence of actual
manufacturing.
(iii) Physical logistics and transportation which means
proof of actual clearance such as vehicle/truck entry
logs, gate registers, lorry receipts, transit check-post
records or statement from truck drivers
(iv) Identity and statement of buyers including concrete
evidence identifying the purchasers, backed by
statements from dealers or consignees acknowledging
receipts of unaccounted goods.
(v) Flow of financial consideration i.e. tangible proof of
cash or unaccounted money changing hands including
flow back of funds from buyers to the manufacturer
from the evidence on record which is the extract of the
diary recovered from the appellant premises.
11. None of the above facts which have been held to be
mandatorily proved to sustain the allegation of clandestine removal,
have been proved by the department. It was the department’s burden
to prove the allegations. The said diary/notepad is held insufficient to
prove the same. Resultantly we hold that there is nothing on record to
prove that the goods purchased by the appellant through Sai Steels

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were in any manner liable to confiscation. We hold that penalty
imposed upon the appellant under Rule 26 of Central Excise Rules
2002 is not imposable. The ordered challenge is therefore set aside
considered thereto the appeal is allowed.
(order pronounced on 02.09.2026 )



(RACHNA GUPTA)
OFFICIATING PRESIDENT


swati