2015 (4) TMI 894 - AT - Central Excise

Exemption under notification no. 6/2000-CE dated 01.03.2000, 3/2001-CE dated 01.03.2001, 6/2002-CE dated 01.03.2002 - whether the appellant for availing the exemption under notification no. 6/2000-CE, 3/2001-CE and 6/2002-CE were using fly ash to the extent of 25% or more in the manufacture of ACC pipes/ couplers - Denial of cross examination request - Held that - Appellant in this regard were maintaining the records as prescribed in the exemption notification and were also filing a monthly return along with ER-1 returns. However, on this point the dispute is that these records were not been properly maintained as according to the Department some of the important columns regarding total quantity of finished products, total quantity of fly ash used and percentage of the fly ash in the finished products were being left blank. - It is seen that in April, 2003, the appellant premises had been visited by the Jurisdictional Central Excise Officers for checking the use of fly ash and at that time no irregularity had been found. In view of these circumstances, we are of the view that the appellants request for cross examination of Shri Darpan Jain of M/s Kaka Roadlines, Sh. Chandmal Kumawat of M/s Kumawat Industris the fly ash supplier and Sh Kailash Sharma of Shubham Fly Ash Products and M/s Nirmala Fly Ash Industries is genuine. It is also seen that in terms of section 9D(2) of Central Excise Act, 1944, the provision of sub section(I) shall, so far as may be, apply in relation to any proceeding under this act other than proceeding before the court as they apply in relation to proceedings before the court. Under section 9D(1) in course of prosecution proceedings, for offences under the Central Excise Act, 1944, the statement of a person can be used against an assessee only when the person who has made the statement is examined as a witness in that case before the court and the court is of the opinion that having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice. - In terms of sub section (2) of section 9D, the provisions of sub-section (1) have to be applied, as far as possible for adjudication proceedings also. Therefore, when the Department s case against an assessee is mainly based on statements given by some persons and those statements are not corroborated by some other independent evidence, and contradict each other, for using those statements, against the assessee for proving the charge of duty evasion against their, their cross examination would be necessary. - Matter remanded back - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the appellant company used 25% or more fly ash in the manufacture of ACC pipes/couplers to avail the exemption under notifications 6/2000-CE, 3/2001-CE, and 6/2002-CE.
2. Validity of the statements given by various individuals and their impact on the case.
3. Denial of cross-examination of the witnesses by the original adjudicating authority.
4. Proper maintenance of records regarding the receipt and use of fly ash.
5. Confirmation of duty demand and imposition of penalties.

Issue-wise Detailed Analysis:

1. Use of Fly Ash:
The primary issue is whether the appellant company used at least 25% fly ash in the manufacture of asbestos cement pressure pipes (ACC pipes) and couplers to avail the exemption under the specified notifications. The appellant claimed compliance by maintaining records and filing monthly returns. However, the Department alleged manipulation of records, supported by statements from employees and suppliers indicating lesser or no use of fly ash in production.

2. Statements of Individuals:
The Department's case heavily relied on statements from various individuals:
- Sh. Laxman Meghwal (Mixture Master) and Sh. Girish Panth (Sales Executive) stated that fly ash was used minimally (2-3%) or not at all, and the received fly ash was used for land filling.
- Sh. Manish Kala (Director) corroborated these statements, admitting manipulation of records for availing exemptions.
- Sh. Chandmal Kumawat and Sh. Kailash Sharma (fly ash suppliers) denied supplying fly ash to the appellant.
- Sh. Darpan Jain (Proprietor of M/s Kaka Roadlines) admitted issuing bogus Goods Receipts (GRs) for fly ash transportation without actual delivery.

3. Denial of Cross-Examination:
The appellant's request for cross-examination of the witnesses was denied by the original adjudicating authority. The Tribunal found this denial incorrect, referencing the Delhi High Court's judgment in Basudev Garg vs. Commissioner of Customs, which mandates the opportunity for cross-examination to ensure fair proceedings. The Tribunal emphasized that without cross-examination, the statements could not be used against the appellant.

4. Maintenance of Records:
The Department contended that the records were not properly maintained, with important columns left blank. The appellant disputed this, arguing that the records did show the percentage of fly ash used. The Tribunal noted the contradiction between the Department's claim and the appellant's evidence, necessitating further examination.

5. Duty Demand and Penalties:
The Joint Commissioner confirmed part of the duty demand and imposed penalties based on the findings. The Commissioner (Appeals) upheld this decision. However, the Tribunal found the proceedings vitiated due to the improper denial of cross-examination and remanded the matter for de novo adjudication, requiring the original adjudicating authority to allow cross-examination of the witnesses.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter for de novo adjudication, emphasizing the need for cross-examination of witnesses whose statements were used against the appellant. The appeals were disposed of accordingly.