CESTAT Sets Aside Excise Demand Against Gutka Manufacturer Over Time-Barred Show Cause Notice

February 05, 2026 : The New Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside an excise duty demand against M/s Gahoi Tobacco Products Pvt. Ltd., holding that the show cause notice forming the basis of the proceedings was not validly served within the statutory limitation period.

The bench, comprising Justice Dilip Gupta, President, and P.V. Subba Rao, Technical Member, allowed the appeals filed by the company and its former managing director, observing that failure to properly serve the show cause notice struck at the root of the adjudication itself.

The dispute arose from a show cause notice dated April 11, 2011, alleging clandestine removal of excisable goods during the period from April 1, 2007, to June 30, 2007. The notice eventually led to an adjudication order confirming the duty demand and imposing penalties.

However, the Tribunal noted that the notice had been dispatched to the assessee’s old address, despite the company having already informed the department of its change of address. The postal authorities returned the notice with the remark “left,” after which the department pasted it on its office notice board and proceeded with adjudication.

The appellants argued that the notice was actually served only on July 24, 2012, well beyond the extended limitation period of five years prescribed under Section 11A of the Central Excise Act, 1944. They further pointed out that the annexures were supplied only in July 2019, while the relied-upon documents were furnished as late as December 29, 2022, making the service of the complete notice grossly delayed.

Accepting this contention, the Tribunal held that pasting a notice on the departmental notice board after it was returned by the postal authorities could not be treated as valid service. It rejected the department’s argument that the appellants should be deemed to have knowledge of the allegations because they were reproduced in the adjudication order.

“The show cause notice must be served before issuing the order and not after the order has been issued,” the Tribunal observed, adding that the very purpose of issuing a notice is to give the assessee an opportunity to respond, which is defeated if the order is passed without proper service of the notice.

The bench held that no demand can be sustained if the show cause notice is served beyond the extended limitation period of five years, even in cases alleging suppression or fraud. Since the notice in the present case was clearly time-barred, the adjudication order could not be upheld.

Accordingly, the Tribunal set aside the impugned order and allowed both appeals with consequential relief to the appellants.