2017 (4) TMI 1288 - HC - Central Excise

Principles of natural justice - denial of cross-examination - Whether the cross examination should have been allowed and whether in absence thereof the statement of such persons could be relied upon? - Whether further retraction on behalf of Mr Varun Gupta Mr Suresh Rao and Mr Avinash Baliga could be held to be valid? - Held that - The Court is unable to find any justifiable reason for the Department to deny the Respondent the opportunity of cross-examining the persons who made statements against the Respondent during the course of the investigation. This was all the more necessary since the statements made by Mr Varun Gupta and other noticees during investigation stood retracted by their subsequent affidavits. Unless the makers of the statements were not available for some reason there was no justification to simply deny the right of cross-examination. In a similar situation this Court in the case of Commissioner of Central Excise Delhi-1 v. Vishnu & Co. Pvt. Ltd. 2015 (12) TMI 593 - DELHI HIGH COURT upheld an the order of CESTAT that had set aside the adjudication order on the ground that it proceeded on the basis of the retracted statement of the persons who were not offered for cross examination. Appeal dismissed - decided against appellant.

Issues Involved:
1. Delay in re-filing the appeal.
2. Clandestine manufacture and clearance of excisable goods.
3. Denial of cross-examination of witnesses.
4. Reliance on retracted statements.
5. Validity of the investigation and evidence.

Detailed Analysis:

1. Delay in re-filing the appeal:

The court condoned a delay of 4 days in re-filing the appeal, allowing the application for the same.

2. Clandestine manufacture and clearance of excisable goods:

The Respondent was accused of manufacturing and clearing Gutkha without paying Central Excise duty. Searches by DGCEI on 7th October 2004 led to the recovery of records indicating clandestine operations. A show cause notice (SCN) was issued on 21st March 2005, demanding ?4,25,226/- for seized goods and proposing penalties under the Central Excise Rules, 2002.

3. Denial of cross-examination of witnesses:

The Respondent argued that the records recovered from third parties and transporters could not substantiate the allegations without cross-examination. The Commissioner of Central Excise (CCE) denied cross-examination, citing various judicial precedents. The CESTAT, however, noted that the denial of cross-examination rendered the statements unreliable without corroboration.

4. Reliance on retracted statements:

The Respondent’s partners and other individuals retracted their statements given during the investigation. The CCE dismissed these retractions, asserting that the initial statements were voluntary. The CESTAT disagreed, emphasizing that retracted statements required corroboration by independent evidence, which was not provided.

5. Validity of the investigation and evidence:

The CESTAT found the Department’s investigation flawed, as it heavily relied on retracted statements and documents from third parties without proper corroboration. The CESTAT referenced its decision in M/s. Aswani & Co., highlighting the necessity of corroboration for retracted statements. The High Court upheld this view, stressing the importance of cross-examination and the reliability of evidence.

Conclusion:

The High Court dismissed the appeal, finding no substantial question of law. It emphasized the need for cross-examination to uphold the principles of natural justice and the requirement for corroboration of retracted statements. The court referenced Section 9D (1) (a) of the Central Excise Act, 1944, and previous judicial decisions to support its conclusion.

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