2016 (6) TMI 956 - HC - Central Excise

Statements under Section 14 of Central Excise Act must be admitted per Section 9D(1)(b) before use in evidence

M/s Jindal Drugs Pvt. Ltd. And Another Versus Union of India And Another

The HC held that reliance on statements recorded under Section 14 of the Central Excise Act without admitting them as evidence per Section 9D(1)(b) ... Demand of duty based on statement recorded u/s 14 of the Central Excise Act, 1944 - Denial of cross-examination of witnesses - violation of the principles of natural justice​​​​​​​ - flagrant violation of Section 9D by relying upon statements without admitting them in evidence by following the prescribed procedure contained therein - Held that:- 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 adjudicating 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. In fact, Section 138 of the Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidence-in-chief has to precede cross-examination, and cross-examination has to precede re-examination - 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. - Matter remanded back. Issues Involved:1. Adherence to Section 9D(1) of the Central Excise Act, 1944 during adjudication.2. Denial of cross-examination of witnesses.3. Legal standards for admitting statements as evidence.Issue-Wise Detailed Analysis:1. Adherence to Section 9D(1) of the Central Excise Act, 1944 during adjudication:The petitioners sought a Writ of Mandamus directing respondent no.2 to comply with Section 9D(1) of the Central Excise Act, 1944, while adjudicating Show Cause Notice No. C.No.V(33)84/HQ/Adj/CE/J&K/JDL/12/1275 dated 5.11.2012. Section 9D(1) stipulates that a statement made and signed before a Central Excise Officer of a gazetted rank is relevant for proving the truth of the facts contained therein only under specific circumstances outlined in clauses (a) and (b). These circumstances include the death of the person, incapability of giving evidence, or unreasonable delay or expense in obtaining their presence, among others. The court emphasized that the procedure prescribed in Section 9D(1) is mandatory and must be followed scrupulously in adjudication proceedings.2. Denial of cross-examination of witnesses:The petitioners contended that respondent no.2 denied the opportunity for cross-examination of all witnesses except one, which is a violation of the principles of natural justice. The court highlighted that the adjudicating authority must follow the procedure under Section 9D(1)(b), which involves examining the person who made the statement as a witness and then forming an opinion on admitting the statement in evidence in the interests of justice. If this procedure is not followed, the reliance on such statements is vitiated in law and fact. The court directed that if the Revenue intends to rely on any statements, they must summon the makers of the statements for examination-in-chief before the adjudicating authority, and provide a copy of this examination to the assessee. The assessee must then be allowed to cross-examine these witnesses.3. Legal standards for admitting statements as evidence:The court reiterated that statements recorded during inquiry or investigation by a gazetted Central Excise officer have every chance of being recorded under coercion or compulsion. Therefore, before admitting such statements as evidence, the adjudicating authority must follow the procedure prescribed in Section 9D(1)(b). This involves examining the person who made the statement as a witness in the adjudicating proceedings and forming an opinion that the statement should be admitted in the interests of justice. The court emphasized that the use of the word 'shall' in Section 9D(1) makes the provisions mandatory. If the procedure is not followed, the statements must be eschewed from consideration.Conclusion:The court directed respondent no.2 to adjudicate the Show Cause Notice by following the procedure contemplated by Section 9D of the Act and the law laid down by various judicial authorities, including the principles of natural justice. The court outlined specific steps for the Revenue to follow if they intend to rely on any statements recorded under Section 14 of the Act. These steps include summoning the makers of the statements for examination-in-chief, providing a copy of the examination to the assessee, and allowing the assessee to cross-examine the witnesses. The court concluded that statements recorded during investigation, whose makers are not examined in chief before the adjudicating authority, must be eschewed from evidence. The Writ Petition was disposed of with these directions.