2014 (3) TMI 881 - AT - Customs

Seizure of prohibited item being - smuggling of goods - source of procurement - Burden of proof - appellant is a trader of polyester yarn - Held that - in this case although the Adjudication order has been passed by the Additional Commissioner but at the time of review, the Joint Commissioner was appointed in place of Additional Commissioner. As per Section 35E(2), the appeal is required to be filed by such authority which has passed the Adjudication order. In this case, the direction to file an appeal was given to the authority which has passed the Adjudication order - appellant is able to prove that they have procured the goods through proper channel. Further, investigation revealed that the supplier of the goods is not procured the goods through proper channel but no proceedings have been initiated against the supplier. In these circumstances, the proceeding against the appellant is not sustainable as they have been able to discharge the burden of proof that they have procured the goods through licit means - Decided in favour of assessee.

Summary

Issues:
1. Appeal against order setting aside show-cause notice dropping.
2. Preliminary objection regarding maintainability of appeal under Section 35E(2) of the Central Excise Act, 1944.
3. Merits of the case regarding procurement of goods through proper channel.

Analysis:
1. The appellant filed an appeal against the order of the Commissioner (Appeals) setting aside the Adjudicating Authority's order dropping the show-cause notice. The appellant, a trader of polyester yarn, was under investigation for possessing prohibited goods. Despite producing documents like challans, invoices, and bank certificates to prove legitimate procurement, proceedings were initiated against them. The Commissioner (Appeals) overturned the dropping of the show-cause notice, leading to the appellant's appeal.

2. The appellant raised a preliminary objection regarding the maintainability of the appeal under Section 35E(2) of the Central Excise Act, 1944. The appellant argued that since the Adjudicating Authority's order was passed by the Additional Commissioner, the appeal filed by the revenue before the Commissioner (Appeals) was not maintainable. However, the Tribunal found that the appeal direction was given to the authority who passed the Adjudication order, hence dismissing the objection.

3. On the merits of the case, the appellant successfully demonstrated that they procured the goods through a proper channel by providing necessary documents. Despite the supplier's failure to prove legitimate procurement, no action was taken against them. The Tribunal concluded that the appellant had discharged the burden of proof regarding legitimate procurement, rendering the proceedings against them unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.