2015 (4) TMI 812 - AT - Central Excise

SSI Exemption - Clandestine removal - The appellants are engaged in manufacture and trading of excisable goods - Statements of some suppliers - Invocation Section 9D - Held that - While the allegation of duty evasion against the appellant is based on the statements of suppliers admittedly their cross examination has not been allowed. If the adjudicator wants to invoke clause (a) of Section 9D(1) a finding has to be given that the situations mentioned in this clause exist after hearing the appellant. In this case admittedly neither a finding has been given after hearing the appellant that the witness whose statements are sought to be relied upon by the Department in support of the allegation of duty evasion against the assessee are either dead or cannot be found or are incapable of giving evidence or are being kept out of way by the adverse party or their presence cannot be obtained without an amount of delay or expense which is unreasonable nor the witnesses who are available have been made available for cross examination which in our view is necessary. - Impugned order is set aside and the matter is remanded to the Commissioner for De novo adjudication in accordance with our observations in this order. - Decided in favour of assessee.

Summary

Issues Involved:
1. Clandestine removal of goods without payment of duty.
2. Admissibility of statements without cross-examination under Section 9D of the Central Excise Act.
3. Violation of principles of natural justice.

Detailed Analysis:

1. Clandestine Removal of Goods Without Payment of Duty:
The appellant company, engaged in manufacturing slotted angles, shelves, and cable trays, was accused of clandestine removal of goods without payment of duty. The central excise officers found a truck loaded with goods from the appellant's factory without any duty payment documents. Subsequent investigations revealed that the appellant's trading division allegedly sold goods manufactured in their factory without paying excise duty. The Commissioner of Central Excise confirmed a duty demand of Rs. 1,48,60,803/- along with penalties based on the statements of suppliers who claimed to have issued bogus invoices without supplying goods.

2. Admissibility of Statements Without Cross-Examination Under Section 9D of the Central Excise Act:
The Tribunal initially invoked Section 9D of the Central Excise Act to rely on the statements of suppliers without allowing cross-examination. However, the Delhi High Court remanded the matter, directing the Tribunal to re-examine the application of Section 9D. The High Court emphasized that statements could only be admitted without cross-examination if the conditions in Section 9D(1)(a) were met, such as the witness being dead, incapable of giving evidence, or their presence causing unreasonable delay or expense. The Tribunal acknowledged that the adjudicating authority must provide a specific finding that these conditions exist and that cross-examination is a fundamental right unless exceptional circumstances justify its denial.

3. Violation of Principles of Natural Justice:
The appellant argued that the denial of cross-examination violated the principles of natural justice. The Tribunal recognized that cross-examination is essential, especially when statements are the primary evidence against the appellant. The High Court's judgment in J&K Cigarettes Ltd. and Basudev Garg vs. Commissioner of Customs reinforced the necessity of cross-examination, aligning with the general principle that the right to be heard includes the right to cross-examine witnesses. The Tribunal concluded that the statements of suppliers could not be relied upon without allowing cross-examination unless the conditions in Section 9D(1)(a) were satisfied.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter to the Commissioner for de novo adjudication, emphasizing the need to adhere to the principles of natural justice and the specific conditions under Section 9D of the Central Excise Act. The Commissioner is required to re-examine the evidence, allow cross-examination of witnesses, and provide specific findings if relying on statements without cross-examination.