2016 (10) TMI 736 - AT - Central Excise

Clandestine manufacture and removal of excisable goods - Sponge Iron - demand of duty with imposition of penalties - recovery of certain private records and statement of employees of the main appellant - denial of cross examination - Held that - the appellants should have been offered an opportunity to cross examine the persons, who gave statements, which were relied upon by the Department. This is more relevant in the present case as the Director of the Company countered various assertions made by the employee in his statement and the correctness of production register maintained privately by one of the employees. As noted above, since the whole case rests on these private records and statements, it is necessary to get the truth of the matter after following the procedure laid down by the law. The chart submitted by the Revenue in para 10 of their appeal, shows that the private records and the RG-I and other statutory records were taken selectively to allege excess clandestine production. We note that wherever the figures are to their advantage to support the allegation of Revenue those figures were selectively taken in respect of some of the selective days to arrive at a calculation. Certain parameters have been taken as per RG-I and Form-IV, which are statutory records. The percentage yield is taken from the private records. We find that there is no consistent approach in calculating the quantification of unaccounted production, if any, by the main appellant. Further, all the purported evidences and claims made by the main appellant have not been discussed and commented upon by the Original Authority. The impugned order suffers from various inconsistencies with reference to appraisal of facts and also due to violation of principles of natural justice - matter remanded back to the Original Authority for fresh decision - appeal allowed.

Summary

Issues:
Appeals against impugned order dated 30.04.2010 of the Commissioner of Central Excise, Raipur.

Analysis:
1. The main issue in this case revolves around the demand of central excise duty and penalties imposed on the main appellant for alleged clandestine manufacture and clearance of excisable goods during Feb., 2004 to December, 2012. The Original Authority confirmed a duty demand of ?73,50,921/- and imposed penalties, while dropping a demand of ?51,58,329/-.

2. The appellant challenged the impugned order on various grounds, primarily disputing the calculation of demand based on production figures, reliability of private registers, denial of cross-examination of employees, and lack of evidence supporting the allegations of clandestine manufacture. The appellant argued that the recovery percentage assumed by the Department was not accurate due to the quality of ore used in production.

3. The Tribunal noted that the case heavily relied on private records and statements of employees, particularly that of Shri B.S. Rathore. The Tribunal emphasized that the denial of cross-examination by the adjudicating authority was a violation of natural justice and legal principles, as established in Section 9 D of the Central Excise Act, 1944. The Tribunal cited legal precedents to support the necessity of allowing cross-examination for a fair adjudication process.

4. Additionally, the Tribunal observed inconsistencies in the Revenue's calculations of unaccounted production, selective use of records to allege excess production, and failure to consider crucial evidence such as test analysis certificates and expert opinions. The Tribunal found the impugned order lacking in proper appraisal of facts and principles of natural justice, leading to the decision to set it aside and remand the matter back to the Original Authority for a fresh decision.

5. The Tribunal directed the Original Authority to provide the appellants with an opportunity for cross-examination, consider all submissions regarding percentage of recovery, and ensure a fair and thorough assessment of the case. By setting aside the impugned order, the Tribunal kept all issues open for reconsideration, allowing both the appellant and Revenue to present their cases afresh. The appeals by the appellant and Revenue were allowed by way of remand, and the cross appeal was also disposed of accordingly.