2024 (8) TMI 314 - AT - Central Excise

Clandestine removal - demand based on the electrical consumption - average electricity consumption was worked out for four months - period August 2009 to November 2009, May 2010 to October 2010 and December 2010 to February 2011 - cross-examination of officials was sought, but no opportunity provided - violation of principles of natural justice - HELD THAT - The Tribunal and High Court have consistently taken the view that what has been given as a electricity consumption based on a formula by Dr. Batra cannot be applied to all the manufacturers having various capacities and different machineries to arrive at the quantification of production. Therefore, this method of ascertaining the clandestine manufacture based on the electricity consumption was discarded by the Tribunals and the High Court. In the present case, the Revenue has not applied any formula given by Dr. Batra, IIT professor, but has actually worked out the electrical consumption for the five months period starting from November 2010 to March 2011 and then worked out the average consumption. This consumption has been used to arrive at the quantification of manufacture for the other period under question. Therefore, the appellant cannot be agreed that the cited case law of R.A. Castings would be applicable in the present case. There are force in the appellant's argument that the statements recorded by various officials have been relied upon by the Revenue while framing their allegations and also while confirming the demand. It is also on record that the Appellant has asked for crossexamination of certain persons which was not granted at the time of adjudication proceedings. The Hon ble Punjab and Haryana High Court in the case of M/S G-TECH INDUSTRIES VERSUS UNION OF INDIA AND ANOTHER 2016 (6) TMI 957 - PUNJAB HARYANA HIGH COURT held ' it would be open to the assessee to seek permission to cross-examine the persons who have made the said statements, should it choose to do so. In case any such request is made by the assessee, it would be incumbent on the adjudicating authority, i.e., on Respondent No. 2 to allow the said request, as it is trite and well-settled position in law that statements recorded behind the back of an assessee cannot be relied upon, in adjudication proceedings, without allowing the assessee an opportunity to test the said evidence by cross-examining the makers of the said statements.' Thus, the appellant should be given an opportunity to cross-examine the persons who had recorded their statements before the investigating officials. Hence, the matter is remanded to the Adjudicating Authority.

Summary

Issues:
1. Alleged clandestine clearance of goods without payment of Excise Duty.
2. Reliance on recorded statements of officials under Section 14 of CEA, 1944.
3. Adjudication of demand along with interest and penalty by the Adjudicating Authority.
4. Appellant's defense against the allegations and quantification of demand.
5. Applicability of case laws in determining clandestine manufacture.
6. Cross-examination of persons who recorded their statements during investigation.

Analysis:

1. The Appellant, engaged in manufacturing MS Ingots, faced allegations of clandestinely clearing goods without paying Excise Duty amounting to Rs. 23,04,677 for a specific period. Another notice alleged evasion of Rs. 1,32,49,419 for different periods. The Adjudicating Authority confirmed the demand, leading the Appellant to approach the Tribunal.

2. The Appellant's defense challenged the Department's reliance on electricity consumption alone to prove clandestine production. They argued lack of corroborative evidence and questioned the admissibility of recorded statements under Section 14 of CEA, 1944, citing the necessity of verification under Section 9D.

3. The Adjudicating Authority upheld the demand based on the Department's findings from the searches and statements recorded. The Appellant contested the quantification method and the evidentiary value of the statements, emphasizing the absence of cross-examination.

4. The Tribunal analyzed a case law cited by the Appellant, distinguishing it from the current scenario where a scientific method was used to calculate demand based on electricity consumption. While rejecting the Appellant's argument, the Tribunal acknowledged the importance of cross-examination in such cases.

5. Referring to a judgment by the Hon'ble Punjab and Haryana High Court, the Tribunal emphasized the right to cross-examine individuals whose statements were pivotal in the case. Consequently, the matter was remanded to the Adjudicating Authority for proper cross-examination and further proceedings.

6. The Tribunal directed the Adjudicating Authority to ensure the availability of persons for cross-examination promptly, aiming to conclude the proceedings within four months from the date of the order, issued in 2024. This decision aimed at upholding principles of natural justice and fair adjudication.

This detailed analysis of the judgment showcases the legal intricacies involved in the case, highlighting the importance of evidence, case laws, and procedural fairness in reaching a just decision.