CESTAT Sets Aside Excise Duty Demand And Confiscation Against Delhi Trader, Finding No Proof It Had Goods Made By Job Workers

M/s Delhi Marketing, a trading concern, M/s Balar Marketing Pvt. Ltd., a registered manufacturer, and M/s Kundan Cab Pvt. Ltd., an unregistered concern, were investigated following searches in February 2011.

The Department seized goods and cash, alleging excess or unaccounted stock, manufacture and clearance without payment of duty, and related contraventions.

Two show-cause notices—one issued in 2011 and another in 2016—were adjudicated together.

The adjudicating authority confirmed duty and other demands, ordered confiscation of goods and cash, imposed redemption fines and penalties, and the Commissioner (Appeals) upheld the order.

The appellants challenged those findings before the Tribunal.

The Tribunal considered the definition of “manufacture” under Section 2(f)(iii) of the Central Excise Act, 1944, and the provisions invoked in the show-cause notices, including Sections 11A, 11AA and 11AC of that Act and Rules 25 and 26 of the Central Excise Rules, 2002.

It also considered the proposed confiscation of currency under Section 121 of the Customs Act, 1962, as applied to central excise matters through Notification No. 68/63 (N.T.).

The decision turned on whether the evidence established manufacture, completed and unaccounted excisable goods, or a link between the seized cash and clandestine clearances.

The Tribunal also addressed the revenue-neutrality contention concerning Kundan Cab, where the supplier had paid duty and the goods’ assessable value was said to remain unchanged after MRP stickers were affixed.

The parties referred to *Jatin Ahuja v. Union of India* on the time limit for issuing a confiscation notice, but the Tribunal’s decision rested on its findings on the merits.

For Delhi Marketing, the Tribunal accepted the verification report showing that the premises lacked an electricity connection, plant, machinery and other manufacturing facilities.

The Department had not investigated the alleged job workers or produced evidence that they manufactured goods on Delhi Marketing’s behalf; it therefore failed to establish that Delhi Marketing was the manufacturer or that the seized goods were intended for clandestine removal.

For Balar Marketing, the Department did not establish that the excess goods had reached the finished-goods stage; the Tribunal accepted that they remained subject to testing, repacking and MRP labelling and noted the submission that they were later cleared on payment of duty.

It also found no evidence linking the seized cash to clandestine clearances, accepting the explanations and records concerning the amounts.

For Kundan Cab, the supplier had paid duty on the MRP-based goods, the MRP and assessable value were not changed by Kundan Cab’s labelling and repacking, and Kundan Cab had not taken CENVAT credit.

In those circumstances, the Tribunal treated the matter as revenue-neutral and found no basis to sustain the duty demand or confiscation.

Because the underlying cases were not established, the individual penalties could not stand.

It directed that the cash seized from Delhi Marketing and Balar Marketing be refunded and held that no penalties were imposable on the appellants.

The impugned orders were set aside and all six appeals were disposed of accordingly.