Nafr High Court
Case Details
1 Digitally signed by AJAY KUMAR DWIVEDI DN: cn=AJAY KUMAR DWIVEDI, ou=HIGH COURT OF CHHATTISGARH, o=HIGH COURT OF CHHATTISGARH, st=CHATTISGARH, c=IN Date: 2025.07.14 17:14:53 +0530 2025:CGHC:31504-DB NAFR HIGH COURT OF CHHATTISGARH AT BILASPUR TAXC No. 31 of 2023 {Arising out of order dated 11.10.2022 passed by the Customs, Excise & Service Tax Appellate Tribunal, Principal Bench, New Delhi in Excise Appeal No.50931/2021} Prachi Resins Pvt Ltd Company Having Its Registered Office at Lunawat Bhawan, Station Road, Raipur 492009, Filed Through Its Director Pramod Lunawat, District : Raipur, Chhattisgarh versus ... Appellant. Principal Commisioner, Central Excise, Raipur Having Its Address At Central G S T Building, Dhamtari Road, Tikrapara Raipur-492001, District : Raipur, Chhattisgarh ... Respondent. For Appellant For Respondent Amicus Curiae : :
Legal Reasoning
Mr. Priyank Rathi, Advocate. Mr. Ashutosh Singh Kachhawaha, Advocate. Mr. Rahul Tamaskar, Advocate Division Bench: - Hon'ble Shri Sanjay K. Agrawal and Hon'ble Shri Deepak Kumar Tiwari, JJ. Judgment on Board (09/07/2025) Sanjay K. Agrawal, J. 1. This tax appeal has been preferred under Section 35G of the Central Excise Act 1944 (hereinafter referred to as the "Act 1944") calling in question legality, validity and correctness of order dated 11.10.2022 passed by the Customs, Excise & Service 2 Tax Appellate Tribunal, Principal Bench, New Delhi (CESTAT), whereby, the Tribunal has partly allowed the appeal of the appellant by setting aside the imposition of penalty. However, the CESTAT did not set-aside the Excise duty imposed by the Principal Commissioner, Central Excise, Raipur upon the appellant and thereby, maintained the Excise duty. 2. This appeal was admitted for final hearing on 26.04.2023 by formulating the following substantial questions of law:- "1. Whether the CESTAT committed a patent illegality in not setting aside the demand of excise duty while holding that the clandestine removal allegation could not be proved by the revenue against the appellant. 2. Whether the CESTAT failed to set aside the demand of central excise while setting aside the penalty under Section 11 AC on account of the fact that the show cause notice in respect of the duty demanded was time barred under Section 11 A of the Central Excise Act." 3. The aforesaid questions of law arise for consideration on the following factual backdrop: - 4. (A) On 05.03.1999, a search was conducted by the Revenue Department in the factory premises of the appellant wherein the stock of raw material and finished goods was verified. As per Revenue, there was shortage of 32.421 Metric Tone (MT) of methanol (raw material) and shortage of 262.400 MT of formaldehyde (finished stock). On 23.06.2001 a show cause 3 notice was issued to the appellant/Company and two Directors/Proprietors of the Company alleging clandestine removal of 3996.286 MT of formaldehyde and shortage of 262.400 MT of methanol, consequent to which, duty and penalty was imposed upon the appellant. (B) On 31.03.2006, the Adjudicating Authority, Commissioner has passed the Order in Original (OIO) confirming the demand made by the Revenue. Feeling aggrieved by the order of Commissioner, the appellant herein preferred an appeal before the CESTAT, whereby, vide order dated 01.08.2016, the Tribunal has set-side the order dated 31.03.2016 by observing that Relied Upon Documents (RUD) were not supplied to the appellant and remanded the matter to decide the show cause notice de novo. (C) On 04.07.2017, the demand was again confirmed by the Adjudicating Authority, Commissioner. Feeling dissatisfied by the order of Commissioner, the appellant again preferred an appeal before the CESTAT. This time, the Tribunal by its order dated 21.02.2018 observed that the appellant had failed to account for a quantity of 743.895 MT of methanol, out of which, 453.02 MT has been established as consumed in the production of formaldehyde and further observed that allegation of clandestine removal of formaldehyde was without any basis and confined the demand of clandestine removal at 1378.595 MT of 4 formaldehyde. Ultimately, the Tribunal allowed the appeal by modifying the order of Adjudicating Authority and remanded the matter to the Adjudicating Authority to re-quantify the duty and re-decide the issue of penalty on the basis of revised computation. However, the appellant did not question the order dated 21.02.2018 before this Court by filing an appeal. Subsequently, on 14.12.2020 the Principal Commissioner, Central Tax & Central Excise, Raipur imposed the demand of duty of Rs.21,11,422/- and imposed equal penalty under Section 11AC of the Act 1944 upon the appellant. Further, penalty of Rs.50,000/- under Rule 209A of the Act 1944 was also imposed upon the two Directors/Proprietors of the appellant/Company and penalty of Rs.5,00,000/- as earlier imposed on the appellant/Company was maintained. (D) Questioning the order dated 14.12.2020, the appellant herein preferred an appeal before the CESTAT, whereby, the Tribunal by order dated 11.10.2022 allowed the appeal in part and set-aside the imposed penalty, however, did not set-aside the duty imposed upon the appellant. Being aggrieved by the order of Tribunal, the instant appeal has been preferred. 5. Mr. Priyank Rathi, learned counsel for the appellant/Company would submit that once the penalty imposed upon the appellant under Section 11AC of the Act 1944 is set-aside, the duty 5 imposed upon the appellant also ought to have been set-aside by
Decision
