2019 (2) TMI 935 - AT - Central Excise

Tribunal overturns penalty for excise duty evasion citing procedural error

Shri Subhash Khattar, Director, M/s Slotco Steel Products Pvt. Ltd. Versus CCE, Delhi – I (Vice-Versa)

Shri Subhash Khattar, Director, M/s Slotco Steel Products Pvt. Ltd. Versus CCE, Delhi – I (Vice-Versa) - TMI Issues Involved:1. Alleged evasion of central excise duty by the appellant.2. Compliance with Section 9D of the Central Excise Act, 1944.3. Validity of statements from witnesses without cross-examination.4. Department's appeal regarding the benefit of Notification No. 6/2002-CE.Detailed Analysis:1. Alleged Evasion of Central Excise Duty:The Department alleged that the appellant was engaged in the manufacture and clearance of excisable goods without payment of duty by misrepresenting them as traded goods. The show cause notice dated 17/10/2007 demanded central excise duty amounting to Rs. 1,46,07,818/- and invoked provisions of interest and penalty. The Commissioner initially confirmed all charges, but upon remand by the Tribunal, the duty was reassessed to Rs. 68,14,035/- with penalties.2. Compliance with Section 9D of the Central Excise Act, 1944:The Tribunal previously directed that the adjudicating authority must comply with Section 9D(1) of the Central Excise Act, 1944, which necessitates that statements made by witnesses during the investigation must be cross-examined unless specific conditions are met (e.g., the witness is dead or cannot be found). The adjudicating authority failed to produce 12 out of 13 crucial witnesses for cross-examination, thus not complying with Section 9D.3. Validity of Statements from Witnesses Without Cross-Examination:The Tribunal emphasized that the entire case of the Department was based on statements from 13 witnesses. The failure to produce these witnesses for cross-examination rendered their statements inadmissible as per the precedent set by the Supreme Court in Andaman Timber Industries vs. CCE, Kolkata – II. The Tribunal held that without cross-examination, the evidentiary value of these statements was lost, and they could not be relied upon to prove duty evasion.4. Department's Appeal Regarding the Benefit of Notification No. 6/2002-CE:The Department's appeal contended that the appellant should not be given the benefit of Notification No. 6/2002-CE due to the absence of a certificate from the Chairman or Managing Director of Delhi Metro Railway Corporation (DMRC). The Tribunal found that the appellant had produced a Chartered Accountant's certificate confirming the supply of goods to DMRC. The Tribunal held that the non-production of the specific certificate was a procedural lapse and could not be grounds to deny the substantial benefit of the notification. The Tribunal cited the Supreme Court's ruling in Mangalore Chemicals & Fertilizers Ltd. vs. Deputy Commissioner to support this view.Conclusion:The Tribunal set aside the order-in-original concerning the confirmation of demand and penalties against the appellant, allowing the appeals of the appellant No. I and II. The Department's appeal was dismissed, affirming that the procedural lapse did not warrant the denial of the benefit of Notification No. 6/2002-CE. The order was pronounced in the open court on 08/02/2019.