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TMI Blog2024 (9) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... of Central Excise Act, 1944. By reading the Section 9D, it is clear that it is not the optional but mandatory to conduct the cross examination of the witnesses. Since in the present case no cross examination was allowed, the statements cannot be relied upon which is the root of the evidence and in the absence of root tree cannot stand. This issue of cross examination has been time and again considered repeatedly by various forums. In the case of ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II [ 2015 (10) TMI 442 - SUPREME COURT] Hon ble Supreme Court held that ' if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show cause notice.' Thus, it is a settled law that in absence of cross examination the statements cannot be relied upon as evidence as the same lose its evidentiary value. The revenue could not establish it s case of clandestine removal. Hence the demand will not sustain - the impugned order is set aside - appeal allowed. - HON'BLE MEMBER ( JUDICIAL ) , MR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .45 M. Tons of Structural Items/ rolled Products and cleared the same clandestinely without payment of duty. The department also recorded Statement dated 12-6-2013 of Shyamlal Jangir, Authorized Signatory of the Appellant and relied upon in support of the said allegations. 1.2 Based on the aforesaid allegations, Show cause notice dated 01.08.2013 was issued to the Appellant demanding Central Excise duty of Rs.3,55,650/- on the said 96.45 M.Tons of Structural items/ rolled products alleged to have been clandestinely manufactured and cleared out of 96.45 M.Tons of Billets alleged to have been clandestinely received by the Appellant from TFCWRL. The said Show Cause Notice has been decided by the Commissioner of Central Excise, Daman, by Order-in-Original dated 26-9-2017, by which the Commissioner has confirmed the said demand for Central Excise duty of Rs.3,55,650/- with interest against the appellant and imposed equivalent penalty under Rule 25 of the Central Excise Rules 2002. Being aggrieved by the said Order-in-original the appellant filed the present appeal. 2. Shri J C. Patel Learned Counsel with Shri Rajeev Ravi Shri Rahul Gajera Learned Advocate appearing on behalf of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that charge of clandestine removal cannot be upheld based on third party documents and mere statements in absence of any evidence of production of goods, their transportation, buyers of the goods, receipt of payment from the buyers, reliance is placed on the following decisions: a) Bajrangbali Ingots Steel P. Ltd v CCE 2019 (1) TMI 966-CESTAT-NEW DELHI, b) Raipur Forging P. Ltd v CCE 2016 (335) ELT 297 c) CCE v Garg Industries P. Ltd 2023 (385) ELT 541 d) Arya Fibers P. Ltd v CCE 2014 (311) ELT 529 e) Continental Cement Co v UOI 2014 (309) ELT 411 (All). 2.6 Moreover, reliance placed on Statements recorded by the department to arrive at finding of clandestine removal is also not tenable in law for the reason that the deponents of the Statements have not been examined as required by Section 9D of the Central Excise Act 1944. In fact, as recorded in the Order-in-original, the none of the witnesses turned up for cross-examination. As laid down in the following decisions, where witnesses do not remain present for cross-examination, no reliance can be placed on their statements: Commissioner v Motabhai Iron Steel Industries 2015 (316) ELT 374 (Guj) Shalimar Rubber Industries v CCE 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose 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 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 a Court. By reading the above Section 9D, it is clear that it is not the optional but mandatory to conduct the cross examination of the witnesses. Since in the present case no cross examination was allowed, the statements cannot be relied upon which is the root of the evidence and in the absence of root tree cannot stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17-3-2005 [2005 (187) E.L.T. A33 (S.C.)] was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 8. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show cause notice. 9. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal. 10. No costs. b) In the case of Jindal Drugs Pvt. Ltd. Versus Union of India 2016 (340) E.L.T. 67 (P H) Hon ble Punjab Haryana High Court has passed the following decision:- 8. In view of the fact that the case of the petitioners is essentially premised on Section 9D of the Central Excise Act, 1944, it would be appropriate to reproduce the said provision, in extenso, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein. If these circumstances are absent, the statement, which has been made during inquiry/investigation, before a Gazetted Central Excise Officer, cannot be treated as relevant for the purpose of proving the facts contained therein. In other words, in the absence of the circumstances specified in Section 9D(1), the truth of the facts contained in any statement, recorded before a Gazetted Central Excise Officer, has to be proved by evidence other than the statement itself. The evidentiary value of the statement, insofar as proving the truth of the contents thereof is concerned, is, therefore, completely lost, unless and until the case falls within the parameters of Section 9D(1). 12. The consequence would be that, in the absence of the circumstances specified in Section 9D(1), if the adjudicating authority relies on the statement, recorded during investigation in Central Excise, as evidence of the truth of the facts contained in the said statement, it has to be held that the adjudicating authority has relied on irrelevant material. Such reliance would, therefore, be vitiated in law and on facts. 