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TMI Blog2024 (10) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... est reports also indicated that the goods would be Crude Mint Oils, the genuineness of test report conducted after receipt of the goods from Amarnath Industries, cannot be doubted and so the request for cross examination of departmental officers and other persons should not be granted. The Commissioner also observed that the case against the appellant is not only on the basis of statements of employees of Amarnath Industries, but also on circumstantial test reports and, therefore, denying the right of cross examination would not be violative of principle of natural justice. In the first instance, under section 9D of the Central Excise Act it is clear that a statement made during investigation/enquiry before a central excise officer cannot be relied upon unless it is first admitted and for this the person who made the statement has to be summoned and examined as a witness in adjudication proceedings. Failure to do so would mean that the adjudicating authority has relied upon an irrelevant material and, therefore, the order would be vitiated. The question of cross examination would arise only after examination of the person who makes statement before the central excise officer. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facturers in cash on the raw materials cleared to the appellant was refunded/ granted as self-credit to them. Basis the invoice issued by Amarnath Industries and other raw material manufacturers, CENVAT credit was claimed by the appellant of the duty paid on the raw materials purchased from such suppliers. 6. The DGCEI investigated the premises of the appellant on 23.06.2006 on the basis of an intelligence that the units located in Jammu, including Amarnath Industries, had certain discrepancies in their record. Investigation was carried out by the department for about 26 months, during which statements of various employees and the Director of the appellant were recorded and documents/ information were resumed. 7. The said investigation culminated in the issuance of a show cause notice dated 20.08.2008. The appellant filed number of replies to the above show cause notice. It is the contention of the appellant that despite repeated requests documents which were relied upon were not provided to the appellant. 8. The show cause notice was adjudicated by the Commissioner by an order dated 17.05.2010. The entire CENVAT credit claimed by the appellant from Amarnath Industries was denied a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the raw material as it is on which no duty was leviable and had subsequently obtained refund of the duty paid under Notification dated 14.11.2002. The appellant had received crude oils, other than the goods mentioned in the invoices issued by the appellant with malafide intention of availing CENVAT credit. The ratio of judgment of the Supreme Court in CCE vs. MDS Switchgear 2008 (229) E.L.T. 485 , does not apply in the instant case. (iii) The facts of the cited cases are different to the present case as the goods on which duty was allegedly paid by the seller-manufacturer in those cases had been actually manufactured, though in some cases the activity/ process carried out did not amount to manufacture. (iv) The appellant had received the goods, which were not subjected to any manufacturing process in the factory of Amarnath Industries and hence, the appellant was not entitled to avail CENVAT Credit in terms of rule 9(2) the 2004 Credit Rules. Therefore, the ratio of the cited judgments would not apply to the present case. Cross-examination of persons whose statements were recorded (i) It is observed that the departmental officers had verified the facts what had been declared by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1A(1) of the Central Excise Act is invokable in the present case. Penalty under section 11AC of the Central Excise Act. (i) Since the extended period under the proviso to section 11A is applicable in the instant case, penalty under section 11AC of the Central Excise Act is also imposable. (ii) There is no scope for any discretion and the levy of penalty is mandatory under the Central Excise Act and the Regulations framed thereunder. Mens-rea is not an essential ingredient for imposition of penalty. Penalty under rule 26 on Managing Director of the appellant (i) Company is an independent legal person working through its Directors. (ii) In addition to the penalty which can be imposed on the company/firm, penalty can be imposed on the person who was actually involved in committing the offence. 11. Shri Prakash Shah, learned counsel for the appellant assisted by Shri Mohit Raval made the following submissions: (i) The appellant had correctly availed CENVAT credit of the duty paid on inputs/ raw-materials received from Amarnath Industries; (ii) The findings recorded by the Commissioner that Amarnath Industries had no infrastructure/ capacity to manufacture goods is contrary to the recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant is not justified in asserting that the show cause notice has been adjudicated only on the basis of assumptions and presumptions. The Commissioner had examined all the evidence on record to arrive at the findings; (iii) The records indicate that no manufacturing activity in relation to the goods supplied to the appellant was carried out in the factory premises of Amarnath Industries; (iv) The benefit of the Notification dated 14.11.2002 has been wrongly availed; (v) The availment of CENVAT credit has been correctly denied to the appellant; and (vi) The extended period of limitation was correctly invoked and the penalty was also correctly imposed. 13. The submissions advanced by the learned counsel for the appellant and the learned special counsel appearing for the department have been considered. 14. It is seen that the appellant is engaged in the manufacture and export of Menthol Crystal and Essential Oils, which are exported by the appellant on payment of duty. For the manufacture of the aforesaid goods, the appellant procures raw material from Amarnath Industries in Jammu which took benefit of the Notification dated 14.11.2002. Under this Notification, the duty paid by Amar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue that arose was that if excise duty is levied on an assessee at place A and Modvat credit is sought to be availed at place B , is it open to the Authorities at place B to deny credit on the ground that no duty was payable at place A . This issue was answered by the Bombay High Court in the following manner: 5. Mr. Ferreira, learned Assistant Solicitor General for the appellant, submitted that the scheme of law is that if, excise duty is collected, a person at subsequent place is entitled to claim Modvat credit. According to Mr. Ferreira, learned Assistant Solicitor General, this can be so if, duty is validly collected at an earlier stage. In this case duty was not payable at all at the place outside Goa, since no duty can be levied on job work but only on manufacture and, therefore, the respondents are not entitled to claim any Modvat credit. Though this submission appears to be reasonable and in accordance with law, we find it not possible to entertain this submission in the facts of the present case since at no point of time the Revenue questioned the applicability of the excise duty at the place outside Goa. Those assessments have been allowed to become final and the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also vitiated the order. 22. This submission advanced by learned counsel for the appellant also deserves to be accepted. 23. The Allahabad High Court in Parmarth Iron examined this issue in detail and on a perusal of section 9D of the Central Excise Act observed: 16. We, therefore, have no hesitation in holding, that there is no requirement in the Act or Rules, nor do the principles of natural justice and fair play require that the witnesses whose statements were recorded and relied upon to issue the show cause notice, are liable to be examined at that stage. If the Revenue choose not to examine any witnesses in adjudication, their statements cannot be considered as evidence. However, if the Revenue choose to rely on the statements, then in that event, the persons whose statements are relied upon have to be made available for cross-examination for the evidence or statement to be considered. 24. The Punjab and Haryana High Court in Jindal Drugs also observed as follows: 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-section set out the circumstances in which a statement, made and signed by a person before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence 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 that, having regard to the circumstances of the case, the statement should be admitted in the interests of justice. xxxxxxxxxxx 22. Clearly, if this procedure, which is statutorily prescribed by plenary Parliamentary legislation, is not followed, it has to be regarded, that the Revenue has gi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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