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TMI Blog2024 (9) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... . Structural Items falling under Chapter 72 of the Central Excise Tariff. The Second Appellant was General manager and authorized signatory of the first appellant. In or about December 2011, officers of DGCEI initiated investigations against Twenty First Century Wire Rods Limited (hereinafter "TFCWRL") having factories at Khadoli and Parzai, Silvassa and on 1-12-2011 conducted search at the said factories of TFCWRL and at the residential premises of the directors and some employees of TFCWRL. 1.2 In the course of search carried out at the residence of Motilal Junwal, Accountant of TFCWRL, the DGCEI officers recovered Private records maintained by Motilal Junwal viz. Note Books Nos. 7, 11, 15 and File No. 22, which allegedly contained entries of clandestine supplies of Billets to the Appellant made without payment of duty. It is the case of the department based on the Statement of Motilal Junwal that entries appearing in the said Private records with the letter "B" were entries of accounted production cleared on payment of duty and that entries appearing in the said Private records with the letter "W" were entries of unaccounted production cleared without payment of duty. Based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks Nos. 7, 11, 15 and File No. 22 maintained by Motilal Junwal, Accountant of TFCWRL and recovered from his residence (See pages 120 to 124 and 132-133 of Appeal). The said private records maintained by the said third party allegedly contained entries of clandestine supplies of Billets made by TFCWRL to the Appellant made without payment of duty. The department also relied upon two Blank Invoices (See page 127 of Appeal) recovered from Ramesh Pandey who was working as a cook in canteen of TFCWRL, which are alleged to have been kept for using as cover for clandestine removal. 2.2 Based on the said private records of the said Third Party, it is presumed that the Appellant clandestinely received 691.33 M.Tons of Billets from TFCWRL and manufactured therefrom, 691.33 M.Tons of Structural Items/ rolled products which are presumed to have been clandestinely cleared by the Appellant. 2.3 There is absolutely no evidence whatever of transport of the said alleged quantity of 691.33 M.Tons of Billets from the factory of TFCWRL to the factory of the Appellant and of any payment made by the Appellant to TFCWRL for the same. 2.4 There is absolutely no evidence of manufacture of 691.33 M.Ton ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006 (193) ELT 48 * Krishna Steel Industries v CCE - 2010 (254) ELT 292 In the case of CCE v Vishnu & Co P. Ltd - 2016 (332) ELT 793 (Del), it is held by the High Court in Para 42 of the judgment that it is the responsibility of the department to ensure presence of the witnesses for cross examination if the department is relying on statements of the witnesses. 3. Shri Sanjay Kumar, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. 4. On careful consideration of the submission made by both the sides and perusal of records, we find that though there is no independent evidence found from the appellant to support the revenue's allegation on clandestine manufacture and clearance of the finished goods from the factory of the appellant. The entire case is made on the basis of alleged receipt of clandestinely removed Billets by M/s Twenty First Century Wire Roads Ltd.. The Revenue has also relied upon the statement of accountant of the TFCWRL, however, the cross examination has not been conducted in this regard. Therefore, the adjudicating authority has gravely erred by violating the principles of natural justice. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the judgments are reproduced below:- a) In the case of Andaman Timber Industries Vs. Commissioner of C. Ex. Kolkata-II- 2015 (324) ELT 641 Hon'ble Supreme Court has given the following decision:- "6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement 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 the adverse party, or whose presence cannot be obtained without an 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 opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. (2) The provision 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 a Court." 9. A plain reading of sub-section (1) of Section 9D of the Act makes it clear that clauses (a) and (b) of the said sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are contained in clauses (a) and (b) thereof. 14. Clause (a) of Section 9D(1) refers to the following circumstances : (i) when the person who made the statement is dead, (ii) when the person who made the statement cannot be found, (iii) when the person who made the statement is incapable of giving evidence, (iv) when the person who made the statement is kept out of the way by the adverse party, and (v) when the presence of the person who made the statement cannot be obtained without unreasonable delay or expense. 15. Once discretion, to be judicially exercised is, thus conferred, by Section 9D, on the adjudicating authority, it is self-evident inference that the decision flowing from the exercise of such discretion, i.e., the order which would be passed, by the adjudicating authority under Section 9D, if he chooses to invoke clause (a) of sub-section (1) thereof, would be pregnable to challenge. While the judgment of the Delhi High Court in J&K Cigarettes Ltd. (supra) holds that the said challenge could be ventilated in appeal, the petitioners have also invited attention to an unreported short order of the Supreme Court in UOI and Another v. GTC India and Other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for any trepidation on the part of the witness concerned. 19. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a Gazetted Central Excise Officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the Gazetted Central Excise Officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for proving the truth of the contents thereof, he has to first admit the statement in evidence in accordance with clause (b) of Section 9D(1). For this, he has to summon the person who had made the statement, examine him as witness before him in the adjudication proceeding, and arrive at an opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bey, it would be incumbent on the Revenue to apply to Respondent No. 2 to summon the makers of the said statements, so that the Revenue would examine them in chief, before the adjudicating authority, i.e., before Respondent No. 2. (ii) A copy of the said record of examination-in-chief, by the Revenue, of the makers of any of the statements on which the Revenue chooses to rely, would have to be made available to the assessee, i.e., to Ambika and Jay Ambey in this case. (iii) Statements recorded during investigation, under Section 14 of the Act, whose makers are not examined-in-chief before the adjudicating authority, i.e., before Respondent No. 2, would have to be eschewed from evidence, and it would not be permissible for Respondent No. 2 to rely on the said evidence while adjudicating the matter. Neither, needless to say, would be open to the Revenue to rely on the said statements to support the case sought to be made out in the show cause notice. (iv) Once examination-in-chief, of the makers of the statements, on whom the Revenue seeks to rely in adjudication proceedings, takes place, and a copy thereof is made available to the assessee, it would be open to the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corded by the investigation officer during investigation. Section 9D of the Central Excise Act of 1944 reads as under : 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubjected to demand, penalty interest on the basis of certain admissions recorded during investigation 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 circu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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