2017 (9) TMI 345 - AT - Central Excise

Clandestine manufacture and removal - Pan Masala/Gutkha - impugned order relied on various documentary and oral evidence to arrive at the findings - Reliance was also placed on various statements given by proprietor of the main appellant, railway booking agents, transporters, dealers of the impugned goods - Held that - summary denial of cross-examination and relying on all these statements to arrive at the findings is not legally justifiable. Accordingly, without going into the merits of the case, we find that on this legal objection, the impugned order cannot be sustained - reliance placed in the case of M/s Jindal Drugs Pvt Ltd and Anr. Vs Union Of India 2016 (6) TMI 956 - PUNJAB & HARYANA HIGH COURT , where it was held that the adjudicating authority has to mandatory comply with the legal requirement of Section 9D and if he fails the order passed is vitiated. Matter remanded back to the original authority for a fresh decision after complying with the provisions of Section 9D and also for re-verification of quantification of demand that may arise on re-adjudication - appeal allowed by way of remand.

Issues:
1. Adherence to legal procedures under Section 9D of the Central Excise Act.
2. Violation of principles of natural justice in the adjudication process.
3. Faulty investigation and lack of direct evidence.
4. Incorrect computation of duty.
5. Imposition of penalties under Rule 26 of Central Excise Rules, 2002.
6. Compliance with legal requirements for penalty imposition.
7. Calculation methodology for determining duty demand.

Analysis:

1. Adherence to Legal Procedures (Section 9D):
The appellants contested the findings in the impugned order, citing non-compliance with the legal mandate of examining witnesses under Section 9D of the Central Excise Act. They argued that the order was not legal due to this non-compliance. The original authority relied on statements without allowing cross-examination, which was a violation of the principles of natural justice.

2. Violation of Principles of Natural Justice:
The appellants argued that the impugned order was passed in violation of natural justice as their request for cross-examination of witnesses was denied without proper grounds. They highlighted the lack of findings on the statements relied upon and the absence of direct evidence supporting the allegations of duty evasion.

3. Faulty Investigation and Lack of Direct Evidence:
The investigation was challenged for being faulty, with no direct evidence of clandestine activities or unaccounted goods. The demand for Central Excise Duty was primarily based on statements and projections from unauthenticated private records, raising concerns about the validity of the findings.

4. Incorrect Computation of Duty:
The appellants pointed out errors in the computation of duty, where figures based on the same evidence were taken multiple times, leading to an improper projection of duty demand. This raised doubts about the accuracy and reliability of the duty calculation methodology.

5. Imposition of Penalties under Rule 26:
Penalties were imposed under Rule 26 of Central Excise Rules, 2002, on various noticees, including the proprietor of the main appellant. The appellants contested these penalties, arguing that there was a lack of clear supporting evidence for penalty imposition under the said rule.

6. Compliance with Legal Requirements for Penalty Imposition:
The legal position regarding the mandatory compliance with Section 9D of the Central Excise Act was discussed, emphasizing the need for a reasoned order and adherence to procedural requirements. Failure to comply with these legal provisions could vitiate the order passed by the adjudicating authority.

7. Calculation Methodology for Determining Duty Demand:
The calculation methodology used to determine the total duty demand was challenged by the main appellant. They argued that figures compiled from various sources were inaccurately totaled, leading to an incorrect quantification of duty demand. The need for re-verification and clear corroboration of sources was emphasized for accurate calculation.

In conclusion, the appellate tribunal set aside the impugned order and remanded the matter back to the original authority for a fresh decision. The decision highlighted the importance of adhering to legal procedures, ensuring natural justice, conducting thorough investigations, and accurately calculating duty demands in compliance with statutory requirements.

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