2025-VIL-402-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Clandestine Removal, Extended Period of Limitation, Principles of Natural Justice, Burden of Proof - Appellant was manufacturing a mix of excisable and non-excisable final products. During an audit, it was observed that the quantitative details of liquid medicament in the tax audit report (Form 3CD) were in "KL" whereas in the monthly excise returns (ER-1) the reporting was in "Boxes/Units" - Notice issued to the appellant alleging clandestine manufacture and clearance of liquid medicaments based on the difference in quantities reported in Form 3CD and ER-1 returns - Whether the charge of clandestine removal of goods can be sustained merely on the basis of difference in figures between Form 3CD and ER-1 returns without any corroborative evidence – HELD - the charge of clandestine removal is a serious allegation and cannot be based solely on inferences or assumptions. The initial burden of proof lies with the department to provide tangible evidence such as dispatch details, receipt details, transaction of sale money, transportation details, etc. to substantiate the allegation. In the present case, the Department has not conducted any independent investigation or provided any third-party evidence to prove the clandestine removal. The mere difference in figures between Form 3CD and ER-1 returns is not sufficient to establish the allegation of clandestine removal. Therefore, the charge of clandestine removal is not sustainable – The impugned order is set aside and the appeal is allowed - Whether the extended period of limitation can be invoked in the present case – HELD - the extended period of limitation can only be invoked if the twin conditions of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any provision of the Excise Act or the rules made thereunder and intent to evade payment of duty are satisfied. In the present case, the entire case of the department is based solely on the discrepancy of figures in the two statutory returns, which are public documents. The department has failed to record any third-party statements or conduct any investigation to support the allegations of clandestine removal. Since there was no suppression of facts by the appellant, the extended period of limitation cannot be invoked - Violation of principles of natural justice – HELD - the personal hearing in the case was granted by one Commissioner in 2015, but the order was passed by another Commissioner in 2017 without providing the appellant an opportunity to present its case. This is held to be a violation of the fundamental principle of natural justice, i.e., the right to be heard. The haste to dispose of the matter resulted in the appellant not being provided adequate time to explain its case in person. Therefore, the impugned order is not sustainable on the ground of violation of principles of natural justice.
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