2024 (12) TMI 220 - AT - Central Excise

Fraudulent CENVAT credit claims on forged invoices overturned due to denial of cross-examination rights under Section 9D

M/s Goyal Malleables Pvt. Ltd. Versus Commissioner of Central Excise, Goods and Service Tax, Ludhiana And Pankaj Aggarwal Director, Goyal Malleables Pvt. Ltd. Versus Commissioner of Central Excise, Goods and Service Tax, Ludhiana

CESTAT Chandigarh allowed appeals involving fraudulent CENVAT credit claims on forged excise duty invoices for MS scrap purchases from Chattisgarh and ... Fraudulent passing on CENVAT credit of duty to various furnace units of Punjab on the strength of their forged excise duty paid invoices - fake purchase of duty paid excisable goods i.e. MS Scrap source manufacturing units/ dealers based in Chattisgarh and Odisha - denial of crossexamination - violation of principle of natural justice - HELD THAT:- The identical issue has been decided by the Hon’ble Punjab & Haryana High Court in the case of M/S JINDAL DRUGS PVT. LTD. AND ANOTHER VERSUS UNION OF INDIA AND ANOTHER [2016 (6) TMI 956 - PUNJAB & HARYANA HIGH COURT] as well as by this Tribunal in the case of M/S LAULS LIMITED, SHRI ABHAY GUPTA, DIRECTOR AND SHRI RAM BILAS BANSAL VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-IV, FARIDABAD, HARYANA [2023 (7) TMI 1113 - CESTAT CHANDIGARH] and M/S TIBREWALA INDUSTRIES (P) LIMITED, SHRI ANIL KUMAR TIBREWALA, DIRECTOR AND M/S R.K. TRADING COMPANY VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, ROHTAK [2023 (7) TMI 1112 - CESTAT CHANDIGARH] wherein it was held that the cross-examination of witnesses whose statements were relied upon by the Revenue to make out a case against the assessee has to be allowed and by following the ratio of the said decisions, the impugned order is not sustainable and therefore, the same is set aside and the cases remanded back to the Adjudicating Authority for a fresh decision after affording opportunity of cross-examination of the material witnesses and by following the procedure as prescribed in Section 9D of the Central Excise Act. The appellants are directed to cooperate with the Adjudicating Authority for a speedy disposal of the case - both the appeals are allowed by way of remand. Issues Involved:1. Denial of cross-examination of witnesses by the adjudicating authority.2. Reliance on third-party statements without allowing cross-examination.3. Violation of principles of natural justice.4. Application of Section 9D of the Central Excise Act, 1944.5. Admissibility of statements without following due procedure.Detailed Analysis:1. Denial of Cross-Examination of Witnesses:The core issue revolves around the denial of cross-examination of witnesses whose statements were used against the appellants. The appellants argued that the adjudicating authority's refusal to allow cross-examination constituted a violation of the principles of natural justice. The Tribunal cited several precedents, including the case of Jindal Drugs Pvt. Ltd., where it was held that cross-examination is mandatory when statements are relied upon to confirm demands. The Tribunal emphasized that without cross-examination, the statements cannot be deemed reliable.2. Reliance on Third-Party Statements Without Allowing Cross-Examination:The appellants contended that the Show Cause Notice was issued based on third-party statements, and they were not given an opportunity to cross-examine these witnesses. The Tribunal referred to the Supreme Court's decision in Andaman Timber Industries, which held that not allowing cross-examination when statements are relied upon is a serious flaw, rendering the order null and void. The Tribunal reiterated that the adjudicating authority must allow cross-examination to ensure fairness and justice.3. Violation of Principles of Natural Justice:The appellants argued that the denial of cross-examination amounted to a violation of the principles of natural justice. The Tribunal supported this view, noting that the opportunity to cross-examine witnesses is a fundamental right in quasi-judicial proceedings. The Tribunal highlighted that the adjudicating authority's failure to provide this opportunity adversely affected the appellants, thus violating their rights.4. Application of Section 9D of the Central Excise Act, 1944:The Tribunal discussed the relevance of Section 9D, which outlines the conditions under which statements can be admitted as evidence. It was noted that the adjudicating authority must follow the procedure prescribed in Section 9D, which includes examining the person who made the statement as a witness before admitting the statement as evidence. The Tribunal found that this procedure was not followed, rendering the reliance on the statements improper.5. Admissibility of Statements Without Following Due Procedure:The Tribunal emphasized that the statements recorded during the investigation must be admitted in evidence following the procedure prescribed in Section 9D(1)(b). This involves examining the witness and forming an opinion that the statement should be admitted in the interests of justice. The Tribunal found that the adjudicating authority did not adhere to this mandatory procedure, which undermined the validity of the statements used against the appellants.Conclusion:In light of the above issues, the Tribunal set aside the impugned order and remanded the cases back to the Adjudicating Authority. The Tribunal directed that a fresh decision be made after allowing the appellants the opportunity to cross-examine the material witnesses and by adhering to the procedure outlined in Section 9D of the Central Excise Act. The appellants were instructed to cooperate with the Adjudicating Authority for a speedy resolution of the case. Both appeals were allowed by way of remand.