Court sets aside Orders-in-Original, remands for de novo adjudication, emphasizes Section 9D compliance. Direction on examination-in-chief, cross-examination, evidence exclusion. Writ petitions allowed.

The court set aside the Orders-in-Original and remanded the Show Cause Notices for de novo adjudication, emphasizing compliance with Section 9D procedures. The court directed summoning statement makers for examination-in-chief, providing copies to assessees, and allowing cross-examination. Unexamined statements would be excluded from evidence. Writ petitions by two petitioners were allowed, and pending Show Cause Notices for other parties were to be adjudicated likewise.

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Issues Involved:
1. Eligibility of the petitioners for area-based exemption under Notification 56/2002-CE.
2. Validity of the Show Cause Notices issued under Section 11A of the Central Excise Act, 1944.
3. Admissibility of statements recorded under Section 14 of the Central Excise Act as evidence.
4. Compliance with the mandatory procedure prescribed by Section 9D of the Central Excise Act.
5. Justification for invoking writ jurisdiction under Article 226 of the Constitution of India.

Detailed Analysis:

1. Eligibility of the petitioners for area-based exemption under Notification 56/2002-CE:
The petitioners, manufacturers of menthol and related products, claimed the benefit of area-based exemption from payment of duty under Notification 56/2002-CE due to their location in Jammu and Kashmir. They were initially granted this benefit on the clearances of their products to downstream manufacturers.

2. Validity of the Show Cause Notices issued under Section 11A of the Central Excise Act, 1944:
Subsequently, Show Cause Notices were issued to the petitioners alleging wrongful availment of the exemption as investigations revealed that they were not engaged in the manufacture of the finished products. These notices covered the periods from November 2007 to 2010 and were based on identical evidence, primarily statements recorded under Section 14 of the Act.

3. Admissibility of statements recorded under Section 14 of the Central Excise Act as evidence:
The petitioners contended that the adjudicating authority relied on these statements without admitting them in evidence as per Section 9D of the Act, thereby depriving them of the opportunity to cross-examine the witnesses. The court noted that the statements recorded under Section 14 could only be relevant if admitted following the procedure in Section 9D, which includes examining the person who made the statement as a witness and forming an opinion that the statement should be admitted in the interests of justice.

4. Compliance with the mandatory procedure prescribed by Section 9D of the Central Excise Act:
The court emphasized that the procedure under Section 9D is mandatory and must be followed in adjudication proceedings. The adjudicating authority had not invoked clause (a) of Section 9D(1) and had not followed the procedure under clause (b), making the reliance on the statements recorded during the investigation invalid. The Orders-in-Original were thus vitiated due to non-compliance with Section 9D.

5. Justification for invoking writ jurisdiction under Article 226 of the Constitution of India:
The petitioners argued that the Orders-in-Original were passed in violation of Section 9D, justifying the invocation of writ jurisdiction despite the availability of an appellate remedy, which required a pre-deposit of 7.5% of the duty demand. The court acknowledged the writ jurisdiction under Article 226 in appropriate cases, as upheld by the Allahabad High Court in Ganesh Yadav vs. U.O.I.

Judgment:
The court set aside the Orders-in-Original dated 19/05/2016 and 01/06/2016, and remanded the Show Cause Notices to the adjudicating authority for de novo adjudication following the procedure prescribed by Section 9D and the principles of natural justice. The court directed that if the Revenue intends to rely on any statements recorded under Section 14, it must summon the makers for examination-in-chief before the adjudicating authority, provide a copy of the record to the assessees, and allow cross-examination if requested. Statements not examined in chief would be eschewed from evidence. The writ petitions filed by M/s Ambika International and M/s Jay Ambey Aromatics were allowed, and the pending Show Cause Notices for M/s Fine Aromatics and M/s Shiva Mint Industries were directed to be adjudicated similarly.

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