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TMI Blog2018 (11) TMI 1514X X X X Extracts X X X X X X X X Extracts X X X X ..... hout compliance of Section 9D of the Act. Did the Tribunal act in accordance with law in upholding the penalty equal to duty under Section 11AC of the Central Excise Act, 1944 and the penalty under Rule 25 of the Central Excise Rules 2002? - Held that:- Revenue does not seriously dispute the submission that the circular containing aforesaid clarification was issued in exercise of statuary powers under Section 37 B of the Act of the 1944 - If that be so, the adjudicating authority could not have proceeded to impose penalty simultaneously under Section 11 AC of the Act and Rule 25 of the Rules of 2002 - the Customs, Excise and Service Tax Appellate Tribunal/adjudicating authority was not justified in law in imposing penalty simultaneously under Section 11 AC of the Act of 1944 and under Rule 25 of the CEC Rules 2002, in view of the specific Bar created under clause 2.2 of the statutory circular issued by CEC, in view of 37 B of the Act of 1944. Was the demand barred by limitation period of one year under Section 11AC(1) of the Central Excise Act, 1944? - Held that:- The period of limitation would begin to run from the date of carrying out search and seizure operation and in tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s visited the factory of the assessee on 06/06/2003 and carried out the verifications of inputs and various products in which shortage of raw material as well as finished goods were found. Thereafter, the department carried out investigation and came to the conclusion that the assessee has cleared inputs on which Cenvat credit have been taken as well as some finished products which were clandestinely removed without payment of duty. Upon conclusion of investigation, a show-cause notice dated 11/07/2007 was issued to the assessee which was adjudicated vide order dated 09/05/2008. The adjudicating authority held that assessee was liable to pay duty to the extent of ₹ 28,19,972/- along with interest and penalty which was also imposed Under Section 11 AC of the Excise Act and also under Rule 25 of the Central Excise Rules. Assessee successfully challenged the order of the adjudicating authority before the Commissioner (Appeals) where the demand was set aside and Revenue then preferred the appeal before the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (CESTAT). The CESTAT took the view that the statements of the Director of the Company admitted clandestine remo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provision contained in section 11 AC of the Act of 1944 meaning thereby that the total penalty imposed under the two provisions could not exceed the maximum penalty which can be imposed under Section 11 AC. The other submission is that the board has clarified this aspect by issuing circular in exercise of the statutory power under Section 37 B of the Act of 1944 in which it has been provided in clause 2.2 that if penalty is imposed under Section 11 AC, penalty under Rule 25 of the Act will not be imposed. 6. In so far as limitation aspect is concerned, demand of ₹ 1,58,453/- is against shortage of inputs as well as finished products at the time of verification. It has been submitted that upon verification of stock, shortage/excess of raw material and finished product was noticed. The assessee accepted the same as unexplained and also paid additional duty of ₹ 1,58,453/- therefore this aspect having been brought to the notice of the authority, the proceedings ought to be initiated within the period of one year and extended period of limitation was not invokable. In support of this contention, reliance has been placed on the decision of the Supreme Court reported i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r payment of excise duty was also liable to pay interest as well as penalty. 8. Counsel for the Revenue would further submit that the instruction issued by CBEC in the matter of simultaneous leviability of penalty under Section 11 AC of the Act of 1944 and Rule 25 of the Central Excise Rules, 2002 are guidelines and in appropriate case, nothing inhibits the adjudicating authority in imposing penalty under both the provisions operating simultaneously and not to the exclusion of each other. Next submission of counsel for the Revenue is that the Director's statement, though, may not have been recorded before the adjudicating authority, nevertheless, the Director never retracted his statements as given to the investigation officers, therefore, the adjudicating authority and the Tribunal can not be said to have committed illegality in relaying upon the same and the assessee is not entitled to get any benefit on account of technical violation of his statement having not been recorded before the adjudicating authority. In so far as the applicability of the extended period of limitation is concerned, counsel for the Revenue would contend that once the case of shortage of excess o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 9D - Relevancy of statements under certain circumstances. - (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains,- (a) When the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or (b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of the opinion that having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice. (2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before the Court. On scanning the anatomy of the said provision, we find that the statement made and signed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion which may have been obtained under the police power of the Investigating authorities by coercion or undue influence. 