TaxTMI 
TaxTMI 
2018 (4) TMI 1788
X X X X Extracts X X X X
X X X X Extracts X X X X
....37 raised against M/s BSPL on the allegation of non receipt of inputs like Ferro Manganese, Ferro Silicon Lumps, Ferro Chromes, manganese Ingot, Chrome Ingot etc. As the adjudicating authority has also dropped the penal proceedings against the director of M/s BSPL as also against the dealer M/s A.G. International (hereinafter referred as M/s A.G.), Revenue has filed the present appeal. It may be clarified that the Revenue's appeal is not against the dropping of the demand in respect of various inputs but the same stands filed challenging non-imposition of penalty on M/s AG, a registered dealer. 2. After hearing both the sides duly representative by Sh. K.K. Anand, Advocate & Shri. H. Singh, AR, we find that the officers of the Directorate General of Central Excise Intelligence (hereinafter referred to as DGCEI) conducted a search in the premises of one M/s Haryana Steel & alloys Ltd., G.T. Road, Murthal, Sonipat (hereinafter referred to as M/s HSAL). The said manufacturing unit is primarily engaged in the manufacture of SS flats. The investigations conducted in the premises of M/s HSAL, led the Revenue to belief that they were clearing SS flats manufactured by them, in a clandes....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6.09.2005 and their records were resumed. It was found that the said buyers had received the goods through the same truck numbers and have entered the same in their records. 4. During the course of investigations conducted from various transport companies, it was found that one transporter M/s Komal Transport Co. used for transportation of the raw materials to the assessee factory premises was non-existence, inasmuch as a person residing there with the name of Shri. Krishan Lal, stated that he was living there for the last 25 years and no transport company was operating from the said address. Similarly, enquiries were made from another transporter M/s Bedi Golden Transport Company, whose services were being utilised by M/s HSAL for transportation of the goods. Statement of Shri. Jasbir Singh, authorised representative of M/s Bedi Golden Transport Company, were recorded wherein , he submitted that he was procuring various trucks from other transporters on commission basis and were supplying the same to M/s HSAL who used the trucks for transportation of their goods to Jodhpur. He also submitted that two person of M/s HSAL, namely Shri. Kuldeep and Shri. Manish Kumar used to order ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....howing transportation of the raw materials from M/s HSAL to their factory. In their various letters addressed to the DGCEI, the assessee revealed that since they were receiving the raw material on FOR basis, they have no copies of GRs bilties etc. 6. It is seen that the statement of Shri. Ramesh Rawat, Executive Director of M/s HSAL was recorded on 29.06.2006 wherein, he stated that they were engaged in the manufacturing of S.S. Flats, Alloys Steel Bilties/MS Bilties/Bars and Rods of Alloys Steel. On being specifically asked as to whether they had supplied any quantities of Alloy/Carbon Steel billets etc. to M/s BSPL and M/s A.G. Faridabad, he categorically stated that no such Alloy/Carbon Steel billets were sent to the assessee or to the dealer and they have only issued cenvatable invoices to cover up some of the quantities of S.S Flats dispatched to Jodhpur, without issuing any invoices. 7. Statement of Shri. Rajan Ghai, Director of the Assessee's company was recorded on 03.03.2008. He deposed that they were procuring raw material from M/s HSAL and during the period 2003-04 to 2005-06 such inputs purchased from M/s HSAL were consumed by them as raw materials. He was confron....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that they had reflected the raw material in their records and had duly entered the same in their RG-23A part -I, which stands consumed by them in the manufacture of their final product, which final product was cleared on payment of duty. As per the allegations of the Revenue, if they had not received the raw materials or inputs, it is not possible for them to manufacture the final product. Revenue has not shown any alternate sources of procurement of such raw material and in the absence of the same, the Revenue's allegations cannot be upheld. The attention of the adjudicating authority was drawn to the fact that the various invoices, covering the transportation, on en-route to their factory was checked by the sales tax authorities, as is clear from the stamps put on the said invoices by the Sales Tax authority, which fact itself defies the statements of the transporters that they never transported the goods to the assessee's factory. The assessee also contended that the Revenue is taking a contrary stand at all stages, inasmuch as during the course of settlement of M/s HSAL case before the Settlement commission, Revenue took a stand that the invoices issued for transporting raw ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sources. He also observed that the assessee's action of deposit of Rs. 1 Crore during the course of investigation establishes that they do not have a case on merits. As regards, dropping a part of the demand in respect of allegation of non receipt of Ferro Manganese, Ferro Manganese Lumps, Ferro Chrome Ingots, the