2024 (10) TMI 505 - AT - Service Tax

Violation of principles of natural justice - opportunity of cross-examination - Evidentiary value of statements recorded under Section 14 of the Central Excise Act, 1944 - Case of appellant is that the statement of witness recorded u/s 14 of the Act before the gazetted Central Excise Officer during the course of investigation cannot be relied upon, unless procedure prescribed under Section 9D of the said Act is scrupulously followed - HELD THAT - Section 9D of the Central Excise Act, 1944 deals with the evidentiary value of statements recorded before a Central Excise Officer in certain situations. Section 9D(1)(b) provides the conditions under which such a statement can be admitted as evidence. As regards cross-examination, we note that the when a statement is used against the appellant in proceedings, the courts have consistently held that the right to cross-examine the individual who made the statement is fundamental. If a person is available for testimony and their previous statement is being used as evidence, the other party must be given the opportunity to cross-examine the person. Failing to provide this opportunity would violate principles of natural justice. The Delhi High Court in the caseJ K CIGARETTES LTD. ORS. AND M/S. GTC INDUSTRIES LTD VERSUS COLLECTOR OF CENTRAL EXCISE ORS. 2009 (8) TMI 64 - DELHI HIGH COURT clarified that if the person who made the statement is available, the person should be presented for cross-examination when requested. It is also noted that the Courts have consistently recognised that if the department seeks to rely on the previously recorded statement of a person during an inquiry, the opposing party must be allowed to cross-examine that person in court to challenge the veracity of the statement. This provision ensures that any statement made in the absence of the accused (during the investigation phase) does not automatically hold evidentiary value unless the maker of the statement is subjected to questioning by both sides, thus adhering to principles of natural justice - In the instant case, it is noted that at the original stage of adjudication, the adjudicating authority considered the submissions made by the appellant and set aside the proceedings. There does not appear to be any request seeking cross examination of the persons whose statements were relied upon, in the show cause notice. There is no evidence of the appellant seeking cross examination. However, this request has been made before this Tribunal. The cross-examination under Section 9D(1)(b) is a right granted to the appellant, which cannot be denied. It is found appropriate to remand the matter to the Commissioner (Appeals) to re-adjudicate the matter, giving an opportunity to the appellant to cross examine all the witnesses whose statements have been relied upon in the impugned order and the show cause notice - the impugned order is set aside and the appeal is allowed by way of remand.

Issues Involved:

1. Evidentiary value of statements recorded under Section 14 of the Central Excise Act, 1944.
2. Classification of service under 'Mandap Keeper Service'.
3. Presumption of documents under Section 36A of the Central Excise Act.
4. Validity of penalty imposition and suppression of facts.

Detailed Analysis:

1. Evidentiary Value of Statements:

The primary issue in this case revolves around the evidentiary value of statements recorded under Section 14 of the Central Excise Act, 1944. The appellant argued that such statements cannot be relied upon unless the procedure prescribed under Section 9D of the said Act is followed. The appellant emphasized that the statements of witnesses must be subjected to examination-in-chief before the adjudicating authority and the witnesses should be available for cross-examination as stipulated under Section 9D(1)(b). The Tribunal noted that Section 9D deals with the conditions under which statements recorded before a Central Excise Officer can be admitted as evidence. The Tribunal reiterated that the right to cross-examine is fundamental and failure to provide this opportunity violates principles of natural justice. The Tribunal cited the Delhi High Court's decision in J&K Cigarettes Ltd. v. Commissioner of Central Excise, which emphasized the necessity of cross-examination to ensure fairness in proceedings.

2. Classification of Service:

The appellant contended that the demand for service tax under the classification of 'Mandap Keeper Service' was incorrect. The appellant's role was limited to leasing premises, while the tent owners provided additional services like mandaps, furniture, and shamianas. The appellant argued that the classification was not sustainable under the definitions provided in Section 65(66) and Section 65(67) of the Finance Act, 1994. The Tribunal did not specifically address this classification issue in detail, as the primary focus was on procedural lapses related to the evidentiary value of statements.

3. Presumption of Documents:

The appellant challenged the presumption of documents under Section 36A of the Central Excise Act. The appellant argued that the 'Green Diary', which allegedly contained booking details, was neither produced by them nor seized from their premises. The Tribunal noted that the presumption under Section 36A applies only when documents are produced by or seized from the custody of the concerned person. In this case, since the diary was not seized from the appellant's control, the burden of proof lay with the Department to establish its relevance. The Tribunal emphasized that the Department failed to meet this burden.

4. Validity of Penalty and Suppression of Facts:

The appellant argued against the imposition of penalties, asserting there was no malafide intention or suppression of facts. The Tribunal observed that the original adjudicating authority had set aside the proceedings based on the appellant's submissions, indicating no evidence of suppression. The Tribunal noted that the appellant had not requested cross-examination during the original proceedings or before the Commissioner (Appeals), but raised this issue before the Tribunal. Recognizing the appellant's right to cross-examine under Section 9D(1)(b), the Tribunal found it appropriate to remand the matter for re-adjudication, allowing the appellant to cross-examine the witnesses whose statements were relied upon.

Conclusion:

The Tribunal set aside the impugned order and allowed the appeal by way of remand, directing the Commissioner (Appeals) to re-adjudicate the matter, providing the appellant an opportunity for cross-examination. This decision underscores the importance of adhering to procedural fairness and the principles of natural justice in adjudication proceedings.

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