2016 (4) TMI 622 - AT - Central Excise

Absence of examination in chief - whether the deponents whose statements have been relied upon by the adjudicating authority were not put to examination-in-chief before providing an opportunity of cross examination? - misuse of brand name - Held that - As during adjudication, the adjudicating authority is required to first examine the witness in chief and also to form an opinion that having regard to the facts and circumstances of the case, the statements of the witness are admissible in evidence. Thereafter, the witness is offered to be cross examined. In the absence of examination in chief, allowing the cross examination, is a futile exercise. We further find that the appellant have challenged the impugned order on the ground that the evidence in the form of statements gathered have no link of the appellant to the activities took at Sandeep Poultry Farm which is required to be examined on the basis of records available during the course of adjudication and the same has not been considered judicially. In view of the above, the impugned order is set aside. The adjudicating authority shall be at liberty to re-adjudicate the matter after following the procedure laid down under section 9D of the Act

Issues Involved:
1. Admissibility of statements recorded during the investigation.
2. Linkage of M/s. Kuber Tobacco India Ltd. and its directors to the clandestine manufacture of gutka and pan masala.
3. Compliance with Section 9D of the Central Excise Act concerning the examination of witnesses.
4. The validity of the demand for duty and penalties imposed.

Detailed Analysis:

Admissibility of Statements Recorded During Investigation:
The appellants contended that the statements recorded during the investigation were inadmissible as evidence because the deponents were not examined in chief before being offered for cross-examination. They argued that according to Section 9D of the Central Excise Act, for a statement to be relevant, the person who made the statement must either be examined as a witness or fall under specific exceptions such as being deceased or incapable of giving evidence. The Tribunal agreed with this interpretation, emphasizing that the procedure prescribed in Section 9D must be scrupulously followed in both adjudication and criminal proceedings. The Tribunal cited several precedents, including the case of J.K. Cigarettes, to support this view.

Linkage of M/s. Kuber Tobacco India Ltd. and its Directors:
The appellants denied any involvement in the manufacture of gutka and pan masala at the Sandeep Poultry Farm, claiming that their brand name was misused by certain elements. They argued that there was no credible evidence linking them to the activities at the farm. The Tribunal noted that the appellants' contention was based on the inadmissibility of the statements recorded during the investigation. Since these statements were not examined in chief, they could not be considered reliable evidence to establish the appellants' involvement.

Compliance with Section 9D of the Central Excise Act:
The Tribunal highlighted the importance of Section 9D, which sets out the circumstances under which statements made before a Central Excise Officer can be considered relevant. The Tribunal reiterated that the adjudicating authority must first examine the witness in chief and then form an opinion on the admissibility of the statement. In the absence of such examination, the statements could not be used as evidence. The Tribunal referenced multiple cases, including Parmarth Iron Pvt. Ltd. and Sukhwant Singh, to underline the necessity of following the procedure outlined in Section 9D.

Validity of the Demand for Duty and Penalties Imposed:
The Tribunal found that the impugned order, which confirmed a duty demand of Rs. 1,77,75,000 along with interest and equivalent penalties on M/s. Kuber and its directors, was based on inadmissible evidence. The Tribunal set aside the order and directed the adjudicating authority to re-adjudicate the matter following the procedure laid down in Section 9D. The Tribunal also noted that the evidence on record did not judicially establish the linkage between the appellants and the activities at the Sandeep Poultry Farm.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter back to the adjudicating authority for re-adjudication, ensuring compliance with Section 9D of the Central Excise Act. The appeals were disposed of with the direction that the adjudicating authority must follow the proper procedure for examining witnesses and forming opinions on the admissibility of statements. The Tribunal emphasized the need for credible evidence to establish the appellants' involvement in the alleged clandestine activities.

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