2020 (1) TMI 1452 - AT - Central Excise

Clandestine removal - Haridakhandi Mawa Masala - Seetal Delux Mix - Swastik Delux Mix - Laxmi Nrusingha Ketaki Masala - loose Khara Masala - Principles of Natural Justice - Opportunity of cross-examination not given - Absolute confiscation - penalty - HELD THAT - It is settled law that if the Revenue seeks to rely on statements of witnesses recorded, it has to make the concerned persons available for cross examination, if requested for. The Revenue ought to have granted an opportunity of cross-examination to the Appellants. Not affording such an opportunity amounts to violation of the principles of natural justice. The power conferred upon the adjudicating authority to deny such an opportunity of cross examination is an exception which has to be based on cogent and relevant grounds. We find that the reasons contained in the impugned orders do not satisfy the said requirement. In the instant case, it is found that the very foundation of the case against the appellants is the statements of 19 persons whose cross-examination the appellant had sought for. Therefore, cross-examination of the witnesses is vital for proper appreciation of the issues involved. Matter remanded back to the adjudicating authority for de novo adjudication, upon affording the appellants to cross-examine the 19 persons and thereafter affording the appellants a personal hearing in the matter and an opportunity to make further submissions - appeal allowed by way of remand.

Issues Involved:
1. Demand of central excise duty and imposition of penalties.
2. Confiscation of goods and cash.
3. Denial of cross-examination of witnesses.
4. Alleged clandestine operation and clearance of goods without payment of duty.

Detailed Analysis:

1. Demand of Central Excise Duty and Imposition of Penalties:
The Commissioner confirmed a central excise duty demand of ?17.25 crores against a sole proprietorship firm under Section 11A(1) of the Central Excise Act, 1944, along with interest under Section 11AB. The firm had deposited ?62.40 lakhs during the investigation, which was appropriated towards the duty demand. Penalties equivalent to the duty amount were imposed under Section 11AC of the Act read with Rule 17 of the Pan Masala Packing Machines (Capacity Determination and Calculation of Duty) Rules, 2008. Additionally, penalties of ?20 lakhs each were imposed on two other appellants under Rule 26 of the Central Excise Rules, 2002.

2. Confiscation of Goods and Cash:
The Commissioner ordered the confiscation of various pouches of Pan Masala under Rule 17 of the Pan Masala Rules, allowing redemption upon a fine payment. Some goods were absolutely confiscated under Rule 25, and cash amounting to ?14.47 lakhs was confiscated under Section 121 of the Customs Act, 1962, on the grounds that it represented the sale proceeds of clandestinely manufactured goods.

3. Denial of Cross-Examination of Witnesses:
The appellants contended that the Commissioner violated principles of natural justice by not allowing them to cross-examine 19 witnesses whose statements were relied upon in the show cause notices. The Tribunal noted that if the Revenue relies on witness statements, it must make those witnesses available for cross-examination if requested. The failure to do so constitutes a violation of natural justice, as established in the case of Andaman Timber Industries Vs. CCE and Kay Pan Sugandh Pvt. Ltd. Vs. Commr. of C.Ex., Cus. & S.T., Rourkela.

4. Alleged Clandestine Operation and Clearance of Goods Without Payment of Duty:
The case against the firm involved allegations of operating undeclared packing machines and clearing goods without paying duty. The show cause notices alleged that the firm had five undeclared packing machines and was found operating six machines during a search. The duty demand of ?17.25 crores included additional duties and cesses. The show cause notices also proposed penalties under various rules and sections for the unauthorized operation of packing machines and the unaccounted packing materials.

Conclusion:
The Tribunal set aside the impugned orders and remanded the matter back to the adjudicating authority for de novo adjudication. The appellants were to be afforded the opportunity to cross-examine the 19 witnesses and provide further submissions. The Tribunal refrained from commenting on the merits of the case, focusing instead on the due process of law. All appeals were allowed by way of remand, ensuring adherence to principles of natural justice.

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