2018 (11) TMI 297 - AT - Central Excise

Clandestine removal - case of the department is that the Polyester Texturised Yarn manufactured by M/s. Subhakti Textiles Limited was cleared without payment of duty to M/s. Samarpan Textiles Pvt. Limited and M/s. Bee Gee Leasing & Investment Pvt. Limited - entire defense of the appellant is that the entire case was made out on the basis of documents said to have been submitted under the covering letter dated 12/13.08.1997 by Shri R.R. Gupta - cross-examination of persons whose statements were relied upon - Principles of natural justice. Held that - The letter dated 12/13.08.1997 could not be provided by the department to the appellants therefore, in the absence of such letter, the claim of the department that all the relied documents were submitted by Shri R.R. Gupta stands failed - As regards other documents relied upon such as, statements of various persons, it is found that when the appellant have seriously challenged the veracity of the documents submitted under letter dated 12/13.08.1997, it is incumbent on the part of the Adjudicating Authority to provide the cross-examination of the persons whose statements have been relied upon because when the relied upon documents said to have been submitted under letter dated 12/13.08.1997 are under serious doubt, then it is necessary to grant the cross-examination. As per Section 9D, the provisions are clear that, before relying on the statement of witness, it is essential on the part of the Adjudicating Authority to first examine the witness and then only such statement can be relied upon. In the present case, as per the above facts, when the documents itself are under doubt then the responsibility of the Adjudicating Authority for granting cross-examination gets increased - thus, the order passed by the Adjudicating Authority, without establishing the source of documents which were relied on and without allowing the cross-examination, cannot be sustained. Since there is serious violation of principle of natural justice, the matter needs to be reconsidered - appeal allowed by way of remand.

Summary

Issues: Alleged duty evasion in the clearance of Polyester Texturised Yarn, twisting of yarn, and dyeing of yarn without payment of duty. Challenge to reliance on documents submitted under a specific letter. Lack of cross-examination of witnesses. Alleged violation of natural justice. Exemption under Notification No. 4/1997-CE dated 01.03.1997.

Analysis:
1. Alleged Duty Evasion: The case involved allegations of duty evasion in the clearance of Polyester Texturised Yarn without payment of duty to subsequent entities engaged in twisting and dyeing. The department alleged that quantities of non-duty paid yarn were cleared between the appellant companies, leading to substantial duty demands.

2. Challenge to Reliance on Documents: The appellant challenged the reliance on documents submitted under a specific letter dated 12/13.08.1997. The absence of this letter raised doubts about the authenticity and source of the documents, casting uncertainty on the veracity of the evidence presented by the department.

3. Lack of Cross-Examination: The appellant requested cross-examination of persons whose statements were relied upon, but this request was not granted by the Adjudicating Authority. The appellant contended that without the opportunity for cross-examination, the statements and documents should not be solely relied upon for confirming the duty demands.

4. Violation of Natural Justice: The Tribunal noted a serious violation of the principle of natural justice due to the absence of proof regarding the submission of relied documents and the denial of cross-examination. The Adjudicating Authority was directed to establish the source of documents and allow cross-examination before passing a de-novo adjudication.

5. Exemption under Notification No. 4/1997-CE: An important issue raised was the applicability of exemption under Notification No. 4/1997-CE dated 01.03.1997 concerning Twisted Yarn and Dyed Yarn. The Tribunal directed the examination of the eligibility for this exemption while reevaluating the entire case.

6. Decision: The impugned order was set aside, and the appeals were allowed by way of remand to the original authority for a fresh order. The Adjudicating Authority was instructed to provide proof of document receipt, allow cross-examination of witnesses, and consider the eligibility for exemption under Notification No. 4/1997-CE. The matter was deemed to require a reevaluation due to the serious procedural lapses identified.

This comprehensive analysis encapsulates the key legal issues, challenges to evidence, procedural irregularities, and the Tribunal's directions for a fresh adjudication, ensuring a fair and just resolution of the case.