2020 (10) TMI 436 - AT - Central Excise

Principles of Natural Justice - Levy of Penalty u/r 26 of the Central Excise Rules, 2002 - Appellants submits that there is gross violation of the principle of natural justice and despite the remand by this Tribunal for denovo adjudication, the cross-examination was not permitted by the revenue - HELD THAT - The writer of the chits/private documents was not examined therefore it raises doubt whether the same can be used against the appellants. Mere recovery of private records is not sufficient to prove clandestine removal and a concrete and clinching evidence is required to prove such allegation and it is for the department to discharge the burden and prove the charges of clandestine removal against the appellants. The department has to prove the allegation on the basis of cogent corroborative evidence which in the facts of the present case the department has failed to produce, so far as the appellant is concerned. From the records it is apparent that from the day show cause notice was issued, the appellants were asking for cross examination. Even despite the order of this Tribunal, the adjudicating authority did not permit the cross-examination and brushed aside the same while observing that the request is without any specific reason and is routine in nature. It is no doubt true that there is no right of cross-examination if sufficient corroborative evidence exists, but in the present case I am unable to find the sufficient corroborative evidence against the appellant and therefore the appellant were justified in asking for cross-examination. Since the cross-examination was denied therefore it vitiates the proceedings qua the appellants. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellants are liable to pay the penalty of ?1 lac under Rule 26 of the Central Excise Rules, 2002?

Analysis:
The case involved a challenge to an order imposing a penalty under Rule 26 of the Central Excise Rules, 2002. The appellant, along with others, was suspected of evading Central Excise duty by clandestinely clearing finished goods through a broker. Statements and evidence were gathered during the investigation, leading to a show cause notice being issued against the appellant and others. The initial order confirmed the demand and imposed penalties, which were upheld by the Commissioner (Appeals). Subsequently, the matter was remanded by the Tribunal for fresh adjudication due to a violation of the principle of natural justice, specifically the denial of cross-examination. Upon remand, the adjudicating authority again confirmed the demand and penalties, including a penalty of ?1 lac on the appellant, which was challenged before the Commissioner (Appeals).

The appellant argued a gross violation of the principle of natural justice, emphasizing the denial of cross-examination despite previous Tribunal orders. The appellant contended that the case was based on seized documents and statements without proper corroboration. The Tribunal disagreed with the Commissioner's finding that the case could not be considered in isolation due to the absence of appeals by other noticees. The Tribunal stressed the importance of individual rights to challenge orders and the necessity for a fair chance to defend against allegations. It highlighted the lack of concrete evidence linking the seized documents to the appellant and the failure to examine relevant individuals to establish ownership. The Tribunal emphasized the need for corroborative evidence to prove clandestine activities and the detrimental impact of denying cross-examination on the proceedings.

Citing legal precedents, the Tribunal reiterated that the denial of cross-examination violates the principles of natural justice, especially when statements are relied upon without sufficient corroboration. It emphasized that the right to cross-examination is crucial for assessing the voluntariness and relevance of witness statements. Refusal of cross-examination during adjudication constitutes a breach of natural justice, as established by various court judgments. Ultimately, the Tribunal found that no case was made out against the appellant, setting aside the impugned penalty and allowing the appeal with consequential relief, if any.