2017 (8) TMI 1386 - AT - Central Excise

Principles of natural justice - opportunity for cross-examination denied - Recovery of wrongly availed CENVAT credit - it was alleged that goods had not been supplied against invoices issued by M/s Sunrise Zink Ltd used for availing CENVAT credit - Held that - The pleading before the lower authorities for an opportunity to cross examine a critical witness had been turned down and such disregard places the confirmation of demand and imposition of penalty in jeopardy. Clearly this must be remedied - To enable that consummation the impugned order is set aside and the matter remanded back to the original authority for grant of such opportunity to the appellant-assessee - appeal allowed by way of remand.

Summary

Issues:
Recovery of wrongly availed CENVAT credit, imposition of penalty on individuals, cross-examination of witnesses.

Analysis:
The judgment deals with the appeal against the recovery of wrongly availed CENVAT credit and imposition of penalty on both the assessee and its director. The recovery was based on the finding that goods were not supplied against invoices used for availing CENVAT credit. The appellants contended that the statement was not subjected to cross-examination, which was crucial for their defense. They relied on precedents to support their argument, emphasizing the importance of cross-examination in such cases.

Regarding the imposition of penalty on individuals, it was argued that at the relevant time, rule 26 of CENVAT Credit Rules, 2004 did not empower the imposition of penalty on individuals. The judgment acknowledged this contention, stating that the penalty on the director was not applicable. Citing precedents, the decision highlighted the necessity of following statutory procedures, especially concerning the admissibility of statements recorded before authorities.

The judgment referenced the decision in HIM Logistics Pvt Ltd, emphasizing the importance of providing the right to cross-examination to the concerned parties. It also discussed the mandatory nature of procedures outlined in Section 9D of the Central Excise Act, emphasizing the need for following due process before relying on statements recorded during inquiries or investigations. The judgment underscored that failure to adhere to statutory procedures could render reliance on such statements misguided and irrelevant for proving the case.

In conclusion, the judgment set aside the impugned order and remanded the matter back to the original authority for granting the opportunity to cross-examine a critical witness. The penalty imposed on the director was set aside due to the lack of empowerment to penalize individuals. The decision highlighted the importance of following legal procedures and principles of evidence in adjudication proceedings, emphasizing the need for fairness and adherence to due process.

Overall, the judgment focused on ensuring procedural fairness, highlighting the significance of cross-examination, adherence to statutory procedures, and the limitations on penalizing individuals under specific rules.