2025 (1) TMI 64 - AT - Central Excise

Ceramic tiles case: Demands based on witness statements without cross-examination held inadmissible under Section 9D

Century Tiles Ltd and Ganpatlal Dayalal Patel Versus Commissioner of C.E. & S.T. -Ahmedabad-III

CESTAT Ahmedabad allowed the appeal in a case involving mis-declaration of MRP and clandestine removal of ceramic tiles. The tribunal held that demands ... Mis-declaration of MRP and/or alteration of MRP post removal of the goods prior to 01.03.2008 - Clandestine removal. Mis-declaration of MRP and/or alteration of MRP post removal of the goods prior to 01.03.2008 - statements of various persons were recorded, cross examination not afforded - demand of differential Central Excise duty under the provisions of Section4A of Central Excise Act, 1944 - HELD THAT:- The issue has been decided by larger Bench of this Tribunal in the case of Ocean Ceramics Ltd. [2024 (1) TMI 1280 - CESTAT AHMEDABAD - LB] and subsequently on the answer given by the larger bench the division bench in the case of Ocean Ceramics& others [2024 (9) TMI 1490 - CESTAT AHMEDABAD] finally decided the issue of MRP in the favour of the assessees. Clandestine removal - manufacture and clearance of 96646 boxes of ceramics tiles of various size and grades - demand based on statements of various persons - admissible evidence or not - HELD THAT:- The said demand is on the basis of the details available in the estimates/debit memos recovered from Appellant’s Mumbai and Delhi office and statements recorded by the investigating officers. It is noticed that in the said matter appellant requested for cross-examination of witnesses which was rejected by the Ld. Adjudicating authority. Further the director of Appellant’s company has also retracted his statement by filing affidavits. It was on records that Appellant have raised the dispute on statements of witness recorded during the course of investigation by investigating officers. Therefore the said statement cannot be relied upon as admissible evidence in terms of the provisions of Section 9D of the Act. Reliance is placed on the ruling of the Hon’ble Punjab & Haryana High Court in the case of Jindal Drugs (Infra) [2016 (6) TMI 956 - PUNJAB & HARYANA HIGH COURT] wherein the Hon’ble High Court laid down the detailed procedure, inter alia, providing for cross-examination of the witness of the Revenue by the Adjudicating Authority and thereafter, if the Adjudicating Authority is satisfied that the statement of the witness is admissible in evidence than the Adjudicating Authority is obligated to offer such witnesses for cross-examination by the other side/assessee. Statements recorded during investigation in the present matter, whose makers are not examination-in-chief before the adjudicating authority, would have to be eschewed from evidence, and it will not be permissible for Ld. Adjudicating Authority to rely on the said evidences. Therefore, none of the said statements were admissible evidence in the present case. Also, there is nothing to indicate compliance with the strict stipulations contained in sub-sections (1) and (2) of Section 36B of the Act in the present case. Therefore no demand is sustainable on this ground also. Conclusion - The reliance on statements without cross-examination and demands based on inadmissible computer-generated evidence were rejected. Appeal allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the mis-declaration of the Maximum Retail Price (MRP) by the appellants prior to 01.03.2008 is valid for demanding differential excise duty.Whether the allegations of clandestine clearance of goods by the appellants are substantiated by sufficient evidence.Whether the statements recorded during the investigation can be relied upon without cross-examination.Whether the demand based on estimates, debit memos, and unofficial ledgers is sustainable without corroborative evidence.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Mis-declaration of MRPRelevant Legal Framework and Precedents: The issue pertains to the interpretation of Section 4A of the Central Excise Act, 1944, concerning the assessment of excise duty based on MRP. The precedents include decisions in the cases of Acme Ceramic and Ocean Ceramics.Court's Interpretation and Reasoning: The court noted that the issue of mis-declaration of MRP prior to 01.03.2008 had been settled in favor of the assessees in previous cases, including the larger bench decision in Ocean Ceramics.Key Evidence and Findings: The appellants were found to be selling their products ex-factory, and the MRP declared on the boxes was the basis for duty assessment.Application