2022 (11) TMI 1071 - AT - Central Excise

Wrongful availment of CENVAT Credit - admission of fictitious transportation by using registration number of vehicle of defunct transport firm - retraction of statements relied upon - May, 2012 to September, 2014 - contravention of provisions of Rule 3, 4 and 9 of Cenvat Credit Rules, 2004 - HELD THAT - The plain reading of sub section (1) of section 9D of Central Excise Act makes it clear that clause (a) and (b) of the said section sets out circumstances in which a statement made and sanctioned by a person before Central Excise Officer of a gazetted rank during the course of inquiry or proceedings under the Act, shall be relevant for the purpose of proving the truth of the facts contained therein. Any findings solely based upon the statements cannot be confirmed against M/s. Mittal Pigments Pvt Ltd. unless those statements have stood the test of Section 9(D) of Central Excise Act. Apparently and admittedly Shri Amit Gupta was not examined by the Adjudicating Authority. More so, for the reason that Shri Amit Gupta was not even allowed to be cross-examined by the appellant and that Shri Sanjeev Maggu had retracted the statements which had been relied upon by the Original Adjudicating Authority - there are no infirmity in the order of Commissioner (Appeals) while denying the admissibility of these statements. The departmental investigating agencies as well as the Adjudicating Authorities have not yet started observing compliance of mandatory statutory provisions i.e. section 9D of Central Excise Act, 1944 and section 138 B of Customs Act, 1962 without which the statement recorded at the stage of inquiry / investigation will not be relevant for the purpose of proving the truth of requisite facts during prosecution. It is therefore desired that department may come with certain guidelines so that the efforts of investigating team may not be discarded for the reason of non-compliance of aforesaid provisions. Appeal of Revenue dismissed.

Summary

Issues Involved:
1. Alleged fraudulent availment of Cenvat Credit.
2. Admissibility of statements recorded during investigation.
3. Requirement for cross-examination of witnesses.
4. Compliance with Section 9D of the Central Excise Act.
5. Validity of evidence and corroboration.

Detailed Analysis:

1. Alleged Fraudulent Availment of Cenvat Credit:
The department alleged that M/s Mittal Pigments Pvt. Ltd. availed Cenvat Credit fraudulently by procuring invoices from dealer companies operated by Shri Amit Gupta without actual receipt of goods. The modus operandi involved fictitious transportation and payments made through banking channels, which were allegedly returned in cash after deducting a commission.

2. Admissibility of Statements Recorded During Investigation:
The department's case heavily relied on statements recorded during the investigation, particularly those of Shri Amit Gupta and Shri Sanjeev Maggu. The Original Adjudicating Authority concluded that M/s Mittal Pigments Pvt. Ltd. availed Cenvat Credit fraudulently based on these statements. However, the Commissioner (Appeals) found that these statements were not admissible as evidence since the procedure under Section 9D of the Central Excise Act was not followed.

3. Requirement for Cross-Examination of Witnesses:
The Commissioner (Appeals) noted that M/s Mittal Pigments Pvt. Ltd. was not afforded the opportunity to cross-examine Shri Amit Gupta, whose statements were crucial to the department's case. The Tribunal agreed that without cross-examination, the statements could not be relied upon as evidence.

4. Compliance with Section 9D of the Central Excise Act:
Section 9D outlines the conditions under which statements recorded during investigations can be admitted as evidence. The Tribunal observed that the Original Adjudicating Authority did not follow the prescribed procedure under Section 9D. Specifically, the person who made the statement must be examined as a witness, and the adjudicating authority must form an opinion that the statement should be admitted in the interest of justice. This procedure was not followed, rendering the statements inadmissible.

5. Validity of Evidence and Corroboration:
The Tribunal noted that the department failed to provide corroborative evidence to support the allegations. The statements of Shri Amit Gupta and Shri Sanjeev Maggu were retracted, and there was no physical verification of stock or seizure of cash from M/s Mittal Pigments Pvt. Ltd.'s premises. The Tribunal referred to previous decisions where similar allegations were dismissed due to lack of evidence and non-compliance with Section 9D.

Conclusion:
The Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the department's appeal. It emphasized the importance of following statutory provisions for the admissibility of statements and the necessity of corroborative evidence. The Tribunal also suggested that the department should issue guidelines to ensure compliance with Section 9D to prevent the dismissal of cases due to procedural lapses.

Pronouncement:
The appeal of the department was dismissed, and the order was pronounced in the open Court on 22-11-2022.