TaxTMI 
TaxTMI 
2025 (4) TMI 441
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....; after appropriating the amount earlier paid by the appellant. The order also confirms the demand of central excise duty involved in the clandestine removal of finished goods without payment of central excise duty and without issue of valid invoices. The aforesaid demands have been confirmed with interest and penalty. 2. Excise Appeal No. 51096 of 2022 has been filed by Harsh Agrawal, Director of the appellant, to assail the aforesaid order dated 09.06.2020 passed by the Principal Commissioner to the extent it imposes penalty upon him under rule 26 of the Central Excise Rules, 2002 [the Central Excise Rules] for his act of omission and commission leading to evasion of duties. 3. The appellant is engaged in the manufacture of HB Wire, GI Wire, Stay Wire, Barbed Wire and Binding Wires. It availed CENVAT credit of duty paid on the inputs, capital goods and input service under the 2004 Credit Rules and utilized such credit towards payment of duty on the final products. 4. It is stated that on 08.04.2016, the Central Excise Officers of the Preventive Wing of the department conducted an investigation in the factory premises of the appellant. The Officers scrutinized the r....
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.... pay the remaining Central Excise Duty within 30 days. 5. It therefore appeared that the Noticee No. 1 had surreptitiously removed GI Wire, HB Wire, Wire Rod & Waste - Scrap weighing 476.206 MT, 7759.274 MT, 245.306 MT & 112.088 MT respectively valued to Rs. 24,33,96,987/- from their factory premises without following the proper procedure and without payment of Central Excise duty of Rs. 3,04,24,623/-. The particulars of duty calculation on the goods, indicating therein the basis of arriving at the assessable value, are summarized in Chart - A below:- ***** 6. It appears that once the quantum of production that is recorded and shown in the books & accounts in not physically found in its entirety during the course of its physical verification, the shortage thereto the said excisable goods, in the lack of any plausible reasoning is deemed to have been removed from the factory in a clandestine manner. It therefore appears to reveal from the above that, the Noticee No. 1 had clandestinely removed excisable goods from its factory premises, which had consequently resulted in shortage in the stock of the goods, ascertained during Panchnama proceedings, sup....
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....payment of Central Excise duty as evident from the incriminating documents seized from the factory premises of Noticee No. 1 under Panchnama dated 08.04.2016 (RUD-1)." (emphasis supplied) 7. The appellant filed a detailed reply dated 25.07.2019 to the show cause notice and denied the allegations made therein. 8. The Principal Commissioner, by order dated 09.06.2020, confirmed the demand and ordered for its recovery. After referring to the statements of the Director of the appellant, security guard, security-in-charge and loading-incharge recorded under section 14 of the Central Excise Act, the Principal Commissioner recorded the following findings: "8.26 I find that all the aforesaid statements recorded under Section 14 of the Central Excise Act, 1944 which includes the Statement of the Director of Noticee no. 1 who in very unambiguous terms has certified the veracity of the documents recovered from the factory premises of Noticee no. 1 and its authenticity. The stand taken by the Noticee in their defense, disowning the veracity and the details mentioned in these documents at a later stage is nothing but a ploy and an alibi to escape the central excise....
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....ls as evident from the incriminating documents seized from the factory premises of Noticee No. 1 under Panchnama dated 08.04.2016, so evaded by Noticee no. 1 is recoverable from them. ***** From the above facts, it gets established that Noticee No. 1 had cleared finished goods and raw materials clandestinely without issuing Central Excise Invoice and without payment of Central Excise duty, which is recoverable from it invoking extended period of five years under Section 11A(4) of Central Excise Act, 1944 read with Rule 14 of CENVAT Credit Rules 2004 *****" (emphasis supplied) 9. Shri K. Krishnamohan Menon, learned counsel for the appellant assisted by Ms. Parul Sachdeva and Ms. Prerna Jain made the following submissions: (i) Statements of witnesses recorded under section 14 of the Central Excise Act before a Gazetted Central Excise Officer during the course of investigation cannot be relied upon unless the procedure contemplated under section 9D of the Central Excise Act is scrupulously followed. Such statements would have no evidentiary value if the persons making them are not examined before the adjudicating authority and they are admitted in evidence in the intere....
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.... the Central Excise Rules could not have been imposed on the Director. 10. Shri Rakesh Agarwal, learned authorized representative appearing for the department, however, supported the impugned order and made the following submissions: (i) The appellant did not make any request for cross-examination during the adjudication proceedings and, therefore, he cannot allege violation of section 9D(1)(b) of the Central Excise Act. In support of this contention, learned authorized representative placed reliance upon the judgment of the Bombay High Court in Harisons Steel Pvt. Ltd. vs. Union of India-2017 (354) E.L.T. 442 (Bom.) ; (ii) The Director of the Company whose statement was recorded under section 14 of the Central Excise Act was correctly not cross-examined as that would amount to self-incrimination. In support of this contention, learned authorized representative placed reliance upon the following decisions: (a) Silicone Concepts International Pvt. Ltd. vs. Principal Commissioner of Cus., Icd, Tkd (Import), New Delhi-2019 (368) E.L.T. 710 (Tri. - Del.); (b) Conybio Healthcare (India) Pvt. Ltd. vs. Commissioner....
