2017 (9) TMI 352 - HC - Central Excise

Clandestine removal - cone yarn as hank yarn - non-speaking order - Whether the Tribunal is justified in holding clandestine removal of final products without any corroborative evidences such as unaccounted purchase of raw materials, transportation of raw materials to the factory and transportation of final products from the factory and suppression of production with electricity consumption? - Principles of Natural Justice - Held that - Going through the materials on record, we are of the view that the order of the Tribunal is a non-speaking order, with reference to what is claimed by the appellant and denied by the Department - the appellant has made out a case, for interference, on the aspect that the Tribunal has failed to address the issue regarding cross examination of witnesses. Decision in NGA Steels (P) Limited s case 2016 (7) TMI 127 - MADRAS HIGH COURT , squarely applies to the case on hand, where it was held that When a specific plea regarding violation of principles of natural justice is raised, CESTAT, Chennai, is bound to record a specific finding, which is conspicuously absent. Matter remanded to CESTAT, Madras to consider and record a specific finding, on the issues regarding cross examination - appeal allowed by way of remand.

Issues Involved:
1. Whether CESTAT passed a cryptic and non-speaking order.
2. Whether CESTAT overlooked material evidence vital to the determination of issues.
3. Whether CESTAT confirmed the demand without corroborative or affirmative evidence.
4. Applicability of the principles of preponderance of probabilities versus proof beyond reasonable doubt in adjudication under the Central Excise Act, 1944.
5. Whether the absence of witnesses for cross-examination affects the burden of proof on the Respondent-assessee.
6. Whether charges stand proved in the absence of witnesses despite summons issued by the Authorities.

Detailed Analysis:

1. Cryptic and Non-Speaking Order:
The appellant contended that CESTAT passed a cryptic and non-speaking order without reasoning or deliberation on the materials presented. The court emphasized that an appellate forum must refer to the pleadings, submissions, points for consideration, discuss the evidence, and dispose of the matter by giving valid reasons. The court cited the Supreme Court's judgment in HVPNL v. Mahavir, which mandates that conclusions must be supported by reasons. The court concluded that the Tribunal's order was indeed cryptic and non-speaking, lacking detailed reasoning.

2. Overlooking Material Evidence:
The appellant argued that CESTAT committed a serious infirmity by overlooking vital material evidence. The court noted that the Tribunal failed to address the issue of cross-examination of witnesses whose statements were crucial to the case. The court referenced the decision in NGA Steels (P) Ltd. v. CESTAT, Chennai, where the Tribunal's failure to permit cross-examination was deemed a violation of natural justice. The court found that the Tribunal did not properly consider the appellant's request for cross-examination, thereby overlooking significant evidence.

3. Confirmation of Demand Without Corroborative Evidence:
The appellant challenged the confirmation of demand without corroborative or affirmative evidence. The court referred to the case of Tata Engineering & Locomotive Co. Ltd. v. Collector of Central Excise, where the Supreme Court held that findings must be supported by evidence and not merely conclusions. The court found that the Tribunal's order lacked sufficient discussion on the evidence, making it unsustainable.

4. Principles of Preponderance of Probabilities vs. Proof Beyond Reasonable Doubt:
The appellant raised the question of whether the principles of preponderance of probabilities or proof beyond reasonable doubt apply in adjudication under the Central Excise Act, 1944. The court did not specifically address this issue in detail but indicated that the matter required a fresh examination by the Tribunal, considering the principles of natural justice and the need for a speaking order.

5. Absence of Witnesses for Cross-Examination:
The appellant argued that the absence of witnesses for cross-examination affected the burden of proof on the Respondent-assessee. The court noted that the appellant had requested cross-examination of witnesses whose statements were the basis of the show cause notice. The court referenced the decision in Karan Traders v. Joint Commissioner of C. Ex., Salem, where the absence of witnesses for cross-examination led to the eschewing of their statements. The court found that the Tribunal failed to address this issue adequately.

6. Charges Proved in Absence of Witnesses:
The appellant contended that the charges could not be proved in the absence of witnesses, despite summons issued by the Authorities. The court agreed, citing that the Tribunal did not take positive steps to ensure the appearance of witnesses for cross-examination. The court emphasized that without cross-examination, the statements of witnesses could not be relied upon, and the burden of proof was not discharged.

Conclusion:
The court allowed the Civil Miscellaneous Appeal, set aside the impugned order of the Tribunal, and remanded the matter to CESTAT, Madras, to consider and record a specific finding on the issues regarding cross-examination within two months. The additional substantial questions of law were answered in favor of the appellant, and the Tribunal was directed to provide a speaking order after giving sufficient opportunity to both parties. The appeal was allowed with no costs, and the connected Civil Miscellaneous Petition was closed.

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