2018 (5) TMI 1335 - AT - Central Excise

Clandestine removal - SS flats - Revenue entertained a view that the assessee had availed the cenvat credit of duty paid on various raw materials received from M/S. HSAL on the basis of the invoices only, without actually receiving the inputs - Whether in view of the gross violation of principles of natural justice and lack of adherence to the procedure under Section 9D, the matter be remanded back to the adjudicating authority for de no adjudication, as held by member (Technical)? - Difference of opinion - majority order. Held that - Reliance placed in the case of Ambika International Vs. Union of India and Another s 2016 (6) TMI 919 - PUNJAB AND HARYANA HIGH COURT , where Hon ble High Court has clearly ruled that if the person whose statement has already been recorded is to be examined before the adjudicating authority and if the adjudicating authority arrives at a conclusion that the statement deserve to be admitted in evidence then the question of offering the witnesses to the assessee for cross-examination arise. The witnesses whose statement were recorded were not examined by the adjudicating authority - such examination-in chief was not conducted by the original authority and therefore, the question of cross-examination does not arise. Therefore, no purpose shall be achieved by remanding the matter back to the original authority for denovo adjudicating. Further, the allegation against M/s.BSPL were that they did not receive inputs but availed the cenvat credit only on the strength of invoices without receipt of inputs. The admitted facts are that the appellant, M/s. BSPL had manufactured the goods and paid Central Excise duty on the same and there are no investigation as to from where the inputs were procured by M/s. BSPL for manufactured of goods, if they had received only the invoices and no inputs from M/s.BSPL is established in proceedings - The appeal filed by the assessee is to be allowed. In view of the majority order, the appeal filed by M/s Bhupendra Steel Pvt. Ltd. is allowed and the appeal filed by the Revenue is rejected.

Issues Involved:
1. Confirmation of duty demand against M/s. Bhupinder Steel Pvt. Ltd. (BSPL) and imposition of penalties.
2. Dropping of demand against M/s. BSPL regarding non-receipt of certain inputs.
3. Non-imposition of penalty on M/s. AG International (AGI).
4. Denial of cross-examination of witnesses.
5. Admissibility of statements under Section 9D of the Central Excise Act.
6. Allegations of non-receipt of inputs and availing CENVAT credit fraudulently.
7. Examination of documentary evidence versus oral statements.
8. Alternative procurement of raw materials by the assessee.
9. Revenue’s contradictory stands before the Settlement Commission and in the present case.

Detailed Analysis:

1. Confirmation of Duty Demand and Penalties:
The Commissioner confirmed a duty demand of ?1,35,58,394/- against M/s. BSPL along with interest and imposed an equivalent penalty under Rule 13 of CCR, 2002, Rule 15 of CCR, 2004, read with Rule 25 of CER 2002, and section 11AC of the Central Excise Act, 1944. The demand was based on allegations of non-receipt of inputs and availing CENVAT credit fraudulently.

2. Dropping of Demand:
The Commissioner dropped a demand of ?1,10,87,137/- against M/s. BSPL concerning the non-receipt of certain inputs like Ferro Manganese, Ferro Silicon Lumps, and others. The adjudicating authority found no evidence supporting the allegations of non-receipt of these inputs.

3. Non-Imposition of Penalty on AGI:
The Commissioner did not impose any penalty on M/s. AGI, a registered dealer, which was contested by the Revenue. The Revenue’s appeal was solely against the non-imposition of this penalty.

4. Denial of Cross-Examination:
The adjudicating authority denied the cross-examination of witnesses whose statements were heavily relied upon by the Revenue. The Commissioner justified this by stating that the statements were recorded under Section 14 of the Central Excise Act and were admissible without cross-examination.

5. Admissibility of Statements:
The Tribunal noted that reliance solely on statements without cross-examination is not permissible. The statements recorded under Section 14 of the Central Excise Act must be subjected to cross-examination to test their veracity, as per Section 9D of the Central Excise Act. The Tribunal cited several precedents, including the Hon’ble Punjab and Haryana High Court's decision in Ambika International Vs. Union of India, emphasizing the need for cross-examination.

6. Allegations of Non-Receipt of Inputs:
The Revenue's case was primarily based on statements from transporters and representatives of M/s. HSAL, alleging that no material was transported to M/s. BSPL. The Tribunal found that these statements were not corroborated by independent evidence and that the assessee had provided documentary evidence indicating receipt of inputs.

7. Documentary Evidence vs. Oral Statements:
The Tribunal observed that the documentary evidence, such as entries in statutory records and payments made through cheques, should prevail over uncorroborated oral statements. The Tribunal emphasized that documentary evidence, including endorsed invoices by sales tax authorities, indicated the movement of goods to the assessee’s factory.

8. Alternative Procurement of Raw Materials:
The Revenue failed to provide evidence of alternative sources from which M/s. BSPL could have procured raw materials if they had not received them from M/s. HSAL. The Tribunal noted that the assessee had manufactured and cleared final products on payment of duty, which necessitated the receipt of raw materials.

9. Revenue’s Contradictory Stands:
The Tribunal highlighted the contradictory stands taken by the Revenue before the Settlement Commission and in the present case. Before the Settlement Commission, the Revenue asserted that M/s. HSAL had actually manufactured and cleared AS/MS products, while in the present case, they contended that only invoices were issued without actual receipt of goods.

Conclusion:
The Tribunal allowed the appeal filed by M/s. BSPL, setting aside the impugned order confirming the duty demand and penalties. The Tribunal also rejected the Revenue’s appeal against the non-imposition of penalty on M/s. AGI. The decision emphasized the necessity of cross-examination of witnesses and the reliance on documentary evidence over uncorroborated oral statements. The Tribunal's findings were based on the principles of natural justice and adherence to the procedures laid down under Section 9D of the Central Excise Act.

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