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....re recorded under section 108 of the Customs Act, 1962 [the Customs Act] and section 138B of the Customs Act deals with relevancy of statements under certain circumstances. 16. It would, therefore, be appropriate to examine these sections of the two Acts at length. Central Excise Act 17. Section 14 of the Central Excise Act deals with power to summon persons to give evidence and produce documents in inquiries under the Central Excise Act. Any Central Excise Officer duly empowered by the Central Government in this behalf has the power to summon any person whose attendance he considers necessary either to give evidence or to produce a document in any inquiry which such Officer is making for any of the purposes of the Central Excise Act. 18. Section 9D of the Central Excise Act deals with relevancy of statements under certain circumstances and it is reproduced below: "9D. Relevancy of statements under 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 prose....
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....ce. (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 a court." 21. It would be seen section 14 of the Central Excise Act and section 108 of the Customs Act enable the concerned Officers to summon any person whose attendance they consider necessary to give evidence in any inquiry which such Officers are making. The statements of the persons so summoned are then recorded under these provisions. It is these statements which are referred to either in section 9D of the Central Excise Act or in section 138B of the Customs Act. A bare perusal of sub-section (1) of these two sections makes it evident that the statement recorded before the concerned Officer during the course of any inquiry or proceeding shall be relevant for the purpose of proving the truth of the facts which it contains only when the person who made the statement is examined as a witness before the Court and such Court is of the opinion that having regard to the circumstances of the case, the statement should be admitted in evidence, in the interests of justi....
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....evidence in the interests of justice. The judgment further holds that in adjudication proceedings, the stage of relevance of a statement recorded before Officers would arise only after the statement is admitted in evidence by the adjudicating authority in accordance with the procedure contemplated in section 9D(1)(b) of the Central Excise Act. The judgment also highlights the reason why such an elaborative procedure has been provided in section 9D(1) of the Central Excise Act. It notes that a statement recorded during inquiry/investigation by an Officer of the department has a possibility of having been recorded under coercion or compulsion and it is in order to neutralize this possibility that the statement of the witness has to be recorded before the adjudicating authority. The relevant portions of the judgment are reproduced below: "15. 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, fo....
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....ty, as, in such an atmosphere, there would be no occasion for any trepidation on the part of the witness concerned. 25. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a gazetted Central Excise Officer during inquiry or investigation, would arise only after the statement is admitted in evidence 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....
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....ordance with the provisions of section 9D of the Central Excise Act. After examining the provisions of sub-sections (1) and (2) of section 9D of the Central Excise Act, and after placing reliance on the judgment of the Punjab and Haryana High Court in Ambika International, the Chhattisgarh High Court held: "9.3 A conjoint reading of the provisions therefore reveals that a statement made and signed by a person before the Investigation Officer during the course of any inquiry or proceedings under the Act shall be relevant for the purposes of proving the truth of the facts which it contains in case other than those covered in clause (a), only when the person who made the statement is examined as witness in the case before the court (in the present case, Adjudicating Authority) and the court (Adjudicating Authority) forms an opinion that having regard to the circumstances of the case, the statement should be admitted in the evidence, in the interest of justice. 9.4 The legislative scheme, therefore, is to ensure that the statement of any person which has been recorded during search and seizure operations would become relevant only when such person is examined by....
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....the adjudicating authority in the proceedings instituted upon show cause notice was not recorded nor formation of an opinion that it requires to be admitted in the interest of justice. In taking this view, we find support from the decision in the case of Ambica International v. UOI rendered by the High Court of Punjab and Haryana." (emphasis supplied) 26. In Additional Director General (Adjudication) vs. Its My Name Pvt. Ltd. -2021 (375) E.L.T. 545 (Del.) decided on 01.06.2020, the Delhi High Court examined the provisions of sections 108 and 138B of the Customs Act. The department placed reliance upon the statements recorded under section 108 of the Customs Act. The Delhi High Court held that the procedure contemplated under section 138B(1)(b) has to be followed before the statements recorded under section 108 of the Customs Act can be considered as relevant. The relevant paragraphs of the judgment of the Delhi High Court are reproduced below: "76. We are not persuaded to change our view, on the basis of the various statements, recorded under Section 108 of the Act, on which the Learned ASG sought to rely. Statements, under Section 108 of the Act, w....