adjudicating authority observed that there was no allegation or evidence to show M/s HSAL has diverted the said goods to other person or the assessee have not received the same in their factory. The adjudicating authority further observed that no enquiries were conducted by the investigating officers from Shri. Ramesh Rawat in respect of the above products and accordingly accepted the assessee stand that the said inputs were entered in their statutory records and were utilised by them in the manufacture of their final product. The adjudicating authority also did not impose any penalty on the directors on the ground that Shri. Arun Ghai was not the director during the relevant period and Shri. Rajan Ghai cannot be penalised under Rule 26 inasmuch as, as per the revenue's allegations the goods were not physically received by the assessee and as such provision of Rule....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not only cross examination but examination in chief was also required to be done by the adjudicating authority so as to test veracity of truth of the said statements. For the above proposition, he has drawn our attention to the Tribunal's decision in the case of CCE, Delhi- L Vs. Kuber Tobacco India ltd. reported in 2016 (338) ELT 113 (Tri. Del.) as also to Hon'ble Punjab and Haryana High Court decision in the case of Ambika International Vs. Union of India and others- 2016-TIOL-1238-HC P & H. We note that the Tribunal in the case of Kuber referred (Supra) observed that the statement recorded during the course of investigation cannot be relied upon as admissible evidence in terms of the provisions of Section 9D(2) of the Central Excise Act. By referring to sub section 1 of Section 9D, it was observed that clause (a)& (b) of the said sub section set out the circumstances in which a statement, made and signed by a person before the Central Excise officers of a gazetted rank, during the course of inquiry or the proceedings under the act, shall be relevant, for the purpose of proving the truth of the facts contained therein. The procedure prescribed in the sub section (1) of Sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a part of the Hon'ble Delhi High Court's decision in the case of M/s J.K. Cigarettes was reproduced as follow: "Section 9D of the Act stipulates following five circumstances, already taken note of, under which statement previously recorded can be made relevant. These are:- (a) when the person who had given the statement is deakd; (b) when he cannot be found; (c) when he is incapable of giving evidence; (d) when he is kept out of the way by the adverse party; and (e) when his presence cannot be obtained without an amount of delay or expense, which the officer considers unreasonable." These circumstances show that if witness cannot be examined for any of these five reasons, the statement previously recorded would be relevant. The adjudicating authority was therefore bound to follow the biding precedent and in absence of any specified circumstance to consider the statement relevant without examining the witnesses, erred in rejecting the request of the assessee to examine the witnesses and to offer them for cross examination. 8. The assessee has also relied on the judgment of Hon'ble Apex Court in Sukhwant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubjected to cross-examination and for seeking any clarification, the witness may be reexamined by prosecution. There is in our opinion, no meaning in tendering a witness for cross-examination only. Tendering of a witness for cross examination, as a matter of fact, amounts to giving up of the witness by prosecution as it does not chose to examine him in chief. However, the practice of tendering witness for crossexamination in session trials had been frequently resorted to since the enactment of the code of criminal procedure, 1898." 14. In fact, the issue now stands settled by the decision of the Hon'ble Punjab and Haryana High Court in the case of Ambika International Vs. Union of India and Another's - 2016-TIOL-1238-HC-P&H. By referring to the provisions of Section 9D of the Central Excise Act, 1944, it was observed that there was no justification for jettisoning the procedure statutorily prescribed by plenary parliamentary legislation for admitting, into evidence, a statement recorded before the gazetted central excise officers. The statements recorded during investigations, under Section 14 of the Act, whose maker are not examined-inchief before the adjudicating authority i.e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed were also transported to the assessee's factory in the same trucks, along with the AS/MS products. The assessee have placed on record certain invoices indicating that both the types of products travelled in the same vehicle. As such the adjudicating authority was not justified in excepting movement of crome articles and to deny the transportation of the AS/MS products, transported in the same trucks. This fact also reflects upon the statements not being true and correct in which case, cross examination was strongly required. As such, we are of the view that denial of cross examination has resulted in strong violation of the principle of natural justice, especially when the said oral statements stands falsified by production of documentary evidence and the revenue's case is solely based upon the said statements recorded at the back of the assessee. The same were required to be tested on the touch-stone of cross examination, for testing the correctness of facts contained therein. 