2017 (6) TMI 1138 - AT - Central Excise

Clandestine removal - MS ingots - assessee claims that the entire case is booked on the basis of chits/ papers recovered from the premises of third party and nothing incriminating was found from the premises of M/s Nashik strips - natural justice - Held that - the demands are mainly based upon the documents and records of third parties and none of the evidences was found from premises of M/s Nashik Strips. In such circumstances when M/s Nashik Strips has objected to statements of third parties and requested for cross examination the same should have been granted by the adjudicating authority. It also appears that the director of the Appellant factory has retracted his statement. Thus the adjudicating authority ought to have permitted the cross examination - the denial of cross examination of the persons requested by the Appellant M/s Nashik Strips is not correct and the same should have been granted as the demands were based upon third party records and statements. The adjudicating authority should have followed the provisions of Section 9D before placing reliance upon such statements and passing of the adjudication order. Matter remanded to adjudicating authority, who shall grant cross examination of the persons as requested by M/s Nashik Strips and shall decide the case De Novo - Appeal allowed by way of remand.

Issues Involved:
1. Demand of duty and imposition of penalties on M/s Nashik Strips Pvt. Ltd. and other appellants.
2. Validity and reliability of evidence obtained from third-party premises.
3. Right to cross-examination and adherence to principles of natural justice.

Detailed Analysis:

1. Demand of duty and imposition of penalties on M/s Nashik Strips Pvt. Ltd. and other appellants:
The case revolves around the demand of ?25,25,388/- confirmed against M/s Nashik Strips Pvt. Ltd. by the Commissioner (Appeals), Central Excise & Customs, Nasik, along with equivalent penalties. Additional penalties were imposed on M/s Salasar Ispat Pvt. Ltd. and individual appellants under Rule 26. The demand was based on allegations that M/s Nashik Strips cleared 797.325 MT of M.S Ingots without payment of duty, supported by records seized from M/s Salasar Ispat and statements from brokers and directors.

2. Validity and reliability of evidence obtained from third-party premises:
The appellant's counsel argued that the entire case was based on chits/papers recovered from third-party premises, specifically M/s Salasar Ispat, and not from M/s Nashik Strips. It was contended that no incriminating evidence was found at M/s Nashik Strips' premises, and proper records of production and stock were maintained without discrepancies. The counsel emphasized that the demand based on third-party records without corroborative evidence lacks evidentiary value, citing various legal precedents.

3. Right to cross-examination and adherence to principles of natural justice:
The appellant's counsel asserted that the statements used against M/s Nashik Strips were obtained under duress and retracted at the earliest opportunity. They argued that the principles of natural justice were violated as cross-examination of brokers and other individuals whose statements were relied upon was not permitted. The counsel referenced several judgments, including Basudev Garg vs. CCU, which underscored the necessity of allowing cross-examination when statements are used against an assessee.

The revenue's representative maintained that the documents and statements seized from M/s Salasar Ispat and associated places indicated clandestine clearance of goods by M/s Nashik Strips. However, the tribunal found that the demand was primarily based on third-party records and statements, and no direct evidence was found at M/s Nashik Strips' premises.

Conclusion:
The tribunal concluded that the adjudicating authority should have allowed the cross-examination requested by M/s Nashik Strips, as the demands were based on third-party records and statements. The tribunal emphasized the importance of adhering to the provisions of Section 9D, which necessitates the opportunity for cross-examination when relying on statements. Consequently, the appeals were allowed by way of remand to the adjudicating authority, directing a de novo adjudication with the opportunity for cross-examination and consideration of the merits of the case. The tribunal's decision underscores the critical role of cross-examination and the principles of natural justice in ensuring fair adjudication.

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