Branded Pan Masala and Gutkha Cleared Without Paying Excise Duty: CESTAT upholds Evasion Charges [Read Order]

The New Delhi Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) upheld excise duty evasion charges, citing clandestine manufacture and clearance of Pan Masala and Gutkha under well-known brand names without payment of central excise duty.

The appellants were found engaged in the unregistered manufacture and sale of Pan Masala, Gutkha, and chewing tobacco of brands such as RMD, Vimal, Rajnigandha, and Tulsi, from multiple unlicensed premises in Indore.

Acting on intelligence, the Central Excise Department conducted simultaneous searches at five locations on 13 July 2015, seizing goods, machinery, and 6.76 lakh in cash. The total value of seized goods was 25.85 lakh. Statements recorded during the operation confirmed that no stock registers were maintained and goods were sold without bills.

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A show cause notice was issued proposing confiscation of goods under Rule 25 of the Central Excise Rules, 2002, and cash under Section 121 of the Customs Act, 1962. The Order-in-Original passed on 31 May 2019 confirmed the duty demand, confiscation of goods, and penalties. Redemption fine was offered for the release of machinery.

The appellants filed appeals before the CESTAT but failed to pursue them diligently. Despite multiple opportunities, they did not cure procedural defects, submit written arguments, or appear during the final hearing. The tribunal observed that their conduct amounted to deliberate delay and obstruction of the adjudication process.

During the hearing, the revenue counsel argued that the appellants were engaged in manufacturing excisable goods without registration or invoices and that the seized cash represented sale proceeds of these unaccounted clearances. They further submitted that statements from appellants and third parties, as well as documentary evidence and material recovered, clearly established the charge of clandestine removal and excise evasion.

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The single-member bench comprising Dr. Rachna Gupta (Judicial Member) found that the appellants had admitted to manufacturing and selling Pan Masala and Gutkha without proper authorization or invoices. They could not produce any permission from the brand owners for manufacturing goods in their name. The tribunal observed that admissions made in statements require no further proof, and the evidence on record was sufficient to uphold the charges.

The tribunal observed that the appellants were given every opportunity to defend themselves, including access to seized records and cross-examination rights. Their failure to engage with the tribunal process, despite repeated adjournments, left the tribunal with no option but to proceed on the merits.

Relying on the Supreme Court's direction in Jai Balaji Industries v. D.K. Mohanty, the tribunal held that there was no justification to disturb the findings of the adjudicating authority. The appeals were dismissed, and the original order confirming excise duty evasion, confiscation, and penalties was upheld.

To Read the full text of the Order CLICK HERE

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