2018 (5) TMI 1670 - HC - Central Excise

Principles of Natural Justice denied - Non independent application of mind - various contentions raised were not dealt with - retracted statements - clandestine manufacture and removal of tobacco/gutkha without payment of central excise duty and education cess - Whether the appellant is right that the order passed by the CESTAT is contrary to law as it does not examine and discuss the contentions and issues of facts and law as raised and had arisen for consideration? - Whether the findings recorded by the Customs, Excise and Service Tax Appellate Tribunal are perverse as they do not meet the mandate and requirement of law? Held that - The Tribunal is the final fact finding authority under the Act i.e. the Central Excise Act, 1940. As a final fact finding authority and the first appellate authority against the order-in-original in the present case, the Tribunal was required to examine the statements, documentary evidence, consider the effect of retraction with reference to the legal position and thereupon arrive at definitive and considered decision. No doubt, as the final fact finding authority, the Tribunal can rely upon the reasoning, findings or inferences given in the order-in- original there has to be also fresh and independent application of mind and not a mere reproduction and repetition even if the final conclusion is one of affirmation. In the present case, the impugned order on all aspects and contentions merely reproduces the order-in-original, without specifically and independently examining and dealing with diverse contentions. Reference and independent and exhaustive elucidation of the factual contentions raised by the appellants and consideration of legal issues based upon the said contentions is conspicuously lacking and missing. The impugned order suffers on this account. The impugned order fails to independently and specifically deal with and examine the contentions raised by the appellants. The aforesaid substantial questions of law are answered in favour of the appellants and against the respondent with an order of remand to the Tribunal for fresh decision.

Issues Involved:
1. Examination of the Customs, Excise and Service Tax Appellate Tribunal's order.
2. Evaluation of the Tribunal's findings for compliance with legal standards.
3. Consideration of retracted statements and their evidentiary value.
4. Adequacy of the Tribunal's reasoning and independent application of mind.

Issue-wise Detailed Analysis:

1. Examination of the Customs, Excise and Service Tax Appellate Tribunal's order:
The appeals arose from a common order dated 20th April 2017, passed by the Customs, Excise and Service Tax Appellate Tribunal. The High Court admitted the appeals to address substantial questions of law regarding whether the Tribunal's order was contrary to law by not examining and discussing the contentions and issues of facts and law raised, and whether the findings recorded by the Tribunal were perverse.

2. Evaluation of the Tribunal's findings for compliance with legal standards:
The High Court noted that the Tribunal did not specifically and elaborately deal with the diverse and different contentions on facts and law. The Tribunal's order was criticized for merely reproducing the findings recorded in the order-in-original without independent application of mind. The High Court emphasized that the Tribunal, as the final fact-finding authority, must examine statements, documentary evidence, and the effect of retraction with reference to legal positions before arriving at a definitive decision.

3. Consideration of retracted statements and their evidentiary value:
The appellants argued that their statements were recorded under extreme pressure and duress and were later retracted. The High Court acknowledged the appellants' reliance on several judgments supporting the contention that retracted statements cannot be accepted as admissions of guilt unless corroborated by other evidence. The Tribunal's order was found lacking in addressing the appellants' allegations of duress and the legal standards for considering retracted statements.

4. Adequacy of the Tribunal's reasoning and independent application of mind:
The High Court found that the Tribunal failed to provide a reasoned and speaking order, as mandated by the Supreme Court in Kranti Associates Pvt. Ltd. and Others Vs. Masood Ahmed Khan and Others. The Tribunal's order did not meet the legal requirements of recording reasons, ensuring transparency, and demonstrating independent application of mind. The High Court emphasized the importance of reasoned decisions to ensure justice is seen to be done and to facilitate judicial review.

Conclusion:
The High Court concluded that the impugned order by the Tribunal failed to independently and specifically deal with and examine the contentions raised by the appellants. It remanded the matter to the Tribunal for fresh adjudication, emphasizing that the Tribunal must independently apply its mind and provide a reasoned decision. The High Court clarified that it had not commented on the merits of the case and that the matter should be decided afresh on merits without being influenced by the impugned order. The appellants were directed to deposit certain amounts as pre-deposit in compliance with Section 35F of the Central Excise Act.

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