9.5. Undoubtedly, the proceedings are quasi criminal in nature because it results in imposition of not only of duty but also of penalty and in many cases, it may also lead to prosecution. The provisions contained in Section 9D, therefore, has to be construed strictly and held as mandatory and not mere directory. Therefore, unless the substantive provisions contained in Section 9D are complied with, the statement recorded during search and seizure operation by the Investigation Officers cannot be treated to be relevant piece of evidence on which a finding could be based by the adjudicating authority. A rational,logical and fair interpretation of procedure clearly spells out that before the statement is treated relevant and admissible under the law, the person is not only required to be present in the proceedings before the adjudicating authority but the adjudicating authority is obliged under the law to examine him and form an opinion that having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly, on the first and second question of law, we hold that the statement of the Director could not be treated as relevant piece of evidence nor could be relied upon without compliance of Section 9D of the Act. The two questions of law accordingly, stand answered in that manner. 10. Findings on Substantial Question of Law (iii) : The third issue relates to the legal permissibility of imposition of penalty simultaneously under Section 11 AC of the Act of 1944 and Rule 25 of the Central Excise Act, 2002. but for the statutory circular issued by CBEC, we would have dwelt upon the statutory scheme of the Act as contained under Section 11 AC and Section 37 (4), required to be read in juxtaposition with provisions contained in Rule 25 of the Rules of 2002. We, however, have perused the circular issued by the CBEC as published in para in CBEC's Central Excise Manual, Clause 2.2 reads as follows- 2.2 If penalty is imposed under Section 11AC, penalty under rule 25 will not be imposed. This, however, does not preclude the Department from confiscating the goods, imposing any fine in lieu of confiscation and prosecuting a person. 10.1. The aforesaid clarification, in our op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stock of raw material and finished products was found and the assessee also admitted this position and paid additional duty of ₹ 1,58,453/-. On this admitted factual position we have to see whether the adjudicating authority was entitled under the law to initiate proceedings beyond one year on an assumption of authority that proceeding could be initiated within the extended period of limitation. 11.1 The legal position in this regard is no longer res integra. Hon'ble Supreme court in the case of CCE Vs PAL Microsystems Ltd. reported in [2011(270) ELT 305 (SC)], has held : 16. We have carefully gone through the facts as ascertained by the Tribunal. Upon perusal of the order of the Tribunal as well as the judgment delivered by the High Court, it is not in dispute that alleged suppression of payment of duty by the respondent-company, was brought to the notice of the authority on 25th October, 1996, when the Superintendent of Central Excise had inspected the premises of the respondent-assessee whereas the show cause notice was issued on 26th June 2000. The department could not establish that there was any suppression of facts or a fraud on the part of the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatements of its author relaying upon various decision rendered by the Tribunal. It appears that the view which was taken by the Commissioner (Appeals) was based on the consistent view taken by the Tribunal in this respect. 12.1. Counsel for the appellant also relied upon the judgment of the Delhi High Court reported in 2016 (332) ELT (379), Commissioner of Central Excise, Delhi-i Vs. Vishnu Co. Pvt. Ltd. which also holds that the statement contained in private documents, without examining it's author, would not constitute relevant evidence of clandestine removal. 12.2. We have gone through the detailed order passed by the adjudicating authority and we find that so far as the demand of challenge in the present case is concerned it rested only on two materials. One was the so called statement of the Director which the adjudicating authority and the Customs, Excise and Service Tax Appellate Tribunal received in advance as admission of clandestine removal by the Director of the appellant/Company and the other was the notebook which contained certain entries, which according to the adjudicating authority constitute relevant material to draw inference of clandestine remo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch have been confirmed by the High Courts that electricity consumption alone if adopted as a basis of the demand, the same is not tenable. The respondents can take the electricity consumption pattern as a corroborative piece of evidence, but, in absence of substantive proofs like- (a) Details about the purchase of the raw material within the manufacturing units and no entries are made in the books of account or in the statutory records. (b) Manufacturing of finished product with the help of the aforesaid raw material, which is not mentioned in the statutory records. (c) Quantity of the manufacturing with reference to the capacity of production by the noticee unit. (d) Quantity of the packing material used. (e) The total number of the employees employed and the payment made to them. In this case, statements of the labourers ought to have been reduced in writing, by the department which ought to refer that over and above of the salary paid by the noticee, some other type of remunerations in cash or kind have been paid by the noticee, such statements are must. (f) Ostensible discrepancy in the stock of raw materials and the finished product. (g) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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