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....dicated in (a) existed in the case. It leaves us with (b) which requires the court or the adjudicating authority to first examine the person who made the statement and form an opinion that having regard to the circumstances of the case, the statement should be admitted in evidence. Of course, the party adversely affected by the statement will have to be given an opportunity to cross examine the person who made the statement but that comes only after the statement is, in the first place, after examination by the adjudicating authority, admitted in evidence. This has not been done in respect of any of the 35 statements. Therefore, all the statements are not relevant to the proceedings. 15. It has been held in a catena of judgments including Jindal Drugs Pvt. Ltd. versus Union Of India [2016 (340) E.L.T. 67 (P&H)] that section 9D is a mandatory provision and if the procedure prescribed therein is not followed, statements cannot be used as evidence in the proceedings under Central Excise Act. ***** 16. Therefore, the 35 statements relied upon in the SCN are not relevant and hence also not admissible." (emphasis supplied) 28. It, therefore, transpires from the af....
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....son whose statements was recorded during investigation/inquiry by the officers of the department. It is in this context that the Tribunal examined whether the denial of cross-examination of the witnesses would result in violation of the provisions of section 9D of the Central Excise Act. The Tribunal held that since the statement of the Director of the Company was in the nature of a confession, the Director cannot be compelled to be cross-examined and the confession statement would be out of the ambit of section 9D of the Central Excise Act. 31. This decision would not apply to the facts of the present case as it is an admitted fact that the issue of cross-examination in Silicone Concepts arose during the course of investigation/inquiry by the Officers of the department under section 14D of the Central Excise Act. In the present case, the issue that arises for consideration is as to whether the statements made during the course of inquiry before the Officers of the department can be relied upon without following the procedure contemplated under section 9D(1)(b) of the Central Excise Act. The question of cross-examination would arise only after the statements are recorded b....
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....ased on the statements of persons who were not examined by the department before the adjudicating authority. This examination was absolutely necessary in terms of the provisions of section 9D of the Central Excise Act. In the absence of examination of such persons before the adjudicating authority and in the absence of admission of such statements in evidence, such statements would not be relevant. For the reasons stated above, the said demand would have to be set aside. 35. The next issue that arise for consideration is in the context of the confirmation of demand of Rs. 1,76,650/-. This demand is based on loose papers recovered from the factory premises of the appellant. What weighed with the Principal Commissioner while confirming the demand is that loose papers were perused by Harsh Agrawal and he unequivocally accepted that all the documents pertained to his factory and were prepared by his staff. 36. In the first instance, the adjudicating authority while recording the finding on loose papers has placed reliance upon the statement of Harsh Agrawal made during the inquiry/investigation under section 14D of the Customs Act. The procedure contemplated under section 9D of t....
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....onsistent view taken by the Tribunal in this respect. ***** 12.2 We have gone through the detailed order passed by the adjudicating authority and we find that so far as the demand of challenge in the present case is concerned it rested only on two materials. One was the so called statement of the Director which the adjudicating authority and the Customs, Excise and Service Tax Appellate Tribunal received in advance as admission of clandestine removal by the Director of the appellant/Company and the other was the notebook which contained certain entries, which according to the adjudicating authority constitute relevant material to draw inference of clandestine removal by the avoidance of payment of duty. Once we have held that the statement of the Director could not be admitted as relevant piece of evidence, there is no question of there being any admission on the statement of the Director of the company. Then the only other material left is unverified private document in the form of certain entries made in the note book, seized during search operations. In view of what has been held by the Delhi High Court, with which we are in complete agreement and that the Trib....
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....h the identity of the buyers or the suppliers of the raw materials or the transporters. Further, it was held by the Tribunal that mere shortages detected at the time of visit of the officers cannot ipso facto lead to the allegations and findings of clandestine removal. The relevant findings recorded by the Tribunal read thus : - "7. The Revenue has again reiterated the same stand that as shortages detected at the time of visit of the officers, which has to be held that the respondents had cleared their final product in a clandestine manner. Admittedly, there is no other evidence on record so as to relate to the clandestine activities of the assessee. The Commissioner (Appeals) has rightly relied upon the various decisions of the Tribunal including the decision in the case of Jai Timber Company v. CCE & C, Bhopal [2009 (234) E.L.T. 457 (Tri.-All.)] and has rightly concluded that mere shortages detected at the time of visit of the officers cannot ipso facto lead to the allegations and findings of clandestine removal." 7. No illegality or perversity could be pointed out in the aforesaid findings of fact recorded by the Commissioner (Appeals) as well as the Tribunal w....
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....o find out finished product receipt details from regular dealers/buyers. (vi) To find out the excess power consumptions. (vii) Several decisions have been given by the Tribunals which have been confirmed by the High Courts that electricity consumption alone if adopted as a basis of the demand, the same is not tenable. The respondents can take the electricity consumption pattern as a corroborative piece of evidence, but, in absence of substantive proofs like - (a) Details about the purchase of the raw material within the manufacturing units and no entries are made in the books of account or in the statutory records. (b) Manufacturing of finished product with the help of the aforesaid raw material, which is not mentioned in the statutory records. (c) Quantity of the manufacturing with reference to the capacity of production by the noticee unit. (d) Quantity of the packing material used. (e) The total number of the employees employed and the payment made to them. In this case, statements of the labourers ought to have been reduced in writing, by the department which ought to ref....