2022 (5) TMI 561 - AT - Central Excise

Cross-examination of witnesses - Relevancy of statements under certain circumstances - whether the witnesses examined at the stage of investigation be allowed to be cross examination by the appellant? - Section 9D of Central Excise Act - HELD THAT - A plain reading of sub-section (1) of Section 9D of the Act makes it clear that clauses (a) and (b) of the said sub-section set out the circumstances in which a statement, made and signed by a person before the Central Excise Officer of a gazetted rank, during the course of inquiry or proceeding under the Act, shall be relevant for the purpose of proving the truth of the facts contained therein - Section 9D of the Act came in from detailed consideration and examination, by the Delhi High Court, in J K CIGARETTES LTD. ORS. AND M/S. GTC INDUSTRIES LTD VERSUS COLLECTOR OF CENTRAL EXCISE ORS. 2009 (8) TMI 64 - DELHI HIGH COURT clearly holds that by virtue of sub-section (2) of Section 9D, the provisions of sub-section (1) thereof would extend to adjudication proceedings as well - There can, therefore, be no doubt about the legal position that the procedure prescribed in sub-section (1) of Section 9D is required to be scrupulously followed, as much in adjudication proceedings as in criminal proceedings relating to prosecution. In the present case, the witness has time and again reiterated that the appellant has never been involved in the alleged clandestine removal. He has tried to explain the shortage as was noticed at the time of physical verification of the stock - he has specifically mentioned that production records are maintained by production units, hence, shall be available there. The separate invoice for captive consumed sponge iron and MS ingots has specifically been denied to be generated. Weighment slips were used to be made manually with no record thereof has been mentioned specifically to answer absence of weightment slips. To test the veracity of these submissions in the light of simultaneous acknowledgement to deposit the differential duty demanded, it is opined that interest of justice shall best be served when this witness is cross examined and his testimony is relied upon after following the procedure of aforementioned section 9D of the Central Excise Act. In addition it is apparent that granting such a permission will in no circumstance be prejudicial to the interest of the Department, except in the case of the cross examination of the Departmental witnesses. The original adjudicating authority shall be cross examining the witness and it is thereafter denovo adjudication of the impugned show cause notice be conducted by Original Adjudicating Authority - appeal allowed by way of remand.

Summary

Issues Involved:
1. Confirmation of demand for duty evasion.
2. Denial of opportunity to cross-examine key witnesses.
3. Admissibility and relevance of statements under Section 9D of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Confirmation of Demand for Duty Evasion:
The appellants, engaged in the manufacture of sponge iron, MS ingots, and TMT Bars, were accused of clandestinely removing TMT bars without paying Central Excise duty. A search conducted on 30.08.2017 led to a show cause notice demanding Rs.6,19,132/- for duty evasion. The demand was confirmed by the original adjudicating authority and upheld by the Commissioner (Appeals).

2. Denial of Opportunity to Cross-Examine Key Witnesses:
The appellant argued that the case was based solely on the statement of Mr. Narendra Mishra, the General Manager, recorded on 1.9.2013, who denied the allegations. The request to cross-examine Mr. Mishra and other witnesses was denied, with the adjudicating authority stating that the proceedings were not criminal in nature and that the evidence was largely documentary. The appellant contended that this denial violated their right to prove innocence beyond reasonable doubt and emphasized the mandatory compliance with Section 9D of the Central Excise Act, 1944.

3. Admissibility and Relevance of Statements Under Section 9D of the Central Excise Act, 1944:
Section 9D outlines the circumstances under which statements made before a Central Excise Officer can be considered relevant. The court highlighted that the procedure prescribed in Section 9D(1) must be strictly followed, both in adjudication and criminal proceedings. The court noted that the adjudicating authority must first examine the person who made the statement as a witness and then decide if the statement should be admitted in the interests of justice. Failure to follow this procedure renders the statement irrelevant for proving the facts contained therein.

Detailed Legal Reasoning:
The court emphasized the mandatory nature of Section 9D(1), which requires that statements made during inquiry or investigation be admitted into evidence only after the witness is examined before the adjudicating authority. The court cited several case laws supporting this interpretation, including Hi Tech Abrasives Ltd. vs. CCE Raipur, G-Tech Industries vs. UOI, and CCE Delhi-I vs. Kuber Tobacco India Ltd. The court also referenced the judgment in J.K. Cigarettes Ltd. vs. CCE, which extended the applicability of Section 9D to adjudication proceedings.

The court acknowledged the appellant's right to cross-examine Mr. Narendra Mishra and other witnesses, as their statements were crucial to the case. The court directed that the original adjudicating authority conduct a de novo adjudication after allowing the cross-examination of the specified witnesses.

Conclusion:
The appeal was allowed by way of remand, directing the original adjudicating authority to permit the cross-examination of Mr. Narendra Mishra and other witnesses. The de novo adjudication process was ordered to be completed within four months. The court's decision underscored the importance of adhering to the procedural requirements of Section 9D to ensure the fairness and legality of the adjudication process.