2017 (2) TMI 1424 - HC - Central Excise

Clandestine removal - reliability on statements - cross-examination not provided - Whether statements drawn by Central Excise Officers under Section 14, duly proved and corroborated by other evidences, are sufficient evidence to rely and impose penalty without being subjected to cross-examination? - HELD THAT - In the present case, it is not a case of admission on the part of assessee himself or his authorized representative but statements relied herein are that of proprietors of transport companies and others. It would be travesty of justice to hold that ex parte statements recorded of other persons than assessee or its representatives can be relied as a sufficient evidence to pass an order adverse to assessee without allowing such persons to be cross-examined by assessee and that too despite demand. Interpretation of statute - Whether provisions of Section 9D of Act, 1944 which is specifically meant for prosecution, is in any way contradictory to Section 14 of Act, 1944? - HELD THAT - Section 9D only renders statement made and signed by any person before any Central Excise Officer of a Gazetted Rank, relevant, for the purpose of proving anything in any prosecution for an offence, truth of facts which it contains but it does not declare such statement to be a conclusive evidence so as to base findings in regard to fiscal liability only on that statement. Making a document relevant for the purpose of proving truth of facts which it contains is one thing and holding such statement as conclusive evidence to prove a fact is another thing. Revenue in the case in hand has tried to use and rely aforesaid statements of third parties, without permitting cross-examination by assessee, as a conclusive evidence to prove facts stated therein. It means that Revenue want to utilize an ex parte version to pass an adverse order against a person without giving such person an opportunity to cross-examine the persons who have made such statements so as to have an opportunity to show that those statements are not true or there is some inaccuracy or otherwise irregularity etc. Such an attempt on the part of Revenue is not only illegal but also in the teeth of principles of natural justice and beyond the scope of Sections 14 and 9D of Act, 1944. Appeal dismissed - decided against appellant-Revenue.

Summary

Issues Involved:
1. Whether statements drawn by Central Excise Officers under Section 14, duly proved and corroborated by other evidence, are sufficient evidence to rely on and impose a penalty without being subjected to cross-examination.
2. Whether provisions of Section 9D of the Central Excise Act, 1944, which is specifically meant for prosecution, are in any way contradictory to Section 14 of the Act, 1944.

Detailed Analysis:

Issue 1: Sufficiency and Reliance on Statements Without Cross-Examination
The court examined whether statements recorded under Section 14 of the Central Excise Act, 1944, can be relied upon without cross-examination. The Tribunal had set aside the duty demand of ?8,35,865/- based on the fact that cross-examination of key witnesses, including Sri Kulbhushan Jain and Sri Subhash Agarwal, was not allowed. The court emphasized that while statements under Section 14 are admissible as evidence, they cannot be the sole basis for a decision without corroboration. The court cited previous judgments, including those from the Bombay High Court and Gujarat High Court, which held that denying cross-examination amounts to a violation of natural justice. The court concluded that statements from third parties, without cross-examination, cannot be used as conclusive evidence against the assessee.

Issue 2: Contradiction Between Sections 9D and 14 of the Act
The court analyzed whether Section 9D, which deals with the admissibility of statements in prosecution, contradicts Section 14, which pertains to the recording of statements by Central Excise Officers. The court clarified that Section 9D makes statements relevant for proving facts in prosecution but does not render them conclusive evidence for fiscal liability. The court stressed that using such statements as conclusive evidence without cross-examination is beyond the scope of both Sections 14 and 9D and violates principles of natural justice. The court rejected the Revenue's attempt to use these statements without cross-examination as a basis for adverse orders against the assessee.

Conclusion:
The court dismissed the appeal, confirming the Tribunal's decision. It held that statements recorded under Section 14 of the Act, 1944, cannot be solely relied upon for imposing penalties without cross-examination. The court also clarified that Section 9D does not contradict Section 14 but emphasizes the need for corroborative evidence and adherence to natural justice principles. The appeal was dismissed with no costs.