2016 (6) TMI 957 - HC - Central Excise

Demand of differential duty of excise - admissibility of statement recorded u/s 14 as evidence - flagrant violation of Section 9D of the Central Excise Act, 1944 - Held that - Section 138 of the Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidence-in-chief has to precede cross-examination, and cross-examination has to precede re-examination. - Clearly, if this procedure, which is statutorily prescribed by plenary Parliamentary legislation, is not followed, it has to be regarded, that the Revenue has given up the said witnesses, so that the reliance by the CCE, on the said statements, has to be regarded as misguided, and the said statements have to be eschewed from consideration, as they would not be relevant for proving the truth of the contents thereof. Respondents No.2 has, in the said Orders-in-Original, placed extensive reliance on the statements, recorded during investigation under Section 14 of the Act. He has not invoked clause (a) of sub-section (1) of Section 9D of the Act, by holding that attendance of the makers of the said statements could not be obtained for any of the reasons contemplated by the said clause. That being so, it was not open to Respondent No.2 to rely on the said statements, without following the mandatory procedure contemplated by clause (b) of the said sub-section. - the Show Cause Notice issued to the petitioner is remanded to respondent no.2 for adjudication de-novo by following the procedure contemplated by Section 9D of the Act and the law laid down by various judicial Authorities in this regard including the principles of natural justice - matter remanded back - Decided in favor of assessee.

Issues Involved:
1. Violation of Section 9D of the Central Excise Act, 1944.
2. Reliance on statements recorded under Section 14 of the Central Excise Act, 1944.
3. Admissibility and evidentiary value of statements in adjudication proceedings.
4. Procedural requirements under Section 9D(1)(b) of the Central Excise Act, 1944.
5. Principles of natural justice in adjudication proceedings.

Detailed Analysis:

Issue 1: Violation of Section 9D of the Central Excise Act, 1944
The petitioner challenged the Order-in-Original dated 4.4.2016, issued by respondent no.2, confirming a differential Central Excise Duty demand of ?7,08,38,008/- with interest and penalty. The petitioner contended that the order violated Section 9D of the Central Excise Act, 1944, by relying on statements recorded under Section 14 without admitting them as evidence per the procedure prescribed by Section 9D(1)(b).

Issue 2: Reliance on Statements Recorded Under Section 14 of the Central Excise Act, 1944
The court underscored that Section 9D sets out the circumstances under which statements made before a Central Excise Officer during an inquiry are relevant. Specifically, Section 9D(1)(a) and (b) outline when such statements can be used to prove the truth of their contents. The court noted that the adjudicating authority had relied on these statements without following the mandatory procedure.

Issue 3: Admissibility and Evidentiary Value of Statements in Adjudication Proceedings
The court referred to the Delhi High Court's decision in J.K. Cigarettes Ltd. vs. CCE, which held that the provisions of Section 9D(1) extend to adjudication proceedings. The court emphasized that the statements recorded during an inquiry cannot be treated as relevant evidence unless the circumstances specified in Section 9D(1) are met.

Issue 4: Procedural Requirements Under Section 9D(1)(b) of the Central Excise Act, 1944
The court detailed the procedural requirements under Section 9D(1)(b), which mandates that the person who made the statement must be examined as a witness before the adjudicating authority. The adjudicating authority must then form an opinion that the statement should be admitted in evidence in the interests of justice. The court stressed that this procedure is mandatory and cannot be bypassed.

Issue 5: Principles of Natural Justice in Adjudication Proceedings
The court highlighted that the adjudicating authority must follow the principles of natural justice, which include allowing the assessee to cross-examine the witnesses whose statements are relied upon. The court cited several judgments affirming that statements recorded behind the back of an assessee cannot be relied upon without providing an opportunity for cross-examination.

Conclusion:
The court found that respondent no.2 had not followed the mandatory procedure prescribed by Section 9D of the Act. As a result, the Order-in-Original dated 4.4.2016 was set aside. The court remanded the Show Cause Notice to respondent no.2 for adjudication de-novo, following the procedure under Section 9D and principles of natural justice. The court outlined specific steps for the Revenue to follow if it intends to rely on statements recorded under Section 14, including summoning the makers of the statements, providing examination-in-chief records to the assessee, and allowing cross-examination.

Order:
The Writ Petition was allowed, and the impugned Order-in-Original dated 4.4.2016 was set aside. The case was remanded for fresh adjudication following the prescribed legal procedure and principles of natural justice.

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