of Law to Facts: The court applied the established precedents and found no reason to deviate from the view that the demands based on alleged MRP mis-declaration prior to 01.03.2008 were unsustainable.Treatment of Competing Arguments: The appellants' reliance on previous favorable judgments was upheld, and the revenue's arguments were not found persuasive.Conclusions: The demand for differential duty based on MRP mis-declaration prior to 01.03.2008 was set aside.Issue 2: Allegations of Clandestine ClearanceRelevant Legal Framework and Precedents: The legal framework involves the Central Excise Act, 1944, and the evidentiary standards for proving clandestine clearance. Precedents include cases like Sakeen Alloys and Vishwa Traders.Court's Interpretation and Reasoning: The court emphasized the need for tangible evidence to support allegations of clandestine clearance, such as excess raw material purchase, unaccounted finished goods, and actual transportation records.Key Evidence and Findings: The evidence presented by the revenue was based on assumptions, estimates, and uncorroborated documents, without concrete evidence of excess production or transportation.Application of Law to Facts: The court found that the revenue failed to establish the necessary criteria for proving clandestine clearance, such as corroborative evidence of raw material procurement or finished goods transportation.Treatment of Competing Arguments: The appellants' arguments regarding the lack of corroborative evidence and the failure to allow cross-examination were upheld.Conclusions: The demands based on allegations of clandestine clearance were set aside due to insufficient evidence.Issue 3: Reliance on Statements without Cross-ExaminationRelevant Legal Framework and Precedents: Section 9D of the Central Excise Act, 1944, outlines the conditions under which statements can be considered relevant. Precedents include Andaman Timber Industries.Court's Interpretation and Reasoning: The court highlighted the necessity of cross-examination to validate the credibility of statements used as evidence.Key Evidence and Findings: The statements recorded during the investigation were not subjected to cross-examination, diminishing their evidentiary value.Application of Law to Facts: The court applied the principles from relevant precedents, emphasizing that statements without cross-examination cannot be solely relied upon.Treatment of Competing Arguments: The appellants' arguments regarding the lack of cross-examination were accepted, and the statements were deemed inadmissible.Conclusions: The statements were not considered reliable evidence due to the absence of cross-examination.Issue 4: Demand Based on Estimates and Unofficial LedgersRelevant Legal Framework and Precedents: The admissibility of computer-generated evidence is governed by Section 36B of the Central Excise Act, 1944. Precedents include cases like Continental Cement Co.Court's Interpretation and Reasoning: The court found that the requirements of Section 36B were not met, rendering the computer-generated evidence inadmissible.Key Evidence and Findings: The evidence consisted of estimates, debit memos, and unofficial ledgers, which lacked corroboration and did not comply with legal standards for computer evidence.Application of Law to Facts: The court applied the legal standards for admissibility and found the evidence insufficient to support the demands.Treatment of Competing Arguments: The appellants' arguments regarding the inadmissibility of the evidence were upheld, and the revenue's reliance on such evidence was rejected.Conclusions: The demands based on estimates and unofficial ledgers were set aside due to non-compliance with legal standards for evidence.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: 'In view of the above judgments facts of which are similar to that of the present case, the demand of Central Excise duty of Rs. 19,36,539/- on the basis of estimates/debit memos is not sustainable and we set aside the same.'Core Principles Established: The judgment reinforces the necessity for tangible, corroborative evidence in cases of alleged clandestine clearance and the inadmissibility of statements without cross-examination.Final Determinations on Each Issue: The demands related to MRP mis-declaration prior to 01.03.2008 and allegations of clandestine clearance were set aside. The reliance on statements without cross-examination and demands based on inadmissible computer-generated evidence were rejected.The judgment concludes by setting aside the order under challenge and allowing the appeals with consequential relief as per law.