13. Once the ambit of Section 9D(1) is thus recognized and understood, one has to turn t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jettisoning this procedure, statutorily prescribed by plenary Parliamentary legislation for admitting, into evidence, a statement recorded before the Gazetted Central Excise Officer, which does not suffer from the handicaps contemplated by clause (a) of Section 9D(1) of the Act. The use of the word shall in Section 9D(1), makes it clear that, the provisions contemplated in the sub-section are mandatory. Indeed, as they pertain to conferment of admissibility to oral evidence they would, even otherwise, have to be recorded as mandatory. 18. The rationale behind the above precaution contained in clause (b) of Section 9D(1) is obvious. The statement, recorded during inquiry/investigation, by the Gazetted Central Excise Officer, has every chance of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D(1) mandates that the evidence of the witness has to be recorded before the adjudicating authority, as, in such an atmosp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the contents thereof. 23. Reliance may also usefully be placed on Para 16 of the judgment of the Allahabad High Court in C.C.E. v. Parmarth Iron Pvt Ltd., 2010 (260) E.L.T. 514 (All.), which, too, unequivocally expound the law thus : If the Revenue choose (sic chose?) not to examine any witnesses in adjudication, their statements cannot be considered as evidence. 24. That adjudicating authorities are bound by the general principles of evidence, stands affirmed in the judgment of the Supreme Court in C.C. v. Bussa Overseas Properties Ltd., 2007 (216) E.L.T. 659 (S.C.), which upheld the decision of the Tribunal in Bussa Overseas Properties Ltd. v C.C., 2001 (137) E.L.T. 637 (T). 25. In the light of the above, respondent no. 2 is directed to adjudicate the show cause notice issued to the writ petitioners by following the procedure contemplated by Section 9D of the Act and the law laid down by various judicial authorities in this regard, including the principles of natural justice, in the following manner : (i) In the event that the Revenue intends to rely on any of the statements, recorded under Section 14 of the Act and referred to in the show cause notices issued to Ambika and Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f counsel for the appellant has been that firstly, the Director s statement was not admissible and secondly it cannot be treated as admission because in reply to Show Cause Notice, the said statement was stated to have been obtained under duress. We shall first examine the legal position with regard to the admissibility of the statement of Director which admittedly was taken during search operations by the investigation officers. 9.1 At the outset, it needs to be clarified that during the course of argument, Learned Counsel for the parties agreed that second substantial question of law is with regard to legality of procedure adopted by the adjudicating authority and not the Tribunal as such because the Tribunal has only exercised appellate jurisdiction. This is quite obvious from orders passed by the Tribunal, the appellate authority and pleadings/ground in the appeal. There is no dispute that the adjudicating authority did not record the statement of the Director Mr. Narayan Prasad Tekriwal and the basis of the finding recorded by the adjudicating authority as well as Customs, Excise and Service Tax Appellate Tribunal, has been the statement of the Director as recorded by the inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings before the adjudicating authority. 9.3 A conjoint reading of the provisions therefore reveals that a statement made and signed by a person before the Investigation Officer during the course of any inquiry or proceedings under the Act shall be relevant for the purposes of proving the truth of the facts which it contains in case other than those covered in clause (a), only when the person who made the statement is examined as witness in the case before the court (in the present case, Adjudicating Authority) and the court (Adjudicating Authority) forms an opinion that having regard to the circumstances of the case, the statement should be admitted in the evidence, in the interest of justice. 9.4 The legislative scheme, therefore, is to ensure that the statement of any person which has been recorded during search and seizure operations would become relevant only when such person is examined by the adjudicating authority followed by the opinion of the adjudicating authority then the statement should be admitted. The said provision in the statute book seems to have been made to serve the statutory purpose of ensuring that the assessee are not subjected to demand, penalty interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that it requires to be admitted in the interest of justice. In taking this view, we find support from the decision in the case of Ambica International v. UOI rendered by the High Court of Punjab and Haryana. Reliance has been placed by the Counsel for the Revenue on the decision in the matter of Commissioner of Central Excise v. Kalvert Foods India Private Limited (Laws (SC) 2011 838) = 2011 (270) E.L.T. 643 (S.C.). That decision turned on its own facts. In para 19 of the judgment, it was concluded as below : 19. We are of the considered opinion that it is established from the record that the aforesaid statements were given by the concerned persons out of their own volition and there is no allegation of threat, force, coercion, duress or pressure being utilized by the officers to extract the statements which corroborated each other. Besides the Managing director of the Company of his own volition deposition the amount of Rs. 11 lakhs towards excise duty and therefore in the facts and circumstances of the present case, the aforesaid statement of the Counsel for the Respondents cannot be accepted. This fact clearly proves the conclusion that the statements of the concerned persons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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