15. We further note that the raw material in question, was entered in the assessee's records RG-23A part-I along with credit entries in RG-23A, Part-II in the ordinary course of their business. The Rev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave been utilised in the manufacture of their final goods 16. We further note that the inquiries stands made from only few of the transporters, whereas, the trucks of various other owners have also been used for transporting the alleged goods. No inquiry stand made by the revenue from the owners of the said truck which are around 100. Revenue has denied the credit based upon the statement of some of the transporters. We also note that the statement of the authorised representative of M/s Bedi Golden Transport Company is to the effect that one Shri. Kuldeep & Shri Manish Kumar of M/s HSAL, who used to order for the trucks on Phone to him specifying the number of vehicles required but revenue has not conducted further investigations from Shri. Kuldeep and Shri. Manish Kumar and have not recorded their statements. The said representative of M/s Bedi Golden Transport Company has further deposed that they were keeping the blank GRs in the premises of M/s HSAL, who were using the same themselves. In such a scenario, the statement to the effect that GRs were being issued only for movement of the goods to Jodhpur, cannot be held to be reflecting the correct position, inasmuch as in one ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fessional statements as also the statements of the transporters cannot be relied upon unless they are corroborated by independent evidences and when the same are contrary to the documentary evidences placed on record. It was also observed that when no drivers of the vehicles has been examined, it could not be said that the goods have not been transported. The majority view also took into consideration the fact that there was evidence of entering of vehicles in the municipal limits of the assessee, in the shape of the octroi receipt etc. The facts of payment of consideration for the inputs by way of cheque and the absence of investigation from the banks etc. as regards, the flow back of such consideration in cash was also taken note of. As such, it was observed by the majority decision that the allegations of non-receipt of inputs and availament of credit on the basis of cenvatable invoices only, cannot be upheld. For better appreciation of the declaration of law laid down by the above majority decision, the relevant portions of the said decisions are reproduced below: 51. Though admissions will bind the maker of the confessional statements and in the absence of any other o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... goods were delivered outside octroi Naka of Aslali and that they were not delivered to the consignee. 53. The fact that payments in respect of the inputs covered by the invoices were made by cheques, is not at all disputed. There is no iota of evidence to justify any inference that there was flow back of the amount of more than six crores of rupees over the period in question from Bhimanis to the assessee in cash after having received the payments by cheques and deducting 2% by way of commission. Ordinarily, when an amount of more than rupees six crores is paid against the invoices, covering the inputs, it would be difficult to contemplate the imprudence of returning cash amount of more than Rs. 5.50 crores, which cannot be accounted for. In other words, ordinarily, no prudent businessman would convert more than Rs. 6 crores of white and legitimate money held by him into an unaccounted money of more Rs. 5.50 crores......... The said decision of the Tribunal stand upheld by the Hon'ble Gujarat High Court, when the appeal filed by the Revenue was rejected reported as 2009(234) ELT (242) Guj. Further, according to the latest decision, the majority decision passed by the T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of the Tribunal, which is required to be considered as larger bench decision stand fully applicable to the facts of the present case. 18. The assessee has also explained the allegation made by the revenue as regards use of trucks to Faridabad as also to Jodhpur. It stands explained by the ld. Advocate that the allegation is only in respect of 28 cases pertaining in respect of M/s A.G. International and four cases in relation to the assessee manufacturer. It stand clarified by the assessee that the exact timings of the issuance of the invoices stands neither mentioned in the invoice nor in the show cause notice and a vehicle takes around 2-3 hours for transporting the goods from Sonipat where the factory of M/s HSAL was located to Faridabad where the factory of the assessee and the registered premise of M/s A.G. are located. The truck works round the clock and even after transporting and unloading goods on the assessee premises at Faridabad, the same truck can be used again for further journey to jodhpur. We note that the there is no reference to the timings of the issuance of the invoices for Faridabad or for Jodhpur. A truck can be utilised twice i.e. first for transportation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is in the realm of assumption and presumption, the revenue was under a legal obligation to establish the alternative sources for procurement of such a huge raw material. Neither was there any investigations nor any evidence to show that in the absence of non receipt of the inputs from M/s HSAL, how the assessee could have manufactured their final product. 