2019 (1) TMI 561 - AT - Central Excise

Clandestine removal - issuance of parallel invoices - cross examination of the witnesses and other persons whose statements were recorded, were not granted - principles of natural justice - Held that - In the present case it is observed that the statements recorded of various persons are very vital evidence and once the same is retracted, the statement can be used only after cross examining the witnesses as provided under Section 9D of Central Excise Act, 1944. Passing an adjudication order without allowing cross examination is gross violation of principles of natural justice. The principle of natural justice is the foundation in any adjudication, if the principle of natural justice is not followed, the adjudication would become meaningless. It is also observed that the appellant have heavily contended that the alleged clandestine removal is trading activity of alleged clandestinely removed goods. It appears that no proper documents were produced in the earlier adjudication, however, an opportunity is given to the appellant to produce all the documents in support of their claim of trading activity. Penalty on Sh. Mahendra G Duggad, partner of the firm - Held that - The partnership firm was already proposed the demand of duty and imposition of penalty under Section 11AC, therefore, separate penalty on the partner cannot be imposed. Appeal is disposed of by way of remand to the adjudicating authority for passing afresh order after observing the principle of natural justice.

Summary

Issues:
1. Violation of principles of natural justice in the adjudication process.
2. Allegations of clandestine removal of goods without proper evidence.
3. Imposition of penalties on the partner of a dissolved partnership firm.

Analysis:

Issue 1: Violation of principles of natural justice
The appellant argued that the adjudicating authority failed to consider their submissions during the adjudication process, violating principles of natural justice. They contended that the audit report did not conclusively prove clandestine removal of goods and cited legal precedents to support their case. The appellant emphasized the importance of cross-examining crucial witnesses, as per Section 9D of the Central Excise Act, to ensure fair adjudication. The Tribunal agreed, highlighting that passing an order without allowing cross-examination is a gross violation of natural justice, rendering the adjudication meaningless. The matter was remanded to the adjudicating authority for a re-evaluation, emphasizing the need for a fair and thorough examination of all evidence.

Issue 2: Allegations of clandestine removal without proper evidence
The appellant disputed the allegations of clandestine removal, arguing that the goods in question were part of a trading activity and not manufactured by them. They contended that no concrete evidence was presented to prove clandestine removal and emphasized the duty already paid by the appellant. The Tribunal noted the lack of proper documentation in the initial adjudication and granted the appellant an opportunity to present all relevant documents supporting their claim of trading activity. The Tribunal stressed the importance of verifying records and addressing any discrepancies before imposing demands based solely on theoretical calculations.

Issue 3: Imposition of penalties on the partner of a dissolved partnership firm
Regarding the imposition of penalties on the partner of a dissolved partnership firm, the appellant argued that once penalties were proposed against the partnership firm, no separate penalty should be imposed on the partner. Citing legal precedents and the decision of the jurisdictional High Court of Gujarat, the Tribunal concurred that separate penalties on the partner were unwarranted in such cases. As a result, the penalty imposed on the partner was set aside, aligning with established legal principles.

In conclusion, the Tribunal allowed the appeal of the partner, setting aside the penalty imposed on him. The case of the appellant was remanded to the adjudicating authority for a fair reassessment, emphasizing the importance of upholding principles of natural justice and thoroughly evaluating all evidence presented.