2014 (9) TMI 687 - AT - Central Excise

CENVAT Credit - non receipt of goods - showing the goods removed for Job work - Job Workers in their respective statements recorded under Section 14 of the Central Excise Act, 1944 admitted that they have not received any raw materials from PMS for processing and as such - Held that - Though the PMS had requested for supply of the RTO reports but the same were not supplied and similarly while they requested for cross examination of 21 out of 24 job workers, and also of 7 transporters but the same were disallowed by the Commissioner on the ground that the same is not required and the request is being made only to delay the adjudication proceedings. When in this case is the main evidence relied upon by the department is the statement of 24 job workers, in our view, before relying upon the statement of the job workers, and using the same against the PMS, their cross examination should have been permitted. In this regard, Section 9D (1) of the Central Excise Act, 1944 provides that a statement made and sent by a person before any central excise officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contained, when the person who had made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. In view of the provisions of sub-section (2) of Section 9 D, the provisions of sub-section (1) of Section 9 D are applicable to the adjudication proceedings also and accordingly, as far as possible before using the statement of a person recorded under Section 14 of the Central Excise Act, 1944, against an assessee, that person must be examined by the adjudicating authority and if his cross examination is requested, the same must be allowed. in view of the provisions of sub-section 9D (2) of Central Excise Act, 1944, the cross examination of a witness, whose statement has been relied upon by the adjudicating authority is a must. Besides this, when the report of the RTO regarding the registration number of the vehicles mentioned in the invoices being non-transport vehicles was relied upon by the department, the copies of the reports should be supplied to the appellant, which admittedly have not been supplied. In view of this, the impugned order is not sustainable. The same is set aside. The matter is remanded to the original adjudicating authority for de novo adjudication after supplying the reports of the RTO relied upon by the department and also examination of the job workers by the Commissioner in terms of the provisions of Section 9 D(2) and also permitting their cross examination by the appellant. - Matter remanded back - Decided in favour of assessee.

Issues Involved:
1. Wrongful availing of Cenvat credit by PMS.
2. Allegations of non-receipt of raw materials by job workers.
3. Denial of cross-examination of job workers and transporters.
4. Use of non-transport vehicles for transporting raw materials.
5. Admissibility of statements under Section 9D of the Central Excise Act, 1944.

Detailed Analysis:

1. Wrongful Availing of Cenvat Credit by PMS:
The primary issue revolves around PMS availing Cenvat credit amounting to Rs. 2,69,03,334/- for inputs allegedly received from 14 suppliers. The department initiated inquiries based on information that PMS was receiving invoices without actual receipt of goods and was procuring cheap diesel engine parts from the market for export while fraudulently utilizing the Cenvat credit. The Commissioner confirmed the demand for recovery of the wrongly availed Cenvat credit along with interest and imposed penalties under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.

2. Allegations of Non-receipt of Raw Materials by Job Workers:
The department's inquiries with 24 job workers revealed that none of them received any raw materials from PMS for processing. The job workers admitted that their transactions with PMS were mere paper transactions. The statements of these job workers formed a significant basis for the department's case against PMS. However, PMS contended that the raw materials were indeed sent to the job workers for further processing and return, and the finished goods were cleared on payment of duty for export.

3. Denial of Cross-examination of Job Workers and Transporters:
PMS requested the cross-examination of 21 out of 24 job workers and seven transporters whose statements were used against them. The Commissioner disallowed these requests, citing potential delays in adjudication. PMS argued that the denial of cross-examination resulted in a violation of natural justice, rendering the proceedings unsustainable. The Tribunal emphasized that cross-examination is essential, especially when the department relies heavily on the statements of job workers.

4. Use of Non-transport Vehicles for Transporting Raw Materials:
The department's investigation revealed that certain vehicles mentioned in the invoices for transporting raw materials were non-transport vehicles like two-wheelers and Maruti cars, which could not have transported the quantities mentioned. PMS requested copies of the RTO reports that confirmed this, but the department did not supply them. The Tribunal noted that the failure to provide these reports to PMS was a procedural lapse.

5. Admissibility of Statements under Section 9D of the Central Excise Act, 1944:
The Tribunal referred to Section 9D of the Central Excise Act, 1944, which mandates that statements made before a central excise officer should be admissible only if the person who made the statement is examined as a witness. The Tribunal highlighted that the cross-examination of such witnesses is crucial unless specific conditions under Section 9D are met. The Tribunal cited judgments from the Delhi High Court and Allahabad High Court, emphasizing the necessity of cross-examination in adjudication proceedings.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for de novo adjudication. The authority was directed to supply the RTO reports relied upon by the department and to examine the job workers in terms of Section 9D(2) of the Central Excise Act, 1944, allowing their cross-examination by PMS. The appeals and stay applications were disposed of accordingly.

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