20. At this stage reference can be made to the Hon'ble Punjab and Haryana High Court decision in the case of CCE, Chandigarh Vs. Neepaz steel ltd. 2008 (230) ELT 218 P&H vide which the Tribunal decision, involving an identical dispute, was upheld by rejecting the revenue's appeal. It was observed that inasmuch as the payments for the purpose of inputs was made through cheques and the input in question were used in the manufacture of final product which have been cleared on payment of duty and the revenue had not proved the alternative sources of raw material and RG-12 returns were finally assessed which contained all the documents on the basis of which cenvat credit availed, Tribunal order cannot be faulted upon. The issue involved in the present case is identical and the ratio of above decision of Hon'ble Punjab and Haryana wo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nds sold by the M/S A.G., as a first dealer, to the buyers of Rajasthan and Gujarat and majority of these invoices carry the stamp of the check posts, which indicate movement of goods from one state to another. As such the finding of the Revenue that the goods were actually not received M/s A.G. registered dealer and were not further sold to the assessee and only invoices were being raised without the actual movement of goods, cannot be upheld. Tribunal in the case of Raj Pertroleum Products Vs. CCE, Mumbai-I reported in 2005 (192) ELT 806 (Tri. Mum.) has held that the findings of the clandestine removal as also the allegations of non receipt of inputs and the credit having been availed only on the basis of cenvatable invoices, without the actual receipt of the inputs cannot be upheld, merely, on the basis of the statements, especially when the same are against documentary evidences. It was observed by the Tribunal that when the documentary evidences stands produced by the assessee and the oral statements which travel beyond the same, the documentary evidences should prevail. In that case also we find that the revenue's allegations were primarily based upon the records and retur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ees had not brought anything on record" to prove their claim of bona fide conduct, on the assessee. It is a cardinal postulate of law that the burden of proving any form of mala fide lies on the shoulders of the one alleging it. This Court observed in Union of India v. Ashok Kumar & Ors. - (2005) 8 SCC 760 that "it cannot be overlooked that burden of establishing mala fides is very heavy on the person who alleges it. The allegations of mala fides are often more easily made than proved, and the very seriousness of such allegations demand proof of a high order of credibility". As is clear from the above declaration of law by the Hon'ble Supreme Court, the allegations are required to be proved by the one who makes them. The assessee cannot be placed under a negative onus of proof, once again to show that they have received the goods. As already observed, such onus, in any case, already stands discharged by them. 23. It is also well settled law that the onus of proving the clandestine activities of a manufacturing unit lies upon the revenue and is required to be discharged by production of positive and tangible evidence. Having discussed the evidence, in the preceding paragraphs,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y raised against M/s HSAL was to the extent of Rs. 24.61 crore approximately. Out of the said duty of the demand M/s HSAL admitted duty liability of Rs. 13.33 crore approximately and requested for adjustment of duty already paid by them on AS/MS products. The said plea of the M/s HSAL stands rejected by the Settlement Commissioner. In their order dated 27.02.2008 para5.1 of their order dated 27.02.2008, it stands observed by the settlement commission that DGCEI had made the statement that M/s HSAL had actually manufactured AS/MS products and the said submissions stands accepted by the settlement commission. The relevant paragraphs from the final order of the Settlement Commissioner are reproduced below for reedy reference: 3. The main applicant company in their settlement application, had initially admitted a duty liability of Rs. 13,33,02,113/- on a quantity of 32,322.190 MTs SS Flats and requested for adjustment of duty already paid by them on AS and MS products which was statedly paid by without removal of any products. The applicant had thus admitted net amount payable as Rs. 3,40,14,122/-. Since Rs. 3,00,00,000/- were paid already, the applicant had, after filing the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....45,08,118/- has been deposited by the applicant. Therefore, no further duty liability exists. It was observed by the settlement commission that if M/s HSAL wanted the adjustment of the said amount against the demand of Central Excise duty in respect of S.S. Flats, it is required to produce evidence to show that such AS/MS products were not actually manufactured and cleared by them. As such, it is seen that the Revenue