2024 (4) TMI 168 - AT - Central Excise

Authority Must Allow Cross-Examination Under Section 9D When Witnesses Deny Their Statements

M/s Excel Pump Industries Versus C.C.E. - Ahmedabad - II

The CESTAT Ahmedabad held that the adjudicating authority failed to conduct proper examination-in-chief and cross-examination of witnesses under Section ... Clandestine removal - onus to prove - cross-examination of witnesses - retraction of statements - Revenue’s case is primarily dependent upon the documents Collection Books (diary), forwarded by the Income Tax after seizure and a photocopy of seized by the Central Excise department during the course of panchnama at the factory on 12.01.2012 - HELD THAT:- From the plain reading of section 9D, it can be seen that it is not a discretion or choice of the adjudicating authority whether to allow or not to allow the examination in chief and or cross examination of witness. In the present case, since the witness have categorically denied the statement it become incumbent on the adjudicating authority to conduct the examination in chief and thereafter allow the cross examination of the witnesses to the appellant. Without carrying out the process as envisaged under Section 9D, the adjudication is not fair, therefore the matter needs to be remanded to the adjudicating authority for passing a fresh order after conducting the examination in chief and thereafter allowing the appellant to cross examine the witnesses whose statements were relied upon. It is also made clear that despite all efforts of cross examination it the cross examination is not completed or partly completed, the adjudicating authority is not precluded to proceed with the adjudication on the basis of records. The impugned order set aside - appeal allowed by way of remand. Issues involved: The appeal challenges the Order-in-Original confirming demand of Central Excise duty, interest, and penalty against the appellant for alleged clandestine production and removal of finished goods without payment of duty. The issues include the burden of proof on the department, reliance on statements before income tax authorities, lack of evidence of manufacturing activity post-income tax raid, absence of documentary evidence, and the retraction of statements by witnesses.Issue 1: Burden of proof and lack of evidence of manufacturing activity post-income tax raid: The appellant, a small-scale manufacturer of submersible pumps, contests the demand of Central Excise duty, arguing that the department failed to provide tangible evidence of clandestine manufacturing and clearance of goods. The appellant asserts that the factory was closed post-income tax raid in January 2010, and no manufacturing activity occurred thereafter. Despite this, the department demanded excise duty for the period after January 2010 until October 2010, without substantiating claims with evidence of raw material purchases or manufacturing processes.Issue 2: Reliance on statements before income tax authorities and lack of documentary evidence: The appellant challenges the department's reliance on statements given before income tax authorities, highlighting the different circumstances under which these statements were made. The appellant contends that the disclosed income was under duress to avoid punishment for unaccounted cash possession, and such disclosures should not form the basis for demanding Central Excise duty. Moreover, the appellant argues that the department failed to verify the authenticity of collection books recovered by the Income Tax Department, emphasizing the lack of inquiry into the veracity of these documents.Issue 3: Retraction of statements by witnesses and procedural fairness: The appellant points out that the proprietor retracted the statement regarding clandestine removal, discrediting the recovered documents. The appellant asserts that witnesses denying their statements necessitate examination in chief and cross-examination under Section 9D of the Central Excise Rules. The Tribunal, noting the denial by witnesses, emphasizes the importance of procedural fairness and orders a remand to the adjudicating authority for conducting a fair adjudication process, including examination in chief and cross-examination of witnesses.In conclusion, the Tribunal remands the matter to the adjudicating authority for a fresh order, emphasizing the need for procedural fairness and completion of cross-examination if required. The denovo adjudication is directed to be completed within two months from the date of the order.