2017 (8) TMI 211 - AT - Central Excise

Clandestine removal - opportunity to cross-examine - Held that - From the reading of the above Section 9D, it is observed that even if the assessee does not seek a cross-examination but if he does not accept the statement given by some other person. It is incumbent on the adjudicating authority to conduct cross examination of the persons whose statements are to be used against the assessee. Without cross-examination the statements cannot be used for establishing a charge of clandestine removal - matters remanded to the adjudicating authority for passing a fresh order after cross-examining the witnesses - appeal allowed by way of remand.

Summary

Issues: Allegations of clandestine removal based on third-party records and statements without cross-examination of witnesses.

Analysis:
1. The case involves the appellants engaged in the manufacture of TMT Bars facing allegations of clandestine removal based on records from a steel broker and transporters. The investigation led to the issuance of show cause notices against the appellants and co-noticees, resulting in the confirmation of excise duty demand against the appellants and imposition of penalties on others.

2. The appellants contended that the case of clandestine removal was solely based on records and statements of third parties, with no evidence found in their factory or any confessionary statement by their personnel. They argued that the adjudicating authority failed to cross-examine the witnesses as required under Section 9D of the Central Excise Act, which is essential when the statements of outsiders are relied upon.

3. The Assistant Commissioner representing the Revenue reiterated the findings of the impugned order, emphasizing the reliance on third-party records and statements in establishing the charge of clandestine removal against the appellants.

4. Upon careful consideration, the Member (Judicial) observed that while strong evidence was found with the third party, it alone was insufficient to conclude clandestine removal charges against the appellants. The adjudicating authority accepted statements from third parties but did not accept those from the appellants. Referring to Section 9D of the Central Excise Act, it was highlighted that cross-examination of witnesses is mandatory when an assessee objects to statements used against them.

5. Citing a precedent from the Hon'ble Delhi High Court, the Member (Judicial) emphasized the necessity of cross-examining witnesses whose statements are crucial in establishing charges. Consequently, the matter was remanded to the adjudicating authority for a fresh order after conducting the required cross-examination, ensuring the appellants are given a fair opportunity for a personal hearing before a new adjudication order is passed.