2019 (2) TMI 935 - AT - Central Excise

Clandestine manufacture and removal - excisable goods cleared without payment of duty by showing such goods as traded goods which have been manufactured/procured from other firms - Section 9D of Central Excise Act, 1944 - the entire case of department is primarily based on the statements of 13 odd witnesses whose statements have been relied upon in the show cause notice for demanding central excise duty. Held that - As ordered by this Tribunal in its previous order dated 04/03/2015 that the department need to comply with the requirement of Section 9D (1) of Central Excise Act, 1944. It has been provided under Section 9D (1) of Central Excise Act, 1944 that statement made and signed by a person before any central excise officer of a gazette rank during the course of enquiry of proceeding under the Central Excise Act shall be relevant for the purpose of proving, non-prosecution for an offence made under this Act. The Adjudicating Authority was required to make available the witnesses for cross-examination to the appellant to establish the evidence as legally sustainable since no other corroborative record have been produced by the department to prove the case of evasion of central excise duty by the appellant by resorting to clandestine manufacture and trading of the same in the garb of trading undertaken by their sister concern. Since, the witnesses have not been cross-examined at the time of adjudication. We feel that the evidentionary value of such statements have been lost and same alone cannot be accepted for proving the case of duty evasion only on the basis of such statements. For proving a case of clandestine manufacture and clearance of dutiable goods, some evidences more concrete and convincing nature need to be adduced. It is a settled law that in cases of alleged clandestine removals and duty evasion the burden lies on the department to prove that activities of manufacturing, its clearance and thus duty evasion have taken place with concrete evidences. We find that the department have not been able to adduce any evidence to show as to from where such a huge quantity of raw materials have been procured by the appellant to manufacture the excisable goods and to whom the same were sold without payment of duty, as to how such a huge quantities has been transported clandestinely after its clearances. We find that no enquiries have been made at the end of the buyers. Since the department has failed to establish the crucial evidences of clandestine manufacture and its clearance, we find that a case of clandestine removal and thereby evasion of central excise duty has not been established by the department - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Alleged evasion of central excise duty by the appellant.
2. Compliance with Section 9D of the Central Excise Act, 1944.
3. Validity of statements from witnesses without cross-examination.
4. Department's appeal regarding the benefit of Notification No. 6/2002-CE.

Detailed Analysis:

1. Alleged Evasion of Central Excise Duty:
The Department alleged that the appellant was engaged in the manufacture and clearance of excisable goods without payment of duty by misrepresenting them as traded goods. The show cause notice dated 17/10/2007 demanded central excise duty amounting to ?1,46,07,818/- and invoked provisions of interest and penalty. The Commissioner initially confirmed all charges, but upon remand by the Tribunal, the duty was reassessed to ?68,14,035/- with penalties.

2. Compliance with Section 9D of the Central Excise Act, 1944:
The Tribunal previously directed that the adjudicating authority must comply with Section 9D(1) of the Central Excise Act, 1944, which necessitates that statements made by witnesses during the investigation must be cross-examined unless specific conditions are met (e.g., the witness is dead or cannot be found). The adjudicating authority failed to produce 12 out of 13 crucial witnesses for cross-examination, thus not complying with Section 9D.

3. Validity of Statements from Witnesses Without Cross-Examination:
The Tribunal emphasized that the entire case of the Department was based on statements from 13 witnesses. The failure to produce these witnesses for cross-examination rendered their statements inadmissible as per the precedent set by the Supreme Court in Andaman Timber Industries vs. CCE, Kolkata – II. The Tribunal held that without cross-examination, the evidentiary value of these statements was lost, and they could not be relied upon to prove duty evasion.

4. Department's Appeal Regarding the Benefit of Notification No. 6/2002-CE:
The Department's appeal contended that the appellant should not be given the benefit of Notification No. 6/2002-CE due to the absence of a certificate from the Chairman or Managing Director of Delhi Metro Railway Corporation (DMRC). The Tribunal found that the appellant had produced a Chartered Accountant's certificate confirming the supply of goods to DMRC. The Tribunal held that the non-production of the specific certificate was a procedural lapse and could not be grounds to deny the substantial benefit of the notification. The Tribunal cited the Supreme Court's ruling in Mangalore Chemicals & Fertilizers Ltd. vs. Deputy Commissioner to support this view.

Conclusion:
The Tribunal set aside the order-in-original concerning the confirmation of demand and penalties against the appellant, allowing the appeals of the appellant No. I and II. The Department's appeal was dismissed, affirming that the procedural lapse did not warrant the denial of the benefit of Notification No. 6/2002-CE. The order was pronounced in the open court on 08/02/2019.