TaxTMI 
TaxTMI 
2026 (4) TMI 1354
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....t that the appellant had destroyed a part of the raw material by putting it into the boiler as it could not be used in the manufacture of the final product. It also came to the notice of the department that part of the raw material was cleared 'as such' by the appellant during the period from March 2015 to March 2017. During the course of audit of the records of the appellant for the period from July, 2015 to January, 2017 some discrepancies were also noticed in respect of the consumption of raw material. 3. Accordingly, investigation was initiated against the appellant and, ultimately, a show cause notice dated 26.08.2020 was issued to the appellant, Lalit Babbar (Director of the appellant) and K.C. Sharma, (Authorized Signatory of the appellant). The show cause notice mentions that from a perusal of the balance sheet for the Financial Year 2015-2016 and the Financial Year 2016-2017, it came to notice that the appellant had shown the rejected raw material as used in manufacturing. The show cause notice also refers to the statement of N.K. Verma (Production Manager) and Lalit Babbar (Director of the appellant) made under section 14 of the Central Excise Act. The relevant portion....
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....ears to be recoverable from M/s REPL under Rule 14 of CENVAT Credit Rules, 2004 read with proviso to Section 11A(4) along with the Interest under Section 11AA of Central Excise Act, 1944." (emphasis supplied) 5. The appellant filed a reply to the show cause notice which was received by the department on 09.11.2021. The appellant denied the allegations mentioned in the show cause notice and gave an explanation in respect of CENVAT credit on inputs used in boiler, CENVAT credit on inputs on cleared values, and CENVAT credit on inputs shown as excess consumption. The appellant also pointed out that neither the extended period of limitation could have been invoked in the facts and circumstances in the present case nor the statements made under section 14 of the Central Excise Act could be considered as relevant since the procedure contemplated under section 9D of the Central Excise Act had not been followed. 6. The Principal Commissioner, by the order dated 11.02.2022, did not accept the contentions advanced by the appellant in the reply to the show cause notice and confirmed the demand with interest and penalty after holding that the extended period of limitation was correctl....
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....: Aluminium 2500 kg/KM approx XLPE 500 Kg/ KM approx GI Strips 750 Kg/Km approx to 1100 Kg approx. PVC compound Total 1000Kg/km (inner and Outer) He further stated that he has provided these particulars information as per his experience in the industry for 1718 years; that Shri D.K. Mishra, lab incharge has prepared a chart called as GTP which contain information regarding which type of cable has to be manufactured and the specification of the cable has been given in that chart; that the assessee has shown a quantity as 6095 Kgs. of Aluminium consumed against the standard 2500 Kgs. which is absolute wrong and impracticable and is much excess than real. Sh. Lalit Babbar, in his statement dated 09.03.2020 also agreed with the calculation of raw material made by Sh. N.K. Verma, Investigating officers, therefore, concluded that Noticees have shown excess consumption of raw material in manufacturing of their final products. Item wise excess consumption was calculated by the officers as per details in Para 13.2 (E) of the SCN on which Cenvat amounting to Rs. 3,51,28,345/- was excess taken and was required to be reversed. In para 13.2.D of the show cause n....
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....ncumbent upon the adjudicating authority to admit the said evidence upon examination in chief and then offering the same for cross-examination by the Noticees against whom the said statements are intended to be used. Noticees, therefore, pray to the Adjudicating Authority to summon the said persons for examination and cross-examination. Section 9D of the Central Excise Act, 1944 in this regard may be referred to. It statutorily requires the procedure of admission of such statement to be followed. I do not find any force in their plea fine cross-examination of the persons whose statements were recorded and relied on in this case. The Statements are of employees and Director of the Company and the allegations are based on documentary evidences. In the circumstances I am of the view that no purpose is going to be served in allowing cross examination of employees and Director of the Company. The contention for cross examination is, therefore, not acceptable." (emphasis supplied) 11. Regarding the invocation of the extended period of limitation, the Principal Commissioner recorded the following findings: "4.59. Now I come to their further contention that extended period i....
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....pon the decision of this Tribunal in M/s Surya Wires Pvt. Ltd. vs. Principal Commissioner, CGST, Raipur [Excise Appeal No. 51148 of 2020 decided on 01.04.2025]; (ii) In the balance sheet for Financial Year 2014-15, an amount of Rs. 25,67,340 /- was reflected under the head 'transfer rejected (unused) for self-use in boiler for fire'. The appellant had, therefore, reflected the consumption of such inputs in the balance sheet and also declared the same in the monthly returns submitted before the appropriate officer, but neither this objection was raised nor any further information was sought by the department. The appellant was, therefore, entitled to avail CENVAT credit and denial of CENVAT credit of Rs. 13,67,345/- is, therefore, not justified; (iii) The appellant had correctly claimed CENVAT credit of Rs. 47,65,962/- on inputs cleared on reduced value. The appellant had shown raw material correctly 'as such' in the ER-1 returns; (iv) The finding of the Principal Commissioner for disallowing CENVAT credit of Rs. 3,51,28,345/- on alleged excess consumption inputs is only on assumption. N.K. Verma, Production Manager, had explained the quantity used for man....
