2025 (4) TMI 176 - AT - Central Excise

Recovery of alleged irregular input credit - rejection of request of cross-examination - violation of principles of natural justice and the provisions of Section 9D of the Central Excise Act 1944 - HELD THAT - The Tribunal in the appellant s own case 2024 (12) TMI 220 - CESTAT CHANDIGARH remanded the matter to the adjudicating authority on the same allegations i.e. denial of cross-examination of the persons whose statements have been relied upon for issuing the show cause notice. Conclusion - The impugned order is unsustainable due to the procedural lapse and the case remanded for fresh adjudication directing the adjudicating authority to allow cross-examination of the material witnesses. Appeal allowed by way of remand.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

Whether the denial of cross-examination of witnesses, whose statements were relied upon in issuing the show cause notice, violates the principles of natural justice and the provisions of Section 9D of the Central Excise Act, 1944.
Whether the impugned order, which upheld the Order-in-Original confirming the demand and penalties, is sustainable in the absence of cross-examination of the material witnesses.
Whether the case should be remanded to the adjudicating authority to allow cross-examination of witnesses and re-evaluate the evidence in accordance with the legal framework.

ISSUE-WISE DETAILED ANALYSIS

Denial of Cross-Examination

Relevant Legal Framework and Precedents: The legal framework is centered around Section 9D of the Central Excise Act, 1944, which mandates the conditions under which statements made before a Central Excise Officer can be admitted as evidence. The provision emphasizes the necessity of cross-examination to uphold the principles of natural justice. The Tribunal referenced several precedents, including the decisions in Jindal Drugs Pvt. Ltd. Vs UOI and Andaman Timber Industries, which underscore the importance of allowing cross-examination to ensure fair adjudication.
Court's Interpretation and Reasoning: The Tribunal interpreted Section 9D as requiring the adjudicating authority to allow cross-examination of witnesses whose statements are relied upon unless specific exceptions apply. The Tribunal emphasized that failure to allow cross-examination constitutes a violation of natural justice, rendering the proceedings flawed.
Key Evidence and Findings: The Tribunal found that the adjudicating authority and the Commissioner (Appeals) failed to provide the appellant with an opportunity to cross-examine the witnesses, whose statements formed the basis of the demand. This omission was deemed a critical procedural lapse.
Application of Law to Facts: The Tribunal applied the principles from Section 9D and relevant case law to the facts, concluding that the appellant's right to cross-examine was unjustly denied, warranting a remand for fresh adjudication.
Treatment of Competing Arguments: The Tribunal considered the Department's reiteration of the impugned order's findings but prioritized the appellant's argument regarding the necessity of cross-examination, supported by legal precedents.
Conclusions: The Tribunal concluded that the denial of cross-examination invalidated the impugned order, necessitating a remand to the adjudicating authority for a fresh decision after allowing cross-examination.

Remand for Fresh Adjudication

Relevant Legal Framework and Precedents: The Tribunal relied on precedents where similar issues were remanded for fresh adjudication, such as M/s Lauls Ltd. Vs CCE and M/s Tibrewala Industries (P) Ltd. Vs CCE, reinforcing the necessity of cross-examination for fair proceedings.
Court's Interpretation and Reasoning: The Tribunal reasoned that remanding the case was essential to rectify the procedural deficiency and ensure compliance with Section 9D, thereby upholding the principles of natural justice.
Key Evidence and Findings: The Tribunal noted that similar cases had been remanded due to the denial of cross-examination, highlighting a consistent judicial approach to such procedural issues.
Application of Law to Facts: The Tribunal applied the established legal principles to the appellant's case, determining that a remand was the appropriate remedy to address the procedural shortcomings.
Treatment of Competing Arguments: The Tribunal acknowledged the Department's position but found the appellant's arguments, supported by judicial precedents, more compelling in ensuring a fair adjudication process.
Conclusions: The Tribunal concluded that remanding the case to the adjudicating authority was necessary to allow cross-examination and a fresh evaluation of the evidence.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal reiterated the importance of cross-examination, quoting the Supreme Court in Andaman Timber Industries: "Not allowing the assessee to cross-examine the witnesses... is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice."
Core Principles Established: The judgment reinforced the principle that the denial of cross-examination of witnesses whose statements are relied upon violates principles of natural justice and the procedural requirements of Section 9D.
Final Determinations on Each Issue: The Tribunal determined that the impugned order was unsustainable due to the procedural lapse and remanded the case for fresh adjudication, directing the adjudicating authority to allow cross-examination of the material witnesses.