TaxTMI 
TaxTMI 
2024 (9) TMI 549
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....e manufacture of M.S. Structural Items falling under Chapter 72 of the Central Excise Tariff. In or about December 2011, officers of DGCEI initiated investigations against Twenty First Century Wire Rods Limited (hereinafter "TFCWRL") having factories at Khadoli and Parzai, Silvassa and on 1-12-2011 conducted search at the said factories of TFCWRL and at the residential premises of the directors and some employees of TFCWRL. 1.1 In the course of search carried out at the residence of Motilal Junwal, Accountant of TFCWRL, the DGCEI officers recovered Private records maintained by Motilal Junwal viz. Note Books Nos. 7, 11, 15 and File No. 22 (See pages 120 to 124 and 132-133 of Appeal), which allegedly contained entries of clandestine supplies of Billets to the Appellant made without payment of duty. It is the case of the department based on the Statement of Motilal Junwal that entries appearing in the said Private records with the letter "B" were entries of accounted production cleared on payment of duty and that entries appearing in the said Private records with the letter "W" were entries of unaccounted production cleared without payment of duty. Based on such entries appearing ....
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....ade without payment of duty. 2.2 Based on the said entries in the said private records of the said Third Party, it is presumed that the Appellant clandestinely received 96.45 M.Tons of Billets from TFCWRL and manufactured therefrom, 96.45 M.Tons of Structural Items/ rolled products which are presumed to have been clandestinely cleared by the Appellant. 2.3 There is absolutely no evidence whatever of transport of the said alleged quantity of 96.45 M.Tons of Billets from the factory of TFCWRL to the factory of the Appellant and of any payment made by the Appellant to TFCWRL for the same. 2.4 There is absolutely no evidence of manufacture of 96.45 M.Tons of Structural items/ rolled products out of the said 96.45 M.Tons of Billets allegedly received by the Appellant from TFCWRL. Not a single buyer of the said alleged 96.45 M.Tons of Structural items/ rolled products has been identified. There is no evidence of transportation of the said alleged 96.45 M.Tons of Structural items/ rolled products to any Buyer. There is no evidence whatever of any payment received by the Appellant from any buyer for supply of the said alleged 96.45 M.Tons of Structural items/ rolled products to an....
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..... On careful consideration of the submission made by both the sides and perusal of records, we find that there is no independent evidence found from the appellant to support the revenue's allegation on clandestine manufacture and clearance of the finished goods from the factory of the appellant. The entire case is made on the basis of alleged receipt of clandestinely removed Billets by M/s Twenty First Century Wire Rods Ltd.. The Revenue has also relied upon the statement of accountant of the TFCWRL, however, the cross examination has not been conducted in this regard. Therefore, the adjudicating authority has gravely erred by violating the principles of natural justice therefore, the statement which is the evidence relied upon the revenue cannot be accepted as evidence of clandestine removal. 5. We further find that there is no evidence of clandestine manufacture of appellant's final product. The revenue couldn't bring a single evidence of finished goods allegedly manufactured received by any buyer. There is not a single evidence of receipt of sale proceed against alleged clandestine manufacture and clearance of final product. No evidence of transport of any single consignment ....
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....les of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned....
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....rty, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or (b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. (2) The provision of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court." 9. A plain reading of sub-section (1) of Section 9D of the Act makes it clear that clauses (a) and (b) of the said sub-section set out the circumstances in which a statement, made and signed by a person before the Central Excise Officer of a gazetted rank, during the course of inquiry or proceeding under the Act, shall be relevant, for the purpose of proving the truth of the facts contained therein. 10. Section 9D of the Act came in from detailed consideration and examination, by the Delhi High Court, in J.K. Cigarettes Ltd. v. CCE....
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....made the statement is kept out of the way by the adverse party, and (v) when the presence of the person who made the statement cannot be obtained without unreasonable delay or expense. 15. Once discretion, to be judicially exercised is, thus conferred, by Section 9D, on the adjudicating authority, it is self-evident inference that the decision flowing from the exercise of such discretion, i.e., the order which would be passed, by the adjudicating authority under Section 9D, if he chooses to invoke clause (a) of sub-section (1) thereof, would be pregnable to challenge. While the judgment of the Delhi High Court in J&K Cigarettes Ltd. (supra) holds that the said challenge could be ventilated in appeal, the petitioners have also invited attention to an unreported short order of the Supreme Court in UOI and Another v. GTC India and Others in SLP (C) No. 2183/1994, dated 3-1-1995 wherein it was held that the order passed by the adjudicating authority under Section 9D of the Act could be challenged in writ proceedings as well. Therefore, it is clear that the adjudicating authority cannot invoke Section 9D(1)(a) of the Act without passing a reasoned and speaking order in....
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....idence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the Gazetted Central Excise Officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for proving the truth of the contents thereof, he has to first admit the statement in evidence in accordance with clause (b) of Section 9D(1). For this, he has to summon the person who had made the statement, examine him as witness before him in the adjudication proceeding, and arrive at an opinion that, having regard to the circumstances of the case, the statement should be admitted in the interests of justice. 20. In fact, Section 138 of the Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidence-in-chief has to precede cross-examination, and cro....
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....ndent No. 2. (ii) A copy of the said record of examination-in-chief, by the Revenue, of the makers of any of the statements on which the Revenue chooses to rely, would have to be made available to the assessee, i.e., to Ambika and Jay Ambey in this case. (iii) Statements recorded during investigation, under Section 14 of the Act, whose makers are not examined-in-chief before the adjudicating authority, i.e., before Respondent No. 2, would have to be eschewed from evidence, and it would not be permissible for Respondent No. 2 to rely on the said evidence while adjudicating the matter. Neither, needless to say, would be open to the Revenue to rely on the said statements to support the case sought to be made out in the show cause notice. (iv) Once examination-in-chief, of the makers of the statements, on whom the Revenue seeks to rely in adjudication proceedings, takes place, and a copy thereof is made available to the assessee, it would be open to the assessee to seek permission to cross-examine the persons who have made the said statements, should it choose to do so. In case any such request is made by the assessee, it would be incumbent on the adjudicatin....
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....der certain circumstances. - (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, - (a) When the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or (b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of the opinion that having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice. (2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before the Court. On scanning the anatomy of the said provision, we find that the statement made and signed by a person before any Central ....
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....have been obtained under the police power of the Investigating authorities by coercion or undue influence. 9.5 Undoubtedly, the proceedings are quasi criminal in nature because it results in imposition of not only of duty but also of penalty and in many cases, it may also lead to prosecution. The provisions contained in Section 9D, therefore, has to be construed strictly and held as mandatory and not mere directory. Therefore, unless the substantive provisions contained in Section 9D are complied with, the statement recorded during search and seizure operation by the Investigation Officers cannot be treated to be relevant piece of evidence on which a finding could be based by the adjudicating authority. A rational, logical and fair interpretation of procedure clearly spells out that before the statement is treated relevant and admissible under the law, the person is not only required to be present in the proceedings before the adjudicating authority but the adjudicating authority is obliged under the law to examine him and form an opinion that having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice. Therefore,....