CESTAT: Statements Under Section 14 Inadmissible Without Section 9D Compliance; Penalty on Raj Kumar Menghani Set Aside

April 6, 2026 : The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, has set aside a penalty imposed on Raj Kumar Menghani under Rule 26 of the Central Excise Rules, 2002, holding that statements recorded during investigation under Section 14 of the Central Excise Act, 1944 cannot be relied upon unless the mandatory procedure under Section 9D is followed.

The appeal arose from Order-in-Original dated September 27, 2024 passed by the Additional Director General (Adjudication), DGGI, New Delhi, which had imposed penalty alleging Menghani’s involvement in an unregistered pan masala manufacturing unit in village Belinga, Bastar. The Department’s case rested primarily on statements recorded during investigation, along with documents such as printouts and WhatsApp messages recovered during search proceedings.

The appellant denied any connection with the alleged unit, asserting that he neither owned nor operated the factory, and that the case was built entirely on uncorroborated statements which were subsequently retracted. He further contended that the statutory mandate under Section 9D, which governs admissibility of such statements, had not been complied with, rendering them legally unreliable.

The Tribunal examined the scope of Rule 26 and reiterated that imposition of penalty requires clear satisfaction of essential ingredients, including a finding that the person had knowledge or reason to believe that the goods were liable to confiscation. It found that the impugned order failed to record any such finding, which is a pre-condition for invoking Rule 26.

On the evidentiary issue, the Tribunal categorically held that statements recorded under Section 14 cannot be relied upon unless the procedure under Section 9D is followed, including examination and opportunity for cross-examination. In the present case, the Department had relied heavily on such statements, including that of a co-accused, without complying with the statutory requirement, rendering them inadmissible.

The Bench further noted that apart from these inadmissible statements, there was no independent or corroborative evidence linking the appellant to the alleged unregistered manufacturing unit. The documents recovered during search also failed to establish any nexus. Even the appellant’s own statement did not indicate involvement with the Bastar unit, and reliance on third-party statements was held to be misplaced in absence of compliance with Section 9D.

In view of the absence of admissible evidence and failure to establish the foundational requirements of Rule 26, the Tribunal set aside the impugned order and allowed the appeal.

Case Title: Raj Kumar Menghani v. Additional Director General (Adjudication), DGGI New Delhi
Case No.: Excise Appeal No. 50751 of 2025
Coram: Justice Dilip Gupta (President) and P.V. Subba Rao (Member Technical)