2019 (10) TMI 165 - AT - Central Excise

Benefit of N/N. 6/02-CE dated 1/3/02 - manufacture and clearance of AC Pressure Pipes - AC Pressure Pipes, claimed by appellant to be made by using fly ash and which contain not less than 25% by weight of fly ash - period from December 2003 to March 2006 - Department s contention is that the pipes in respect of which the exemption under Notification No. 6/02-CE dated 1/3/02 (Sl. No. 158) has been availed either do not contain fly ash or the fly ash content is much less than 25% and, hence, the same do not qualify for exemption - Extended period of limitation. HELD THAT - From the findings of the Commissioner in para 27 of the impugned order it appears that during 2005-2006, the appellant used 9411.8 M.T. of cement for manufacture of AC Pressure Pipes containing only cement and not containing fly ash, while 46553.754 M.T. of cement had been used for manufacture of 53995.600 M.T. of Asbestos Cement Pipes containing fly ash. The fly ash content on this basis would come to 13.8% which is much less than the required 25%. Though the appellant plead that out of total 55965.554 M.T. of cement received at Bhilwara Plant, the quantity of 19882.4 of the cement had been sent to manufacturing unit at Ahmedabad and as such 26671.35 M.T. of cement had been used during 2005-2006 for manufacture of 53995.6 M.T. of Asbestos Cement Pipes containing fly ash, no evidence in this regard has been produced which makes the assertion doubtful. The entire case of the Department is made on the basis of statements of the various persons, who have not been examined by the adjudicating authority while adjudicating the case and also the Appellants were not permitted to cross examined these witnesses and thus the impugned orders suffers from the inherent infirmity. Reliance placed on the decision of M/S G-TECH INDUSTRIES VERSUS UNION OF INDIA AND ANOTHER 2016 (6) TMI 957 - PUNJAB HARYANA HIGH COURT and SWADESHI POLYTEX LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, MEERUT 2000 (7) TMI 85 - SC ORDER wherein it is held that it is mandatory on the part of the adjudicating authority to examine the witnesses whose statements have been relied upon and thereafter these witnesses are required to be subjected to cross examination by the Appellant. The case needs to be remitted back to the adjudicating authority so as to follow mandatory conditions prescribed under Section 9D of the Act. Accordingly, the matter remanded to the adjudicating authority by setting aside the impugned order - appeal allowed by way of remand.

Summary

Issues Involved:
1. Confirmation of Central Excise duty demand.
2. Imposition of penalties on various individuals.
3. Alleged non-compliance with exemption conditions under Notification No. 6/2002-CE.
4. Validity of evidence and statements obtained during investigation.
5. Denial of cross-examination of witnesses.
6. Time-barred nature of the demand.

Issue-wise Detailed Analysis:

1. Confirmation of Central Excise Duty Demand:
The Commissioner confirmed a demand of Central Excise duty amounting to ?11,02,12,141 under Section 11 of the Central Excise Act, 1944, along with equivalent penalties under Section 11AC and Rule 25 of the Central Excise Rules, 2002. The adjudicating authority also ordered for recovery of interest under Section 11AB of the Act. The demand was based on the allegation that the appellant did not use the required 25% fly ash in the manufacture of Asbestos Cement Pressure Pipes, thus fraudulently availing the exemption under Notification No. 6/2002-CE.

2. Imposition of Penalties on Various Individuals:
Penalties were imposed on several individuals, including ?10 lakhs on the MD/Vice Chairman and the Chief General Manager of the appellant company, and ?5 lakhs each on the proprietors of three transport companies under Rule 26 of the Central Excise Rules, 2002. The penalties were based on the alleged involvement in the fraudulent availing of the exemption.

3. Alleged Non-Compliance with Exemption Conditions:
The appellant claimed compliance with the exemption conditions, maintaining records and filing returns as required. However, the Department contended that these records were false. The investigation revealed discrepancies, including statements from thermal power plant officials and transporters denying the lifting and transportation of fly ash, and fake weighment slips.

4. Validity of Evidence and Statements Obtained During Investigation:
The Department relied on statements from thermal power plant officials, transporters, and truck owners, which indicated no fly ash was transported to the appellant's factory. The appellant contested these statements, citing retractions and lack of cross-examination. The Tribunal noted that the statements of two Assistant Engineers from the thermal power plant were of doubtful value due to lack of records and cross-examination.

5. Denial of Cross-Examination of Witnesses:
The Tribunal found that the denial of cross-examination of witnesses whose statements were relied upon by the Department was a significant procedural lapse. The Tribunal emphasized the importance of cross-examination in ensuring the reliability of evidence, referencing decisions in G. Tech Industries and Swadeshi Polytex Ltd.

6. Time-Barred Nature of the Demand:
The appellant argued that the demand was time-barred as all statutory records were maintained and submitted to the Department, and multiple audits were conducted without any objections. The Tribunal noted the need to examine records and returns to determine if the extended period of limitation under Section 11A could be invoked.

Conclusion:
The Tribunal found that the entire case was primarily based on statements that were not subjected to cross-examination, rendering the impugned order procedurally flawed. The Tribunal remanded the matter to the adjudicating authority for re-examination, ensuring compliance with Section 9D of the Act and allowing cross-examination of witnesses. The adjudicating authority was directed to complete the remand proceedings within three months, providing the appellant an opportunity to be heard.