2019 (4) TMI 1875 - AT - Central Excise

Recovery of duty along with interest and penalty - demand based on statements of various persons - Section 9D(1) of Central Excise Act, 1944 - diversion of duty free materials imported - violation of Notification No. 53/97-CUS dated 03.06.1997 - HELD THAT - Section 9D has to be scrupulously followed whenever a statement recorded by an officer of Central Excise is to be relied upon in any adjudication proceedings as has been held by the Hon ble High Court of Punjab Haryana in the case of M/S JINDAL DRUGS PVT. LTD. AND ANOTHER VERSUS UNION OF INDIA AND ANOTHER 2016 (6) TMI 956 - PUNJAB HARYANA HIGH COURT which has not been done in this case - To be fair, the judgment of the Hon ble High Court of Punjab Haryana was not before the adjudicating authority and at that time Section 9D was not been followed although it was in the statute book. Neverthless, Section 9D has to be followed and since it was not done in this case, this is a fit case to be remanded to the original authority for re-adjudication after following Section 9D and giving the appellant an opportunity of being heard again. Appeal allowed by way of remand to the adjudicating authority with a direction to follow the procedure under Section 9D in respect of every statement he wished to rely upon.

Summary

Issues:
1. Confirmation of demand, interest, and penalties under Central Excise Act, 1944 and Central Excise Rules, 2002.
2. Alleged diversion of duty-free materials.
3. Compliance with Section 9D of Central Excise Act, 1944 for reliance on statements.
4. Cross-examination of individuals giving statements during adjudication proceedings.

Analysis:
1. The main appeal, along with other appeals arising from the same Order-in-Original, dealt with the confirmation of demand, interest, and penalties under the Central Excise Act, 1944, and Central Excise Rules, 2002. The appellant firm challenged the imposition of penalties under Section 11AC of the Act and Rule 25 of the Rules, while other appeals involved personal penalties under Rule 26 of the Rules.

2. The investigation, based on information from DRI, revealed alleged diversion of duty-free materials by the appellant, claiming benefits under Notification No. 53/97-CUS. Following this, a show cause notice was issued proposing duty recovery, interest, and penalties under relevant sections and rules. After due process, the lower adjudicating authority upheld the demands and penalties as proposed.

3. The appellant contended that reliance on statements of individuals during the investigation, without following the procedure under Section 9D of the Central Excise Act, 1944, was improper. Citing a judgment from the Hon'ble High Court of Punjab & Haryana, the appellant argued for strict adherence to Section 9D when using officer-recorded statements in adjudication proceedings. The Tribunal concurred, emphasizing the necessity of following Section 9D and ruled for a remand to the original authority for re-adjudication after complying with the prescribed procedure.

4. The issue of cross-examination of individuals giving statements arose during the proceedings. While some cross-examinations were allowed, it was noted that certain individuals, who were employees of the appellant, were not produced for cross-examination. The Tribunal considered these arguments but primarily focused on the procedural lapse regarding the reliance on statements without following Section 9D.

In conclusion, the Tribunal allowed all appeals by remanding the case to the adjudicating authority for proper adherence to Section 9D in considering statements for re-adjudication, ensuring the appellant's right to be heard and cross-examine individuals involved.