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2024 (10) TMI 808 - AT - Central ExciseDenial of CENVAT Credit - non-manufacture of goods by Amarnath Industries - appellant cleared the raw material i.e., Crude Mentha Oil, Crude Piperita Oils, Crude Spearmint Oils as it is without subjecting the same to any manufacturing process - irregular availment of benefit of Notification dated 14.11.2002 during the period 29.04.2005 to 04.06.2002 - Whether the final products stated to be supplied to the appellant and to various other buyers were raw-material supplied to them as such under the guise of final products during the above period - denial of cross-examination - violation of priciples of natural justice? HELD THAT - The Commissioner found that since the departmental officers had verified the facts which had been declared by the appellant in the statutory records and the test reports also indicated that the goods would be Crude Mint Oils, the genuineness of test report conducted after receipt of the goods from Amarnath Industries, cannot be doubted and so the request for cross examination of departmental officers and other persons should not be granted. The Commissioner also observed that the case against the appellant is not only on the basis of statements of employees of Amarnath Industries, but also on circumstantial test reports and, therefore, denying the right of cross examination would not be violative of principle of natural justice. In the first instance, under section 9D of the Central Excise Act it is clear that a statement made during investigation/enquiry before a central excise officer cannot be relied upon unless it is first admitted and for this the person who made the statement has to be summoned and examined as a witness in adjudication proceedings. Failure to do so would mean that the adjudicating authority has relied upon an irrelevant material and, therefore, the order would be vitiated. The question of cross examination would arise only after examination of the person who makes statement before the central excise officer. The Commissioner has placed reliance upon the statements without following the procedure prescribed under section 9D of the Central Excise Act. The order passed by the Commissioner deserves to be set aside for this reason also - The penalties imposed upon the Managing Director of the appellant cannot also, for the same reasons, be sustained. The impugned order dated 17.05.2010 passed by the Commissioner so far as it concerns the two appellants deserves to be set aside and is set aside - appeal allowed.
Issues Involved:
1. Denial of CENVAT credit to the appellant. 2. Alleged non-manufacture of goods by Amarnath Industries. 3. Invocation of extended period of limitation. 4. Imposition of penalty under Section 11AC of the Central Excise Act. 5. Imposition of penalty under Rule 26 on the Managing Director. 6. Admissibility and reliance on statements under Section 9D of the Central Excise Act. Issue-wise Detailed Analysis: 1. Denial of CENVAT Credit: The core issue was whether the appellant was entitled to CENVAT credit for duty paid on raw materials purchased from Amarnath Industries. It was argued that since Amarnath Industries had paid duty on the raw materials, the appellant, as a recipient, should be allowed to claim CENVAT credit. The judgment referenced decisions from the Gauhati High Court and Bombay High Court, which supported the appellant's position that once duty is paid and accepted by the department, CENVAT credit cannot be denied to the recipient. The court concluded that CENVAT credit of the duty paid by Amarnath Industries could not have been denied to the appellant. 2. Alleged Non-manufacture of Goods: The Commissioner had concluded that Amarnath Industries did not have the capacity to manufacture the goods and that the appellant received raw materials as such, without any manufacturing process. The court found that the findings were based on assumptions and not supported by evidence. The court emphasized that the refunds granted to Amarnath Industries were unchallenged and had attained finality, reinforcing the appellant's claim for CENVAT credit. 3. Invocation of Extended Period of Limitation: The Commissioner invoked the extended period under the proviso to Section 11A(1) of the Central Excise Act, alleging that the appellant was involved in a fraudulent transaction. However, the court found no substantial evidence of fraud or misrepresentation by the appellant, thereby questioning the justification for invoking the extended period. 4. Imposition of Penalty under Section 11AC: The imposition of penalty under Section 11AC was linked to the invocation of the extended period. Since the court found the invocation of the extended period unjustified, it also questioned the imposition of penalty under Section 11AC, which requires mens rea or intent to evade duty. The court noted that mens rea is not an essential ingredient for imposition of penalty, but in this case, the penalty was not warranted. 5. Imposition of Penalty under Rule 26 on Managing Director: The Commissioner imposed a penalty on the Managing Director under Rule 26, asserting that he was involved in the alleged offence. The court found that the penalties imposed on the Managing Director could not be sustained due to the lack of evidence supporting the allegations against him. 6. Admissibility and Reliance on Statements under Section 9D: The appellant contended that the statements of various individuals were inadmissible as they did not comply with Section 9D of the Central Excise Act. The court agreed, citing precedents that require such statements to be admitted in evidence through examination of the person who made them. The failure to follow this procedure rendered the reliance on these statements improper, leading to the conclusion that the order was vitiated. Conclusion: The appellate tribunal set aside the impugned order dated 17.05.2010, allowing the appeals with consequential relief to the appellants. The judgment emphasized adherence to procedural requirements under Section 9D and upheld the appellant's entitlement to CENVAT credit, rejecting the penalties imposed.
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