Commr. of Cus. and C. Ex. vs K.S. Tobacco Company Ltd.

V.V.S. Rao, J.—This appeal u/s 35G of the Central Excise Act, 1944 (the Act), by the Commissioner of Customs and Central Excise, Hyderabad-Ill Commissionerate, is against the Final Order No. 200 of 2008, dated 4-3-2008, of Customs, Excise and Service Tax Appellate Tribunal, South Zonal Branch, Bengaluru (CESTAT), in Appeal No. Excise/771/2005 [2008 (227) E.L.T. 257 (Tribunal)].

M/s. K.S. Tobacco Company Limited (KSTC) are manufacturers of cigarettes under the brand names of "My Victory", "Victory", "Top Class Magna" and "Boss" falling under chapter sub-heading Nos. 2403.11, 2403.13 of the Schedule to the Central Excise Tariff Act, 1985. They hold Central Excise Registration No. 4 of 1998. On 26-11-1999, the officers of Central Excise Anti Evasion Wing conducted surprise check of the KSTC factory premises and seized 26 CF Cs each containing 12000 Nos. of cigarettes and one loose CFC containing empty jute bags etc. On the same day, Central Excise staff recorded statement of the Managing Director, who paid an amount of Rs. 2,00,000/- voluntarily agreeing that from 30-11-1999 two employees removed the cigarettes on which duty was not paid. The statements of other persons connected with the business were also recorded on different dates. On an allegation that KSTC was indulging in clandestine manufacture of cigarettes and the products were being removed without paying proper excise duty in contravention of Rules 9, 52-A, 53, 54, 93, 94, 173(G), 173(F) and 226 of the Central Excise Rules, 1944 (the Rules), a show cause notice was issued. KSTC submitted reply vide letter dated 19-8-2000. The matter was adjudicated and by order dated 8-7-2004, original authority confirmed the show cause notice and demanded the duty payable at Rs. 12,35,980/- and imposed penalty of equal sum u/s 11AC of the Act besides ordering confiscation and imposition of penalty under Rule 209 of the Rules. Aggrieved by the same, KSTC preferred appeal before the jurisdictional Appellate Commissioner, Hyderabad. By order dated 29-4-2005, Appellate authority modified the order of original authority directing to appropriate the duty of Rs. 2,00,000/- paid . In respect of other amounts, KSTC was exonerated. Aggrieved by the Appellate order, the Department filed appeal before the CESTAT, Bengaluru. Learned Tribunal dismissed the same for non-prosecution.

This Court heard the Senior Standing Counsel for Central Excise and Customs. Placing reliance on Section 37C(1)(c) of the Act, he submits that when there was no effective substituted service of notice in appeal, learned Tribunal ought to have allowed the Appellant to serve the notice as contemplated u/s 37C(1)(c) of the Act. Section 37C of the Act reads as under -

37C. Service of decision, orders, summons etc. - (1) Any decision or order passed or any summons or notice issued under this Act or the rules made thereunder, shall be served, -

(a) by tendering the decision, order, summons or notice, or sending it by registered post with acknowledgment due to the person for whom it is intended or his authorized agent, if any;

(b) if the decision, order, summons or notice cannot be served in the manner provided in Clause (a), by affixing a copy thereof, to some conspicuous part of the factory or warehouse or other place of business or usual place of residence of the person for whom such decision, order, summons or notice, as the case may be, is intended;

(c) if the decision, order, summons or notice cannot be served in the manner provided in Clauses (a) and (b), by affixing a copy thereof on the notice board of the officer or authority who or which passed such decision or order or issued such summons or notice.

(2) Every decision or order passed or any summons or notice issued under this Act or the rules made thereunder, shall be deemed to have been served on the date on which the decision, order, summons or notice is tendered or delivered by post or a copy thereof is affixed in the manner provided in Sub-section (1).

As per Section 37C(2), decision, order, summons or notice is deemed to have been served on the date on which such notice is tendered and delivered by post or a copy thereof is affixed in the manner provided under Sub-section (1) of Section 37C of the Act. Section 37C(1) of the Act contemplates three distinct methods of serving notice, namely, (i) by tendering the notice or sending it by registered post with acknowledgment due to the person/authorized agent to whom it is intended; (ii) if such service is not possible, by affixing a copy of the notice to some conspicuous part of the factory or place of business or usual place of residence of the person to whom such notice is intended; or (iii) if the first two methods/modes of service are not possible, notice can be affixed on the notice board of the officer or authority who passed such a decision or order or issued such summons or notice. In this case, there is no dispute that before adjudicating the authority, KSTC appeared and opposed the duty and other penalties proposed in the show cause notice. There is also no dispute that KSTC themselves preferred appeal before the Appellate commissioner u/s 35 of the Act. Therefore, here we do not have a situation of either adjudicating authority or Appellate authority serving any notice as contemplated u/s 37C of the Act. Here, we have a situation of service of notice in appeal pending before CESTAT. As observed by the learned Tribunal, there is no procedure for serving notice by substituted service by publication in the newspapers. Further admittedly the factory was sold by the company and it does not exist. In such an event, it was incumbent on the part of the Appellant to have obtained permission from the Tribunal and take out notice u/s 37C(1)(c) of the Act. Having failed to do so, Appellant only pleaded sufficiency of affixing notice on the factory gate and also at the old residence of the Managing Director. If the department had resorted to the method of serving notice u/s 37C(1)(c) of the Act, the things would have been different. When such a procedure is not followed, it is not incumbent on the part of the department to contend that the Appellate authority ought to have allowed the procedure.

In the facts and circumstances of the case, having regard to the situation, that the department affixed notice of appeal at the factory gate and at the old residence of the Managing Director, learned Tribunal correctly came to the conclusion that the appeal has to be dismissed for non-prosecution. The appeal does not warrant any interference.

The central excise appeal is therefore dismissed.