Case Details: Arunaday Tobacco Industries Versus Union of India (2025) 29 Centax 51 (Ori.)
Judiciary and Counsel Details
- Arindam Sinha & M.S. Sahoo, JJ.
- Shri Umesh Ch. Behura, Adv., for the Petitioner.
- Shri Choudhury Satyajit Mishra, Senior Standing Counsel, for the Respondent.
Facts of the Case
The assessee, involved in the manufacture of chewing tobacco, had requested the Central Excise Department to seal a packing machine that was not in use. During a surprise inspection conducted in the assessee’s absence, the department claimed the machine was found unsealed and raised a duty demand under Rule 9 of the Central Excise Rules, 1944. The adjudication order relied entirely on the panchanama prepared during the inspection. The assessee filed a petition before the Hon’ble High Court, submitting that the panchanama witnesses were not called for cross-examination and that there was no supporting evidence such as purchase of raw materials, sales, or bank transactions to prove actual use of the machine. The assessee also stated during cross-examination that the machine was sealed and he did not know how it was found unsealed.
High Court Held
The Hon’ble High Court held that the adjudication order was invalid as it was based solely on the panchanama, without giving the assessee an opportunity to cross-examine the witnesses who signed it. The Court clarified that Section 139 of the Indian Evidence Act, 1872 does not apply to such witnesses when they are not called to produce the document from their custody. It further held that under Rule 3 and Rule 6(4) of the Chewing Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010, the department must prove actual use of the machine. The contention that mere installation attracted duty under Rule 9 was rejected. The adjudication order was set aside, and the department was granted liberty to initiate fresh proceedings only after properly establishing the machine’s use. Petition allowed in favour of the assessee.
List of Cases Cited
- Telestar Travels Pvt. Ltd. v. Special Director of Enforcement — 2013 (289) E.L.T. 3 (S.C.) — Referred [Para 8]
