Appellants contest duty demand order, denied cross-examination, Tribunal allows appeal citing violation of natural justice.

The appellants contested an order alleging clandestine removal of goods without payment of duty. The case involved shortage and excess in finished goods stock, along with recorded statements admitting to removal. The appellants were denied the opportunity to cross-examine witnesses whose statements formed the basis of the allegation. The Adjudicating Authority and Commissioner confirmed the duty demand and penalties based on these statements, violating principles of natural justice. The Appellate Tribunal set aside the order, remanding the matter for allowing cross-examination, citing a violation of natural justice principles as per Andaman Timber Industries case. The appeals were allowed by way of remand.

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Issues: Allegation of clandestine removal based on evidences, denial of cross-examination of witnesses, violation of principles of natural justice.

In this case, the appellants filed appeals against an order-in-appeal passed by the Commissioner of Central Excise (Appeals) Surat-II. The case involved the discovery of shortage and excess in the stock of finished goods during a factory visit, along with retrieval of delivery challans and recorded statements admitting to removal of goods without payment of duty. The Director later denied endorsing these statements. A show cause notice was issued alleging clandestine manufacture and clearance of finished goods, resulting in a duty demand of Rs. 11,13,297. The demand was confirmed with interest and penalty, including personal penalties on individuals. The appellants contested the order, arguing that the clandestine removal allegation was primarily based on the statements of witnesses and delivery challans, for which they were denied the opportunity of cross-examination. The Adjudicating Authority and the Commissioner (Appeals) relied on these statements to confirm the demand and impose penalties, leading to a violation of principles of natural justice according to the appellants, who cited the judgment in the case of Andaman Timber Industries vs CCE, Kolkata-II 2015 (324) ELT 641 (S.C.).

The Revenue accepted that cross-examination of witnesses was not allowed but maintained that the allegation of clandestine removal could still be sustained based on other documentary evidence. However, the Appellate Tribunal found that both lower authorities had heavily relied on the statements of the witnesses to establish clandestine manufacture and clearance of goods, without permitting cross-examination when requested by the appellant. This lack of cross-examination was deemed a violation of natural justice, as per the principles established in the Andaman & Timber Industries case. Consequently, the impugned order was set aside, and the matter was remanded to the adjudicating authority with directions to allow cross-examination of the witnesses, ensuring a reasonable opportunity of hearing for the appellant. All issues were kept open, and the appeals were allowed by way of remand.

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