2015 (10) TMI 372 - AT - Central Excise

Relevancy of statements under certain circumstances - principles of natural justice - Cenvat Credit - allegation of fake/manipulated documents - non receipt of the goods - difference of opinion is whether the lower authorities have violated the principles of natural justice by denying cross examination for the appellant and whether the matter needs reconsideration by the adjudicating authority for following the mandate of Section 9D of the Central Excise Act, 1944. Held that - the provisions of section 9D mandates adjudicating authority to examine the witnesses on whose statements reliance has been placed and on exercise of such examination; and if cross-examination thereof is not undertaken, such statement needs to be discarded in the law. The provisions of Section 9D were interpreted by the Honourable High Court of Delhi in the case of J&K Cigarettes Ltd 2009 (8) TMI 64 - DELHI HIGH COURT . The impugned order is found to be cryptic and in violation of principles of natural justice, non-speaking and further violates the provisions of Section 9D of the Central Excise Act. Thus, the impugned order is set aside and the matter is remanded back to the adjudicating authority with a direction to provide opportunity of hearing to the appellants in accordance with law, more particularly to provide opportunity of cross-examination of persons, the statements to whom have been relied upon by the Revenue and to consider the evidence on record or now produced in the de novo proceedings, more particularly documents like Goods Receipt Note, Material Requisition Note, Sales Tax Register including Way Bill Register, Form-C Register, sales invoice of watch case to the different buyers of the appellant etc. The appellant is also directed to appear before the adjudicating authority with a copy of this order and seek opportunity of hearing.

Issues Involved:
1. Ineligible Cenvat Credit availed by M/s. J & J Precision Industries.
2. Denial of cross-examination of witnesses.
3. Penalties imposed on co-noticees.

Detailed Analysis:

1. Ineligible Cenvat Credit availed by M/s. J & J Precision Industries:
The case against M/s. J & J Precision Industries involves the availing of Cenvat Credit without the actual receipt of goods, based on fake/manipulated documents. The Revenue's allegations are supported by various incriminating documents and statements from the officials of the main appellant's firm and the suppliers. The investigation revealed that copper ingots/bars/rods and float glass/sheet glass were not required for manufacturing wristwatch cases and straps, and these goods were never received or used in the factory. The adjudicating authority confirmed a duty demand of Rs. 4,45,50,547/- along with interest and imposed penalties on the main appellant and its proprietor.

2. Denial of cross-examination of witnesses:
The main appellant contended that the principles of natural justice were violated as no opportunity for cross-examination of the deponents of the statements was given, despite their request. The Revenue argued that the documentary evidence was overwhelming and that cross-examination was not a matter of right. The Tribunal noted that the adjudicating authority had denied the request for cross-examination with reasons and that the statements of the employees of the main appellant corroborated the non-receipt of goods. The Tribunal found that the denial of cross-examination did not cause prejudice to the appellant as the documentary evidence was sufficient to support the allegations.

3. Penalties imposed on co-noticees:
Penalties were imposed on various co-noticees under Rule 26 of the Central Excise Rules, 2002. The Tribunal held that the penalties could not be sustained as the relevant provision for imposing penalties on persons issuing fake documents for availing Cenvat Credit was introduced only with effect from 01/03/2007, while the period involved in the present case was prior to 2007. However, penalties were imposable under Rule 27 of the Central Excise Rules, 2002, with a maximum penalty of Rs. 5000/- each on the co-noticees.

Majority Order:
The impugned order was found to be cryptic, non-speaking, and in violation of principles of natural justice and Section 9D of the Central Excise Act. The matter was remanded back to the adjudicating authority with a direction to provide an opportunity for cross-examination of the witnesses whose statements had been relied upon and to consider the evidence on record or newly produced in the de novo proceedings. The appellants were directed to appear before the adjudicating authority with a copy of the order and seek an opportunity for a hearing.

Conclusion:
The Tribunal upheld the confirmation of the duty demand of Rs. 3,86,29,390/- along with interest and penalty on the main appellant M/s. J & J Precision Industries. The penalty on the proprietor was set aside. The penalties on the co-noticees were reduced to Rs. 5000/- each under Rule 27 of the Central Excise Rules, 2002. The matter was remanded for de novo adjudication to ensure compliance with Section 9D of the Central Excise Act and the principles of natural justice.

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