2026 (2) TMI 232 - AT - Central Excise

Right to crossexamination in excise proceedings upheld, order set aside and matter remanded for fresh adjudication allowing witness testing.

Violation of the principles of natural justice was found where appellants were denied the opportunity to crossexamine witnesses whose statements, and ... Principles of natural justice - right to cross-examination - admissibility of statements u/s 9D(1) of the Central Excise Act - reliance on statements recorded during investigation - clubbing of clearances - remand for fresh consideration - Mutuality of interest - HELD THAT:- As regards the clubbing of the sale among the units, the learned Counsel submits that each of the unit is independent with separate premises, manpower, registration numbers with department of Industries & Commerce Punjab, VAT/Sales Tax and Income Tax PAN numbers; also, each of the three units has separate brand names, bank accounts, balance sheets, ledger accounts of purchase/sale, electricity meters and bill payment records; also, their returns are assessed to taxes independently. He further submits that there are no financial flow backs, no loans or advances and there was no mutuality of interest; in fact, there was a competition among these units; but the Adjudicating Authority has misinterpreted and overlooked all the aspects with intent to confirm the demand and impose penalty. We find that the entire case is built on the basis of search made by the Preventive Officers of the department on 14.12.2012 at the premises of the Appellants, as well as on the statements of Sh. Avtar Singh, Sh. Gurjeet Singh, Sh. Jatinder Singh and other employees of the firms. On the basis of the statements made by the above persons, the show cause notice was issued. We also find that the Appellants filed their replies to the show cause notice and strongly contested the allegations made against them. Since, in this case, the Appellants right to cross-examination has been seriously affected by not granting them the cross-examination, therefore, we are of the considered view that the impugned order is liable to be set aside. We are of the considered opinion that the impugned order is liable to be set aside only on violation of principle of natural justice for non-grating the examination/cross-examination; accordingly, without going into the other issues, we set aside the impugned order and remand the matter back to the learned Adjudicating Authority with the direction to provide the opportunity of cross-examination of the relevant witnesses and officials whose statements have been relied upon to make a case against the Appellants, and then decide the matter within a period of three months from the date of receipt of certified copy of this order. In result, the appeals are disposed of by way of remand. Issues: Whether the impugned adjudication order can be sustained where the adjudicating authority declined to permit examination/cross-examination of witnesses whose statements recorded during search/investigation were relied upon, and whether the matter requires remand for fresh adjudication.Analysis: The case hinges on reliance upon statements recorded during search/investigation and the denial of the assessee's request for examination/cross-examination of those witnesses and departmental officers who typed the statements. Statutory procedure under Section 9D(1) was considered regarding the sequence for admitting such statements in evidence and the necessity to examine the person whose statement is relied upon before permitting cross-examination. The record shows requests for cross-examination and for supply of non-relied-upon documents were made but were not granted and no adequate reasons for denial were recorded. Discrepancies in the relied-upon statements and the fact that statements were typed by departmental officers in English without explanation to the declarants were found to justify cross-examination. Established authorities require that reliance on such statements without offering cross-examination violates principles of natural justice and renders those statements not admissible for proving their content.Conclusion: The impugned order is set aside on the ground of violation of natural justice for denial of examination/cross-examination; the matter is remanded to the adjudicating authority with a direction to provide opportunity for cross-examination of relevant witnesses and officials whose statements were relied upon and to decide the matter afresh within three months from receipt of certified copy of this order.