took a contra stand before the settlement commission by submitting that the duty of 13 crore paid by the HSAL on AS/MS Products cannot be neutralised against the duty liability on flats, inasmuch they actually manufactured and cleared the said goods. The said stands of the Revenue stand accepted by settlement commission and M/s HSAL have been directed to pay the entire amount of duty on the clandestinely cleared flats. It leads to the conclusion that the settlement commissioner had accepted the fact that AS/MS products were being cleared by M/s HSAL. The said order of the settlement commission which stands passed by them on the plea made by the DGCI before them. The contrary stand has been taken by the Revenue in the present case. It is contended in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; Member (Judicial) PER: DEVENDER SINGH 27. Having gone through the order of my Sister Member (J), I pass a separate order. 28. The facts and the submissions of both sides have been duly recorded by Member (Judicial) in preceding pages, the same are not being repeated. 29. Having carefully gone through the recorded submissions made, I find that the appellant had specifically sought cross examination of the witnesses Sh. Ramesh Rawat, ED of M/s HSAL and various transporters, and the same was denied on flimsy considerations by adjudicating authority. Denial of cross examination resulted in gross violation of principles of natural justice. The ld. Advocate also contended that in terms of Section 9D of the Central Excise Act, 1944, the statement of the witnesses cannot be relied upon. In support of these contentions, the ld. Advocate placed reliance upon the decision of Kuber Tobacco Ltd.-2016 (338) ELT 113 (Tri....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... situations. Sub-section (2) extends the provision of sub-section (1) to any proceedings under the Act other than a proceeding before the Court. In this manner, Section 9D can be utilized in adjudication proceedings before the Collector as well. In the present case, provisions of Section 9-D of the Act were invoked by the Collector holding that it was not possible to procure the attendance of some of the witnesses without undue delay or expense. Whether such a finding was otherwise justified or not can be taken up in the appeal. 9. In other words, in the absence of the circumstances specified in Section 9D(1), the truth of the facts contained in any statement, recorded before a gazetted Central Excise officer, has to be proved by evidence other than the statement itself. The evidentiary value of the statement, in so far as proving the truth of the contents thereof is concerned, therefore, completely lost, unless and until the case falls within the parameters of Section 9D(1). Therefore, two steps are required to be followed by the adjudicating authority, under clause (b) of Section 9D(1)(i) the person who made the statement has to first be examined as a witness in the case....
X X X X Extracts X X X X
X X X X Extracts X X X X
....egard to the circumstances of the case, the statement should be admitted in the interests of justice." 32. Relying on the above decision of this Tribunal and Hon'ble High Court of Punjab & Haryana, I hold that the adjudication order has been passed in violation of procedure laid down in section 9D of the Central Excise Act, 1944. There has also been gross violation of principles of natural justice. Therefore, the matter needs fresh examination in terms of procedures laid down in Section 9D of the Act as well as various judicial pronouncements cited hereinabove. 33. I also find that appellants had submitted before adjudicating authority documentary evidence of certain consignments having passed through the checkpost of Excise and Taxation Department at Sonepat and Faridabad. However, the adjudicating authority has given no findings on his appreciation of the said evidence. For that reason also, the matter requires fresh examination by adjudicating authority, who should record clear findings after examining the said evidence. 34. In view of the above observations, I set aside the impugned order and remand back the matter to the adjudicating authority to first follow the proc....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., which is reproduced below for the sake of appreciation: "26. In fact, Section 138 of the Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidencein- chief has to precede cross-examinatin and crossexamination has to precede re-examination. 27. It is only, therefore; (i) after the person whose statement has already been recorded before a gazette Central Excise Officer is examined as a witness before the adjudicating authority, and (ii) the adjudicating authority arrives at a conclusion, for reasons to be recorded in writing, that the statement deserves to be admitted in evidence, that the question of offering the witness to the assessee, for cross-examination can arise. 28. Clearly, if this procedure, which is statutorily prescribed by plenary parliamentary legislation is not followed, it has to be regarded, that he Revenue has given up the said witness, so that the reliance by the CCE, on the said statements, has to be regarded as misguided and the said statements have to be eschewed from consideration, as they would not be relevant for providing the truth of the contents thereof. 29. Reliance may....