2015 (10) TMI 1102 - AT - Central Excise

Waiver of pre deposit - Clandestine removal of goods - Violation of principle of natural justice - Opportunity of cross examination not given - Difference of opinion - Majority order - Held that - first appeal is a matter of right under the Constitution of India and the same has been also provided under the provisions of the Central Excise Act. In Revenue legislations, some minimum pre-deposit is prescribed for admission of the first appeal in most of the Taxation Statutes of the Central Government and/or the State Governments. However, under the Central Excise Act, Section 35F provides for depositing the adjudicated amount of disputed duty in respect of the goods, which are not in the control of the Central Excise authorities or any penalty levied under the Act pending the appeal. Further discretion has been provided to the appellate authority including the Tribunal that such deposit of duty demanded or penalty levied, if would cause undue hardship to such person, the appellate authority may dispense with such deposit, subject to such conditions as may be deemed fit to safe guard the interest of revenue. - no incriminating documents have been recovered from the appellants. Some information from pen drive indicating clandestine purchase of inputs and sale of outputs was recovered from one Rutuja Ispat (P) Ltd. (RIPL). The whole case of the Revenue is prima facie based on the statements of Directors and employees of RIPL. On the basis of statements and recovered data, the Directors of appellants were confronted and they have admitted to some extent. By denial of opportunity to cross-examine, there have been gross violation of the principles of natural justice - there are discrepancies in ascertaining the expected production or output based on plant capacity, as idle time and non working days, have not been considered properly. - no further pre-deposit is required and that the impugned order is fit to be set aside and matter be remanded back to the adjudicating authority for re-adjudication afresh after granting opportunity to cross-examine the witnesses whose statements have been relied upon to make out the allegations against the appellants, and to provide reasonable opportunity of hearing - Decided in favour of assessee.

Issues Involved:
1. Violation of principles of natural justice.
2. Requirement of pre-deposit for entertaining the appeal.
3. Admissibility and reliance on statements and documents obtained during investigation.
4. Cross-examination of witnesses.
5. Adjudication of the case pending against Rutuja Ispat Pvt. Ltd. (RIPL).

Detailed Analysis of the Judgment:

1. Violation of Principles of Natural Justice:
The appellants contended that the adjudication order was passed in violation of the principles of natural justice. They argued that the adjudicating authority confirmed the demands based on documents and statements obtained from RIPL without granting them the opportunity to cross-examine the directors and employees of RIPL. The Tribunal, referencing the decision in PMS International Pvt. Ltd. vs. CCE and Basudev Garg vs. CC, held that the denial of cross-examination violated the principles of natural justice. Thus, the impugned order was set aside, and the matter was remanded for fresh adjudication after granting cross-examination.

2. Requirement of Pre-Deposit for Entertaining the Appeal:
The appellants had already paid Rs. 1.2 crores during the investigation, which was about 22% of the total demand. The Tribunal noted that according to the Finance Act, 2014, the appellant was required to pay only 7.5% of the duty confirmed for the appeal to be entertained. Given that the appeal was filed before the enactment of the Finance Act, 2014, the Tribunal found the amount already deposited to be sufficient for securing the interest of the Revenue and waived the requirement of further pre-deposit.

3. Admissibility and Reliance on Statements and Documents Obtained During Investigation:
The investigation at RIPL's premises led to the recovery of incriminating documents and pen-drives, which were used to confirm the demand against the appellants. The statements of the directors of the appellant company, recorded over a period of time, admitted to clandestine clearances and duty evasion. The Member (Technical) emphasized that these statements, which were never retracted, were sufficient to prove the clandestine clearances and duty evasion, citing the Supreme Court's rulings in CCE, Madras vs. Systems & Components Pvt. Ltd. and K.I. Pavunny vs. ACCE, Cochin.

4. Cross-Examination of Witnesses:
The appellants sought cross-examination of the directors and employees of RIPL, whose statements were relied upon by the adjudicating authority. The Tribunal, acknowledging the importance of cross-examination as a right in quasi-judicial proceedings, found that the denial of this right was a violation of natural justice. The Third Member agreed with the Member (Judicial) that the matter should be remanded for fresh adjudication, ensuring the appellants are granted the opportunity to cross-examine the witnesses.

5. Adjudication of the Case Pending Against Rutuja Ispat Pvt. Ltd. (RIPL):
The appellants argued that the adjudication against RIPL, which was still pending, had a bearing on their case. The Tribunal recognized that the outcome of RIPL's case could influence the appellants' case. The Third Member noted discrepancies in the adjudication process, such as the non-consideration of idle time and non-working days in ascertaining production capacity, and the disputed recovery of pen-drives from RIPL. Therefore, it was deemed just to remand the matter for re-adjudication after the adjudication of RIPL's case.

Majority Decision:
The appeals were allowed by way of remand. The adjudicating authority was directed to re-adjudicate the matter afresh after granting the appellants the opportunity to cross-examine the witnesses whose statements were relied upon and to provide a reasonable opportunity of hearing. The requirement of further pre-deposit was waived.

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