2018 (10) TMI 1537 - AT - Central Excise

CENVAT Credit - fake invoices - only paper transactions, no receipt of goods - denial of opportunity to cross-examine - principles of natural justice - Held that - The department tried to establish that the appellant have not received the goods and they have only received the invoices on the basis of which the credit was availed. To establish the said charges, the statements of various persons were recorded and cross-examination of the said persons has been sought by the appellants. The Adjudicating Authority rejected the request of cross-examination, at the same time he relied upon all the statements for adjudicating the show cause notice. In terms of Section 9D of the Central Excise Act, 1944, if the Adjudicating Authority wants to rely upon any statement, it is incumbent upon him to test the witness before relying upon the statement - In the present case, it is more necessary when the appellants themselves have asked for cross-examination of the witnesses. The matter is remanded to the Adjudicating Authority for passing a fresh order after granting cross-examination of witnesses as requested by the appellants - appeal allowed by way of remand.

Summary

Issues involved:
Fraudulent availment of Cenvat credit; Cross-examination of witnesses; Violation of principles of natural justice.

Analysis:

1. Fraudulent Availment of Cenvat Credit:
The main issue in this case revolved around the alleged fraudulent availment of Cenvat credit by the appellants, M/s. Baroda Extrusion Limited and M/s. Jewel Metals Pvt. Limited. The disallowance of Cenvat credit was based on the assertion that the appellants had received invoices without actually receiving the goods mentioned in those invoices. The investigation revealed that one of the entities issuing the invoices did not have a manufacturing facility, leading to suspicions of paper transactions without accompanying goods. Penalties were imposed on the appellants in connection with the alleged fraudulent credit availment.

2. Cross-Examination of Witnesses:
The appellants contended that the case against them heavily relied on the statements of various witnesses. They requested the Adjudicating Authority for the cross-examination of these witnesses to challenge the veracity of the statements. However, their request was denied, and the Authority proceeded with the adjudication without granting the cross-examination. The appellants argued that the denial of cross-examination violated the principles of natural justice, as it was a crucial step in challenging the evidence presented against them. They cited several judgments to support their argument.

3. Violation of Principles of Natural Justice:
The issue of violation of principles of natural justice was raised concerning the denial of cross-examination of witnesses by both appellants. It was contended that without the opportunity for cross-examination, the adjudication process was flawed and legally improper. The Adjudicating Authority was criticized for rejecting the cross-examination request without providing a separate order that could be appealed against, as per the requirements of natural justice.

In the judgment, the Tribunal found that the Adjudicating Authority had not acted judiciously by rejecting the cross-examination requests while relying on the statements of witnesses in the adjudication process. The Tribunal emphasized the importance of testing witnesses before relying on their statements, especially when cross-examination was requested by the appellants. Consequently, the impugned order was set aside, and the matter was remanded to the Adjudicating Authority for a fresh order after granting the cross-examination of witnesses as requested by the appellants. The Tribunal stressed the necessity of providing the appellants with the opportunity for personal hearing and making additional submissions if required.

In conclusion, all the appeals were allowed by way of remand to the Adjudicating Authority, highlighting the significance of adhering to principles of natural justice in the adjudication process.