Trader Without Manufacturing Facility Cannot Be Taxed as Manufacturer; Seized Cash Refunded: CESTAT New Delhi

CESTAT New Delhi set aside excise demands, confiscation and penalties arising from a 2011 search of electrical goods dealers, holding that excess stock and cash alone do not prove clandestine manufacture or removal.

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has held that a trader with no electricity connection, machinery or manufacturing infrastructure cannot be treated as a manufacturer liable to excise duty. It also held that goods and cash seized during a search cannot be confiscated on a bare allegation of clandestine removal [Bilesh Jain & Ors. v. Commissioner of Central Excise & CGST, Delhi East, 2026-juristway.com-3324-CESTAT(New Delhi)-CE].

The Bench of Ashok Jindal, Officiating President, and P.V. Subba Rao, Member (Technical), heard six connected appeals; the order was written by Mr. Jindal. A search on 11 Feb 2011 found goods worth ₹6,25,46,332 in excess of records, and ₹10,25,000 in cash, at Delhi Marketing, a proprietorship trading in electrical items. Excess goods and cash were also seized from Balar Marketing Pvt. Ltd., a registered manufacturer, and goods from Kundan Cab Pvt. Ltd. show cause notices (SCNs) dated 11 Aug 2011 and 9 Feb 2016 led to duty demands, including ₹61,04,086 on Delhi Marketing, and redemption fines of ₹1,85,00,000 and ₹7,80,000.

On Delhi Marketing, the Tribunal relied on the Superintendent’s own report that the premises had no manufacturing facility. The allegation that job workers made goods on its account was never investigated, and in any case a job worker would be the manufacturer liable to duty. The seizure, confiscation, fine, duty and penalties were set aside.

For Balar Marketing, the excess goods were awaiting testing, repacking and MRP stickers. They had not reached the finished stage and did not need to be entered in the RG-1 register. The seized cash was explained through the cash book, and the Revenue had no evidence that it was sale proceeds of clandestine clearances, so all of it was ordered refunded.

For Kundan Cab, which repacked goods and affixed MRP stickers, the manufacturer had already paid duty on the MRP-based value, and the assessable value did not change. Since the unregistered dealer could neither take credit nor would owe more than that credit, the situation was revenue neutral.

All demands, confiscations, fines and penalties, including those on the individual appellants, were set aside.

2026-juristway.com-3324-CESTAT(New Delhi)-CE