2007 (8) TMI 190 - AT - Central Excise

Adjudication order without following the process o law Fair and reasonable opportunity of being heard should be granted to appellant providing copies of documents sought to be used against him with proper opportunity of cross-examination Appeal allowed by way of remand

Issues Involved:
1. Levy of central excise duty and penalty on Appellant No. 1.
2. Penalties on Appellants No. 2, 3, and 4.
3. Allegations of removal and suppression of Vanaspati.
4. Plea of limitation under Section 11A of the Central Excise Act, 1944.
5. Denial of cross-examination and access to documents.
6. Validity of the adjudication process and adherence to natural justice.

Detailed Analysis:

1. Levy of Central Excise Duty and Penalty on Appellant No. 1:
The Appellant M/s. Ipinit Vanaspati Ltd. challenged the levy of central excise duty amounting to Rs. 2,46,93,445/- for the period from August 1991 to 17-8-1995 under Section 11A of the Central Excise Act, 1944, and a penalty of Rs. 30,00,000/- under Rule 173Q of the Central Excise Rules, 1944. The charges included the removal of 16,252.219 MT of Vanaspati as refined oils without payment of duty, false recording of Vanaspati as refined oil, suppression of production, failure to file statutory returns, and manipulation of records by the Managing Director and junior officers.

2. Penalties on Appellants No. 2, 3, and 4:
Appellant No. 2, the Managing Director, faced a penalty of Rs. 5,00,000/- under Rule 209A for involvement in the alleged fraud. Appellants No. 3 and 4 were penalized Rs. 25,000/- and Rs. 10,000/- respectively for abetting the offenses, including manipulation of records and removal of goods without payment of duty.

3. Allegations of Removal and Suppression of Vanaspati:
The charges against Appellant No. 1 included the removal of Vanaspati disguised as refined oil, false entries in the RG-1 Register, and failure to file quarterly returns and maintain prescribed records. The adjudicating authority examined these charges based on shortages of oils, discrepancies in registers, fictitious traders, excessive use of chemicals, suppression of production, and removal of excisable goods without payment of duty.

4. Plea of Limitation under Section 11A of the Central Excise Act, 1944:
The plea of limitation was examined and rejected, with the adjudicating authority holding that the fraud committed negated the time-bar defense. The adjudicating authority concluded that the proceedings were not time-barred due to the fraudulent nature of the activities.

5. Denial of Cross-Examination and Access to Documents:
The appellants argued that they were deprived of due process as they were not provided with necessary documents and were denied cross-examination. The Tribunal noted that the appellants were not given copies of documents used against them, and statements from various persons were used without confrontation. The Tribunal emphasized that failure to allow cross-examination crippled the evidence against the appellants.

6. Validity of the Adjudication Process and Adherence to Natural Justice:
The Tribunal found that the adjudicating authority failed to demonstrate the role of catalysts and caustic soda in the allegations. The close monitoring by the department did not justify the allegations made only after the search. The Tribunal concluded that the appellants were deprived of due process and that the adjudicating order did not meet judicial scrutiny. The Tribunal remanded the case for a fair and reasonable opportunity to be heard, providing necessary documents and allowing cross-examination.

Conclusion:
The Tribunal allowed the appeal by way of remand, directing the adjudicating authority to provide the appellants with relevant documents and a fair opportunity for rebuttal and cross-examination. The adjudicating authority was instructed to decide the matter afresh, ensuring adherence to natural justice and due process of law. The appeal was allowed, and the case was remanded for re-adjudication within six months from the date of the first notice.

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