the Tribunal. Therefore, the impugned order is not sustainable. 6. Mr. Ashutosh Singh Kachhawaha, learned counsel for the respondent/Revenue, would support the order impugned and submit that the Tribunal was absolutely justified in passing the order impugned and as such, the appeal deserves to be dismissed. 7. Mr. Rahul Tamaskar, Amicus Curiae has brought correct factual and legal position to our notice. 8. We have heard learned counsel for the parties and considered their rival submissions made herein-above and also went through the record with utmost circumspection. 9. The substantial questions of law involved, formulated and to be answered in this appeal have been projected in the opening paragraph of this judgment. 10. In the second round of appeal which was preferred against the order dated 04.07.2017, the CESTAT, New Delhi while passing the order dated 21.02.2018 recorded the following finding after hearing learned counsel for the parties:- "12. After analysing the various documents recovered and the statement of various persons, we conclude that the appellant, by failing to account the full quantity of raw material received by them has 6 indulged in suppression of facts. Analysis of some of the documents relating to finished product clearly evidences that appellant has manufactured and cleared significantly more quantity of formaldehyde then what has been accounted. We are of the view that the preponderance of probability clearly indicates clandestine clearance in the present case. However, we are of the view that duty demand cannot be sustained on 3996.86 MT of formaldehyde as has been done by the adjudicating authority. It will be reasonable to restrict the demand to the quantity of 1378.595 MT of formaldehyde manufactured out of the unaccounted methanol which has been consumed to the extent of 453.302 MT. In addition, the appellant will also be liable for payment of duty on the shortage of raw material as well as finished products. 13. In view of the above discussion, the impugned order is sustained to the extent of the quantity indicated above. We set aside the demand over the quantity indicated above. Matter is remanded to the Adjudicating Authority to requantify the demand and redecide the penalties on the basis of the revised computation." 11. A careful perusal of aforesaid paragraph would show that the Tribunal has confined the allegation of clandestine removal to the extent of 1378.595 MT of formaldehyde (finished products) and 453.302 MT of methanol (raw material), consequent to which, the appellant was liable to pay penalty as well as the 7 duty on the shortage of raw material and finished products. Subsequently, the Tribunal has modified the order of Commissioner passed on 04.07.2017 and remanded the matter to the Adjudicating Authority to re-quantify the demand and re- decide the penalties on the basis of revised computation. 12. It is pertinent to mention here that the appellant/Company has not challenged the order dated 21.02.2018 passed by the Tribunal and, thereby, the same has attained finality. 13. In compliance of order passed by the Tribunal on 21.02.2018, the Principal Commissioner has passed the order dated 14.12.2020, whereby, demand of duty was confined to Rs.21,11,422/- and equal penalty under Section 11AC of the Act 1944 was imposed upon the appellant, against which, the appellant has again preferred an appeal and the Tribunal while passing the impugned order dated 11.10.2022 has recorded the following finding at Para 10:- 10. Having considered the rival contentions, I find that there is no reasonable explanation in the impugned order and also in the previous order of this Tribunal, whereby the clandestine removal of finished goods have been alleged at 1378.595 MT of formaldehyde. The actual/installed capacity of production have been ignored, which has caused prejudice to the appellant. I further find that the appellant have already suffered civil consequence by 8 the impugned order in view of duty both on the allegation of clandestine removal as well as on the shortage of finished goods and raw materials. I further find that not a single instance of clandestine removal have been found by revenue by way of interception of any consignment without proper invoices/ challan etc. In this view of the mater, I find that there is not reasonable basis for imposition of penalty under Section 11AC/Rule 209A of the Central Excise Rules, 1944." 14. From analysis of record and the impugned order, it appears that the Tribunal has clearly recorded a finding that the appellant has already suffered civil consequences on account of allegation of clandestine removal of finished goods at 1378.595 MT of formaldehyde as well as on account of shortage of raw materials, as a result of which, the Tribunal proceeded to set- aside the penalty under Section 11AC of the Act 1944 and Rule 209A of the Central Excise Rules, 1944, however, duty imposed upon the appellant has not been set-aside. This Court is of the considered opinion that the Tribunal has rightly maintained the duty imposed upon appellant for the reason that by order dated 21.12.2018, the Tribunal has confirmed the demand of clandestine removal of formaldehyde to 1378.595 MT, in compliance of which, the Commissioner after recomputation imposed the duty of Rs.21,11,422/- and the said order dated 9 21.02.2018 has not been challenged by the appellant before this Court by filing an appeal, as such, the said order has attained finality. 15. In view of the above discussion, the impugned order passed by the CESTAT is affirmed and it is held that the Tribunal has not committed any error in not setting-aside the imposition of duty. Since finding with regard to setting-aside the penalty under Section 11AC of the Act 1944 has not been questioned by the Revenue, we deem it appropriate not to dwell on the said issue. 16. The substantial question of law No.1 is answered in favour of the respondent/Revenue and against the appellant. 17. Accordingly, the appeal is dismissed. No order as to cost(s). 18. This Court appreciates the valuable assistance rendered by Shri Rahul Tamaskar, Amicus Curiae in a short notice. Sd/- (Sanjay K. Agrawal) Judge Ajay Sd/- (Deepak Kumar Tiwari) Judge