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2015 (7) TMI 146 - AT - Central ExciseClandestine removal of goods - Penalty u/s 11AC - Held that - Duty demand for the period from April 05 to Aug. 06 is in respect MS Ingots which are manufactured by the appellant. The raw material for the MS Ingots is Sponge Iron, Pig Iron, Steel Scrap and Ferro Alloys. The MS Ingots are manufactured by using two induction furnaces each of 6 MT capacity manufactured by M/s. Inductotherm. The allegation of un-accounted manufacture and clandestine removal of 21082 MT MS Ingots during period of April 05 to Aug. 06 is based on the assumption that power consumption per MT of MS Ingots is 830 units of electricity which according to the Department, is based on Technical Literature of M/s. Inductotherm. - It is well settled law that when duty demand against an assessee is based on opinion given by an expert and his cross-examination is requested, it has to be allowed. As opinion given by the technical expert is only an opinion evidence and its evidentiary value has to be ascertained by permitting his cross-examination. Similarly documents recovered from the premises of M/s. Manu Steels which are one of the main corroborative, evidence are in the nature of third party documents, and, therefore, in view of Apex Court s judgment in the case of Kishanchand Chellaram v. CIT, reported in 1980 (9) TMI 3 - SUPREME Court , the cross-examination of Sh. S.K. Pansari from whose premises these documents had been recovered was necessary, more so when the same had been requested and as such the denial of his cross-examination has resulted for denial of natural justice - Matter remanded back - Decided in favour of assessee.
Issues Involved:
1. Alleged clandestine removal of MS Ingots and evasion of Central Excise duty. 2. Validity of technical evidence and expert opinions. 3. Denial of cross-examination and principles of natural justice. 4. Use of third-party documents as evidence. 5. Allegation of unaccounted income from commodity trading. Detailed Analysis: 1. Alleged Clandestine Removal of MS Ingots and Evasion of Central Excise Duty: The Appellant Company was accused of evading Central Excise duty by clandestine removal of 21082 MT of MS Ingots during the period from May 2005 to August 2006. The Department's investigation, based on records recovered from M/s. Monu Steel and statements from Sh. S.K. Pansari, indicated that 685.44 MT of MS Ingots had been sold without payment of duty and without issuing invoices. The Department calculated the duty evasion to be Rs. 5,32,49,247/-, based on an assumed power consumption of 830 units per MT of MS Ingots produced. 2. Validity of Technical Evidence and Expert Opinions: The Department relied on technical literature from M/s. Inductotherm, which suggested an average power consumption of 830 units per MT for MS Ingots production. Additionally, an opinion from the Department of Metallurgy, National Institute of Technology, Raipur, stated that the proportion of Pig Iron in MS Ingots should not exceed 8%. The Appellant contested this evidence, arguing that their factory's power consumption varied due to several factors and that the opinion on Pig Iron consumption was merely speculative without cross-examination of the experts. 3. Denial of Cross-Examination and Principles of Natural Justice: The Appellant sought cross-examination of the technical experts from National Institute of Technology and Sh. S.K. Pansari of M/s. Monu Steel. The cross-examination was denied by the Adjudicating Authority without valid reasons. The Tribunal emphasized that denying cross-examination of witnesses whose statements are relied upon by the Department amounts to a violation of natural justice. The Tribunal cited judgments from the Hon'ble Allahabad High Court and Hon'ble Delhi High Court, which upheld the necessity of cross-examination under Section 9D of the Central Excise Act, 1944. 4. Use of Third-Party Documents as Evidence: The Department used documents recovered from M/s. Monu Steel as corroborative evidence against the Appellant. The Tribunal noted that these were third-party documents, and their authenticity needed to be verified through cross-examination of Sh. S.K. Pansari. The Tribunal referenced the Apex Court's judgment in the case of Kishanchand Chellaram v. CIT, which required cross-examination of the person from whom such documents were recovered. 5. Allegation of Unaccounted Income from Commodity Trading: The Department alleged that the Appellant's declared income of Rs. 7,84,93,467/- from commodity trading was actually from unaccounted manufacture and sale of steel products. This allegation was based on an inquiry with the National Commodity & Derivative Exchange Ltd., Mumbai, which indicated that the Appellant had not conducted any such transactions. The Tribunal found that this evidence was not disclosed in the Show Cause Notice, and therefore, could not be relied upon in the adjudication proceedings, as per the judgment of the Apex Court in the case of CCE v. Ballarpur Industries Ltd. Conclusion: The Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for de novo decision. The Tribunal instructed that the adjudicating authority must not rely on any evidence not disclosed in the Show Cause Notice and must allow cross-examination of witnesses as per Section 9D(2) of the Central Excise Act, 1944. The appeal and stay application were disposed of accordingly.
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