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2024 (9) TMI 549 - AT - Central ExciseClandestine manufacture and clearance of the finished goods - entire case is made on the basis of alleged receipt of clandestinely removed Billets by M/s Twenty First Century Wire Rods Ltd. - reliance placed upon the statement of accountant of the TFCWRL - violation of principles of natural justice - HELD THAT - There is no evidence of clandestine manufacture of appellant s final product. The revenue couldn t bring a single evidence of finished goods allegedly manufactured received by any buyer. There is not a single evidence of receipt of sale proceed against alleged clandestine manufacture and clearance of final product. No evidence of transport of any single consignment of alleged clandestinely removed goods was adduced. Third party's evidence is not sufficient to establish the clandestine removal of appellant s goods particularly when the said third party's statement was not examined under Section 9D of Central Excise Act, 1944. By reading the Section 9D, it is clear that it is not the optional but mandatory to conduct the cross examination of the witnesses. Since in the present case no cross examination was allowed, the statements cannot be relied upon which is the root of the evidence and in the absence of root tree cannot stand. This issue of cross examination has been time and again considered repeatedly by various forums. In the case of ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II 2015 (10) TMI 442 - SUPREME COURT Hon ble Supreme Court held that ' if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show cause notice.' Thus, it is a settled law that in absence of cross examination the statements cannot be relied upon as evidence as the same lose its evidentiary value. The revenue could not establish it s case of clandestine removal. Hence the demand will not sustain - the impugned order is set aside - appeal allowed.
Issues Involved:
1. Whether the allegation of clandestine manufacture and clearance of finished goods can be established based on private records of a third party and statements of persons not cross-examined. 2. Whether the principles of natural justice were violated by not allowing cross-examination of witnesses. 3. Whether the demand for Central Excise duty and the imposition of penalties were justified. Issue-wise Detailed Analysis: 1. Establishing Allegations Based on Private Records and Statements: The principal issue in this appeal was whether the allegation of clandestine manufacture and clearance of finished goods could be established merely on the basis of private records of a third party (TFCWRL) and statements of individuals who were not cross-examined. The Appellant was accused of receiving 96.45 M.Tons of Billets clandestinely from TFCWRL and manufacturing and clearing 96.45 M.Tons of Structural Items/Rolled Products without payment of duty. The department's case relied heavily on private records maintained by Motilal Junwal, an accountant of TFCWRL, and statements recorded during the investigation. The Appellant argued that the entire demand was based on private records and statements without any corroborative evidence of transportation, buyers, or payments for the alleged clandestine goods. The Appellant cited several judicial precedents, such as Bajrangbali Ingots & Steel P. Ltd v CCE and Raipur Forging P. Ltd v CCE, to support their contention that clandestine manufacture and removal cannot be established based on third-party documents and unexamined statements. 2. Violation of Principles of Natural Justice: The Appellant contended that the reliance on statements recorded by the department was not tenable in law because the deponents were not examined as required by Section 9D of the Central Excise Act, 1944. The adjudicating authority's failure to allow cross-examination of witnesses was a significant violation of the principles of natural justice. The Appellant cited various judgments, including Commissioner v Motabhai Iron & Steel Industries and Andaman Timber Industries v. Commissioner of C. Ex. Kolkata-II, to argue that statements cannot be relied upon without cross-examination. The Tribunal agreed with the Appellant, noting that the adjudicating authority had erred by not conducting cross-examination, thereby violating the principles of natural justice. The Tribunal emphasized that Section 9D mandates the cross-examination of witnesses, and in its absence, the statements lose their evidentiary value. 3. Justification of Demand and Penalties: The Tribunal found that there was no independent evidence from the Appellant to support the Revenue's allegation of clandestine manufacture and clearance. The entire case was based on the alleged receipt of clandestinely removed Billets from TFCWRL, and no evidence was provided regarding the transportation, buyers, or payments for the finished goods. The Tribunal concluded that the Revenue could not establish a single piece of evidence to support their allegations. The Tribunal cited several judgments to reinforce that in the absence of cross-examination, the statements cannot be relied upon as evidence. The Tribunal concluded that the Revenue's case of clandestine removal was not established, and therefore, the demand for Central Excise duty and the imposition of penalties were not justified. Conclusion: The Tribunal set aside the impugned order, allowing the appeal with consequential relief. The Tribunal pronounced that the demand for Central Excise duty of Rs. 3,55,650/- and the equivalent penalty under Rule 25 of the Central Excise Rules, 2002, would not sustain due to the lack of corroborative evidence and the violation of principles of natural justice. (Pronounced in the open court on 06.09.2024)
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