2015 (6) TMI 429 - AT - Central Excise

Duty evasion - on the basis of the documents recovered from M/s Gopal Steel and the statement of Shri Gopal Krishna Aggarwal, that the Investigating Officers inferred that the appellant had sold the consignments of sponge iron to various customers through M/s Gopal Steel without payment of duty - Held that - It is clear that no inquiry had been made with the transporters or the customers mentioned in the records of Shri Gopal Krishna Aggarwal and similarly neither the factories of the appellant had been visited in follow up action nor there is any allegation that any discrepancies in the stock of finished goods or raw material has been noticed in their factories. In all these cases though the inquiries have been made with the representatives of the appellant, there is nothing in those statements from which any adverse conclusion can be drawn against the appellants. The entire evidence in support of the Department s allegation of duty evasion against the appellants and the confirmation of duty demands against them alongwith interest is only the documents recovered from Shri Gopal Krishna Aggarwal and his statements - Since, in this case the appellant had requested for cross-examination, but the same has been refused by the Commissioner, which, in our view, is necessary, as other than the documents recovered from Shri Gopal Krishna Aggarwal and his statement, there is no other evidence in support of the Department s allegation of duty evasion - Appeal restored.

Summary

Issues:
Duty evasion based on recovered documents from commission agent, denial of cross-examination, dismissal of appeals for non-compliance with pre-deposit order, restoration application filed after High Court order.

Analysis:
The case involved allegations of duty evasion against the appellants, manufacturers of sponge iron, based on documents recovered from a commission agent, M/s Gopal Steel. The Central Excise officers inferred that the appellants sold consignments of sponge iron without payment of duty through M/s Gopal Steel. The Commissioner confirmed duty demands and imposed penalties on the appellants. The appellants filed appeals to the Tribunal against this order, but failed to comply with the pre-deposit order, leading to dismissal of the appeals on 15/9/14.

The appellants then filed appeals before the High Court, which allowed them to withdraw the appeals and file restoration applications before the Tribunal. The High Court emphasized the need for a merit adjudication by the Tribunal and granted the appellants four weeks to file restoration applications. Subsequently, the appellants filed restoration applications which were heard by the Tribunal.

During the hearing, the appellant's counsel argued that the case against the appellants was solely based on records recovered from the commission agent and emphasized the denial of cross-examination of the agent. The counsel referenced a previous Tribunal judgment where a similar denial of cross-examination led to the order being set aside for denovo adjudication. The appellant's counsel requested a similar approach in this case.

The Respondent, however, opposed the restoration applications, stating that the pre-deposit order was based on sufficient evidence from the records recovered from M/s Gopal Steel. The Respondent highlighted that the Commissioner and Tribunal had already addressed the issue of cross-examination and found it unnecessary.

After considering the submissions and perusing the records, the Tribunal found that the entire case against the appellants was based on documents recovered from the commission agent and his statements. The Tribunal noted the lack of inquiries with transporters or customers mentioned in the records and the absence of discrepancies in the appellants' factories. The Tribunal referenced a Supreme Court judgment emphasizing the importance of allowing cross-examination when allegations are based on records from another person.

Consequently, the Tribunal set aside the impugned order, recalled the dismissal of appeals, and remanded the matter to the Commissioner for denovo adjudication. The Tribunal directed the Commissioner to permit cross-examination of the commission agent and consider other pleas of the appellants. The appeals, along with the restoration applications, were disposed of accordingly.