2024 (10) TMI 816 - HC - Central Excise

SSI Exemption - clubbing of the value of clearances of PP/HM Sheets and Bags - cross-examination not allowed - violation of principles of natural justice - whether the decision of the Hon'ble Supreme Court in ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II 2015 (10) TMI 442 - SUPREME COURT , can be applied to the facts of the present case, particularly regarding remitting back the case to the respondents? HELD THAT - In the present case, not only the statement of accountant itself is clear but also of the respective petitioners. The necessity for cross-examining the customer of the respective petitioner is not required as in a quasi judicial proceedings before the respondents, the respondents are merely governed only by the principles of preponderance of probability and are not governed by strict rules of evidence. Unless, the statements of the persons who have given statements against the petitioners are solely relied for confirming the demand, question of cross-examination of any of the persons who have given statements against the petitioners does not arises only where demand is solely based on such statement, the Department has to allow cross-examination or in the alternative eschew such statements. The impugned orders prima facie indicate that the respondents have merely relied on the statement of buyers of the respective petitioners. They have merely corroborated the records maintained by the respective petitioners that the buyers have purchased PP bags from the respective petitioners. Therefore, there is no merits in the challenge to the impugned orders on the ground that no cross-examination was allowed in terms of the decision of the Hon'ble Supreme Court in Andaman Timber Industries case. Petition dismissed.

Issues Involved:

1. Clubbing of clearances for determining excise duty liability.
2. Confiscation and imposition of fines and penalties.
3. Denial of cross-examination of witnesses.
4. Application of principles of natural justice.
5. Opportunity to appeal and procedural fairness.

Issue-wise Detailed Analysis:

1. Clubbing of Clearances:

The petitioners challenged the orders which treated two firms as a single manufacturer for the purpose of computing Central Excise duty. The orders confirmed the clubbing of clearances from both firms, M/s Annai Poly Packs and M/s Banu Poly Packs, for specific periods. The basis for this was the control exerted by the proprietor of Annai Poly Packs over both firms. The order relied on Section 2(f) of the Central Excise Act, 1944, and conditions of the SSI Exemption Notification No. 8/2003-CE. The court noted that the statements from the proprietors indicated shared operations and control, justifying the clubbing of clearances.

2. Confiscation and Imposition of Fines and Penalties:

The orders confirmed the confiscation of goods found ready for clearance without payment of duty and imposed redemption fines in lieu of confiscation. Penalties were imposed under various rules of the Central Excise Rules, 2002, for breaches such as non-registration and failure to maintain proper records. The court upheld these findings based on the evidence presented, including statements from involved parties admitting to the activities that led to the confiscation and penalties.

3. Denial of Cross-Examination of Witnesses:

The petitioners argued that the orders were null due to the denial of cross-examination of certain witnesses whose statements were used against them. They cited the Supreme Court's decision in Andaman Timber Industries, which emphasized the right to cross-examine witnesses when their statements form the basis of an order. The court distinguished this case by noting that the impugned orders did not solely rely on these statements but were corroborated by other evidence, such as records from the petitioners' premises.

4. Application of Principles of Natural Justice:

The petitioners contended that the denial of cross-examination violated principles of natural justice. The court observed that in quasi-judicial proceedings, strict rules of evidence do not apply, and decisions can be based on the preponderance of probability. The court found no merit in the petitioners' challenge on this ground, as the statements in question were not the sole basis for the orders.

5. Opportunity to Appeal and Procedural Fairness:

The court dismissed the writ petitions, granting the petitioners the liberty to file a statutory appeal before the Commissioner of Central Excise (Appeals). The court emphasized that the appellate authority should consider the appeals on their merits and not be influenced by the observations made in the current order. The petitioners were directed to comply with the pre-deposit requirements under Section 35F of the Central Excise Act, 1944, to proceed with their appeals.

In conclusion, the court found no violation of natural justice principles or procedural unfairness in the impugned orders. The petitioners were advised to seek redress through the appellate process, ensuring that their grievances could be addressed within the legal framework provided by the Central Excise Act.

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