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....he Central Excise Act cannot be considered as relevant in the facts of the present case but this contention has been rejected by the Principal Commissioner for the reason that the statements are of employees and Directors of the company and as they are based on documentary findings, no purpose would be served by allowing cross examination of the employees and the Directors of the company. 17. The Principal Commissioner completely failed to appreciate that the contention that was advanced on behalf of the appellant was that it was incumbent upon the adjudicating authority, in terms of section 9D of the Central Excise Act, to first conduct the examination-in-chief of the person whose statements were recorded under section 14 of the Central Excise Act and if the evidence was admitted, then to permit cross-examination such persons whose statements had been recorded. It is also seen from the findings recorded in paragraph 4.48 of the order that the contention of the appellant that they had submitted revised figures of raw material consumption was not accepted for the reason, that they were admitted by the authorized representative and Directors in their voluntary statements. These st....
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....xcise Act. A bare perusal of subsection (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 justice, except where the person who tendered the statement is dead or cannot be found. In view of the provisions of sub-section (2) of section 9D of the Central Excise Act or sub-section (2) of section 138B of the Customs Act, the provisions of subsection (1) of these two Acts shall apply to any proceedings under the Central Excise Act or the Customs Act as they apply in relation to proceedings before a Court. What, therefore, follows is that a person who makes a statement during the course of an inquiry has to be first examined as a witness before the adjudicating authority and thereafter the adjudicating authority has to form an opinion whether having regard to the circumstance....
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....sibility 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, for the purpose of proving the truth of the facts contained therein. 16. Section 9D of the Act came in from detailed consideration and examination, by the Delhi High Court, in J.K. Cigarettes Ltd. v. CCE, 2009 (242) E.L.T. 189 (Del.). Para 12 of the said decision clearly holds that by virtue of sub-section (2) of Section 9D, the provisions of sub-section (1) thereof would extend to adjudication proceedings as well. ***** 22. If none of the circumstances contemplated by clause (a) of Section 9D(1) exists, clause (b) of Section 9D(1) comes into operation. The said clause prescribes a specific procedure to be followed before the statement can be admitted in evidence....
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....rity 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. 26. 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 cross-examination has to precede re-examination. 27. It is only, therefore, - (i) after the person whose statement has already been recorded before a gazetted Central Excise Officer is examined as a witness before the adjudicating authority, and (ii) the adjudicating authority arrives at a conclusion, for r....
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....vered 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 the adjudicating authority followed by the opinion of the adjudicating authority then the statement should be admitted. The said provision in the statute book seems to have been made to serve the statutory purpose of ensuring that the assessee are not subjected to demand, penalty interest on the basis of certain admissions recorded during investigation which may have been obtained under the police power of the Investigating authorities by coercion or undue influence. 9.5 ***** The provisions contained in Section 9D, therefore, has to be construed strictly and held as mandatory and not mere directory. Therefore, unless t....
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....ed 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, we may note, though admissible in evidence, acquire relevance only when they are, in fact, admitted in evidence, by the adjudicating authority and, if the affected assessee so chooses, tested by cross-examination. We may, in this context, reproduce, for ready reference, Section 138B of the Act, thus:***** A Division Bench of this Court has, speaking through A.K. Sikri, J. (as he then was) held, in J & K Cigarettes Ltd. v. Collector of Central Excise [2009 (242) E.L.T. 189 (Del.)] that, by virtue of sub-section (2), Section 138B(1) of the Act would apply, with as much force, to adjudication proceedings, as to criminal proceedings. ....
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....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) 27. A Division Bench of this Tribunal in Surya Wires after examining the aforesaid decisions of the High Court held that the statements made under section 108 of the Customs Act during the course of an inquiry under the Customs Act shall be relevant for the purpose of proving the truth of the facts contained in them only when such persons are examined as witnesses before the adjudicating authority and the adjudicating authority forms an opinion that the statements should be admitted in evidence. 28. It, therefore, transpires from the aforesaid decisions that both section 1....
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....ly suppressed the facts of burning the raw materials on which CENVAT credit was availed to avail irregular CENVAT credit with intent to evade payment of duty. It also mentions that the appellant showed clearance of rejected raw material in the ER-1 returns on the reduced value with an intention to evade payment of duty. 32. The Principal Commissioner has merely reproduced the allegations made in the show cause notice to hold that the extended period of limitation was correctly invoked. 33. It is clear that the case of the department is based on the balance sheet for the Financial Years 2013-14 to 2016-17. The contention of the appellant is that the documents required during investigation were provided to the department including the balance sheet. The appellant had also reflected and accounted for inputs in the statutory records and monthly ER-1 returns. The appellant had declared the sale of inputs as rejected raw materials in the ER-1 returns. The officers could have sought details or raised objections on the information furnished by the appellant in the returns. 34. The invocation of extended period of limitation under section 11A(4) of the Central Excise Act has to be ....