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2021 (7) TMI 682 - AT - Central ExciseCENVAT Credit - duty paying documents - denial on the ground that the appellant company has availed CENVAT credit on the strength of fake invoices without actually receiving the goods in violation of the CENVAT Credit Rules, 2004 - demand based on statements made by the manufacturers and the Excise dealers - rejection of request for cross-examination of the persons whose statements have been relied upon - HELD THAT - The entire proceedings have been initiated on the basis of statements made by the manufacturers and the Excise dealers which have been solely relied to conclude that the appellant has not received the goods. The appellants in the course of adjudication have been consistently demanding cross-examination of the witnesses whose statements have been heavily relied upon by the Department. The appellants have pleaded that the goods on which credit have been availed were duly received by them and duly accounted for in the statutory records and that payments have been made through banking challans. The request for cross-examination of the persons whose statements have been relied upon has been turned down on the ground that despite several opportunities given by the Department, those persons failed to turn up before the authorities. Identical observation has been made in para 3.12 of the other adjudication order dated 15.09.2017 - the reasons assigned by the authorities below to reject cross-examination is clearly unsustainable in legal parlance for the obvious reason that no adverse inference can be drawn against assessee whose statements are to be relied by the Revenue without ascertaining the veracity in the absence of cross-examination. The Tribunal in the case of M/S NIDHI AUTO PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, NOIDA-I 2019 (6) TMI 899 - CESTAT ALLAHABAD , while relying on the ratio laid down by the Hon ble High Court in the case of COMMISSIONER OF CENTRAL EXCISE, MEERUT-I, MEERUT ANOTHER VERSUS M/S PARMARTH IRON PVT. LTD., BIJNOR. 2010 (11) TMI 109 - ALLAHABAD HIGH COURT has held that when the Revenue does not allow cross-examination of any prosecution witness then Revenue cannot rely on the statement given by such prosecution witness for confirmation of demand. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Eligibility of CENVAT credit based on alleged fake invoices. 2. Denial of cross-examination of witnesses whose statements were relied upon. 3. Imposition of penalty on the company and its director. Issue-wise Detailed Analysis: 1. Eligibility of CENVAT credit based on alleged fake invoices: The appellant company, engaged in the manufacture of M.S. Ingots, faced a demand for Central Excise duty for the periods 2012-13 to 2013-14 and 2014-15. The demand was based on allegations that the company availed CENVAT credit using fake invoices without actually receiving the goods, violating the CENVAT Credit Rules, 2004. The Show Cause Notices (SCNs) issued by the Addl. Commissioner, Central Excise, Ranchi, alleged that the dealers mentioned in the invoices never supplied the goods. The SCNs relied on statements from manufacturers and dealers, suggesting the invoices were bogus. The appellant disputed the duty demand, asserting that the goods were received and used in manufacturing, payments were made through banking channels, and necessary records were maintained. 2. Denial of cross-examination of witnesses whose statements were relied upon: The appellant's request for cross-examination of the witnesses whose statements were relied upon was denied. The adjudicating authority observed that despite several opportunities, the witnesses did not appear for cross-examination, suggesting a possible understanding between the appellant and the witnesses. The Commissioner (Appeals) upheld this decision, citing Section 9D of the Central Excise Act, 1944, which allows reliance on statements if cross-examination would cause undue delay or expense. The appellant argued that denying cross-examination prejudiced their case, as they could not test the correctness of the allegations. They cited several decisions, including CCE vs. Parmarth Iron Pvt. Ltd, G-Tech Industries vs. UOI, and Nidhi Auto Pvt Ltd vs. CCE, to support their contention that statements cannot be used as evidence without cross-examination. 3. Imposition of penalty on the company and its director: The original adjudication orders confirmed the duty demand and imposed penalties on the company and its director, Shri Deepak Kumar Jain. The appellant argued that since the CENVAT credit was lawfully availed, there was no basis for imposing penalties. They emphasized that the payments were made through banking channels, and there was no evidence of payment being received back to dispute the authenticity of the transactions. Tribunal's Findings: The Tribunal found that the entire proceedings were based on statements from manufacturers and dealers, which were heavily relied upon without allowing cross-examination. The Tribunal noted that no adverse inference could be drawn against the assessee without verifying the statements through cross-examination. The Tribunal referred to its previous decisions, including Arsh Castings Pvt Ltd vs. CCE, Chandigarh, which emphasized the necessity of cross-examination to ensure fair adjudication. The Tribunal also cited the case of Nidhi Auto, where it was held that statements could not be relied upon without cross-examination. The Tribunal concluded that the reasons for denying cross-examination were unsustainable in legal parlance. It noted that the absence of cross-examination rendered the statements inadmissible as evidence. Consequently, the Tribunal set aside the impugned orders, allowing the appeals with consequential relief. Conclusion: The Tribunal allowed the appeals, setting aside the impugned orders due to the denial of cross-examination, which violated principles of natural justice and fair play. The decision emphasized the necessity of cross-examination to validate statements used as evidence in adjudication proceedings. The penalties imposed on the company and its director were also set aside, granting consequential relief to the appellants.
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