2020 (1) TMI 267 - AT - Central Excise

Clandestine removal - grey fabric - reliability on statements - cross-examination of persons - Section 9D of the Central Excise Act, 1944 - HELD THAT - The adjudicating authority was required to record a finding on the request of cross examination as per the provisions of Section 9D, and then could have proceeded to rely or discard the statements relied upon by the revenue in the adjudication proceedings - It is not the case the adjudicating authority had not found the request for cross examination irrelevant in the adjudication proceedings, he himself had allowed. It appears that adjudicating authority has in the first instance allowed the request of cross examination and fixed the date for cross examination on 22.4.2008. However since the cross examination did not happen on the appointed day he held the same to be irrelevant. In terms of Section 9D referred above, cross examination is necessary to establish the relevance of statements recorded during the investigation proceedings. Once it is found that cross examination is required for establishing the truth and relevance of the statement recorded it should be allowed, and only after cross examination the statement can be admitted as an evidence in the proceedings - Once adjudicating authority/Commissioner (Appeals) find that cross examination was required, then before admitting any statement in evidence, they should allow/ extend opportunity for cross examination. There are no merits in the findings recorded by the adjudicating authority/ Commissioner (Appeal) that the opportunity was extended and since cross examination was not done on the appointed date, the bar of Section 9D has been successfully crossed. While making this observation, we are not observing that appellant could prolong the adjudication proceedings indefinitely by making the request for cross examination a then choosing not to appear on the day appointed for cross examination. In the present case after allowing the request for cross examination, adjudicating authority has proceeded to adjudicate the case without putting the appellant on notice just for the reason that hearing fixed for cross examination, did not happen on the appointed day - the matter needs to be remanded back to adjudicating authority for considering the request for cross examination made by the appellants, and only after recording reason for permitting or disallowing cross examination proceed with the adjudication proceedings - appeal allowed by way of remand.

Issues Involved:
1. Confirmation of demand for CENVAT Duty.
2. Confirmation of demand for interest.
3. Imposition of penalties.
4. Denial of cross-examination.
5. Relevance and admissibility of statements under Section 9D of the Central Excise Act, 1944.
6. Inconsistency in adjudication between related cases.

Detailed Analysis:

1. Confirmation of Demand for CENVAT Duty:
The Additional Commissioner confirmed the demand for CENVAT Duty amounting to ?48,84,790/- against the appellant under Section 11A(2) of the Central Excise Act, 1944, due to alleged clandestine clearance of processed fabrics without payment of duty. This demand was based on 583 Delivery Challans cum Packing Slips provided by an informer and supported by statements recorded under Section 14 of the Central Excise Act, 1944.

2. Confirmation of Demand for Interest:
The Additional Commissioner also confirmed the demand for interest under Section 11AB of the Central Excise Act, 1944, on the confirmed duty amount and directed the appellant to pay the same forthwith.

3. Imposition of Penalties:
Penalties were imposed on both the appellant and its Managing Director under Section 11AC of the Central Excise Act, 1944, and Rule 26 of the Central Excise Rules, 1944, respectively. The penalties were equivalent to the amount of duty confirmed, i.e., ?48,84,790/-.

4. Denial of Cross-Examination:
The appellant contended that their request for cross-examination of the individuals whose statements formed the basis of the demand was not honored. Although the Additional Commissioner initially allowed the request for cross-examination and set a date for it, the adjudication proceeded without it due to the appellant's absence on the appointed date. The Commissioner (Appeals) upheld this decision, stating that the appellant had been given sufficient opportunities.

5. Relevance and Admissibility of Statements under Section 9D of the Central Excise Act, 1944:
The Tribunal emphasized the importance of Section 9D, which stipulates that statements recorded during an investigation must be admitted in evidence only after the person making the statement is cross-examined, unless specific conditions apply. The adjudicating authority failed to adhere to this requirement, thereby undermining the reliability of the statements used as evidence.

6. Inconsistency in Adjudication Between Related Cases:
The appellant highlighted that in a related case involving M/s Sonu Texcom, the Commissioner (Appeals) had granted complete relief based on the same set of documents and investigations. This inconsistency was noted as the statements deemed unreliable in one case were relied upon in the appellant's case without proper cross-examination.

Conclusion and Order:
The Tribunal set aside the impugned order and the order in original, remanding the matter back to the adjudicating authority for fresh consideration. The adjudicating authority was directed to allow the cross-examination of witnesses as requested by the appellant and proceed with the adjudication only after recording reasons for permitting or disallowing cross-examination. The Tribunal also directed the appellant to make themselves available for cross-examination on the appointed dates and instructed the adjudicating authority to draw inferences if the appellant failed to do so. The matter was to be adjudicated within six months of the receipt of the Tribunal's order. Appeal No. E/589/2009 was allowed and remanded, while Appeal No. E/583/2009 abated due to the death of the respondent.

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