2016 (10) TMI 375 - AT - Customs

100% EOU - clandestine removal of inputs - demand of customs duty, excise duty - imposition of penalty - cross examination of witnesses - principles of natural justice - Held that - decision in the case of Andaman Timber Industries Vs. Commissioner of Central Excise, Kolkata-II 2015 (10) TMI 442 - SUPREME COURT relied upon where it was held that, not allowing the assessee to cross-examine the witnesses by the adjudicating authority, though the statements of those witnesses were made the basis of the impugned order, is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. The appellant are allowed for cross examination of the witnesses requested for except the investigating officers, in the interest of justice - appeal allowed - matter remanded - decided in favor of appellant.

Summary

Issues:
- Alleged diversion of raw materials for local market instead of export
- Confirmation of demand and imposition of penalty by adjudicating authority
- Request for cross-examination of witnesses denied by Commissioner
- Violation of principles of natural justice

Analysis:
1. The case involved allegations against an appellant, an EOU engaged in the production of Dyes Intermediates, for diverting imported and indigenous raw materials meant for export to the local market. The demand notice issued by the Commissioner of Central Excise, Ahmedabad-II included central excise duty and customs duty along with penalties. The appellant challenged the order through appeals.

2. The appellant's advocate contested the order on the grounds that the demand was confirmed based on an unverified formula of raw material consumption and statements of unexamined witnesses. The appellant requested cross-examination of witnesses, including customers, but the Commissioner rejected the request without providing reasons, leading to a violation of natural justice principles. Legal precedents were cited to support the argument.

3. The Revenue's representative supported the Commissioner's findings, stating that evidence of raw material diversion was established independently. The denial of cross-examination was justified as per their argument. The appellant clarified they were not interested in cross-examining investigating officers but sought the opportunity to cross-examine other witnesses.

4. Upon review, the Tribunal found that the allegations of raw material diversion were based on evidence collected during the investigation, including witness statements. Citing a Supreme Court judgment, the Tribunal emphasized the importance of allowing cross-examination when witness statements form the basis of the order. Consequently, the Tribunal allowed the appellant to cross-examine witnesses, excluding investigating officers, to ensure justice. The impugned order was set aside, and the appeals were allowed for remand, keeping all issues open for further consideration.