TMI Blog1995 (9) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... ords took into possession 20 gate passes against which the appellants had received Iron and Steel Waste/Scrap from M/s. Dee Kay Steel Corporation and M/s. Sonu Iron Store, Mandi, Chandigarh. Investigations made by the authorities concerned indicated that the appellants have received 333.215 MTs of Iron and Steel scrap against the 20 gate passes taken over by them and on this quantity of Iron and Steel scrap, the appellants had availed Modvat credit amounting to Rs. 2,09,925.45 during the period 20-8-1990 to 8-12-1990. The said gate passes so resumed by the officers showed M/s. Anupama Steel Industries, Plot No. 15, M/s. Ganpat Rai Jai Gopal, Plot No. 35, and M/s. Mahadev Industrial Corporation, Plot No. 34 all of Alang (Gujarat) as consignors of the goods. However, as per Revenue, Shri Ashwani Bhai Bhagwan Bhai Gujrati, partner of M/s. Mahadev Industrial Corporation, Shri Sanjeev Satpal Sharma, Director of M/s. Anupama Steel Industries Ltd., and Shri Vipin Ganpat Rai Aggarwal, partner of M/s. Ganpat Rai Jai Gopal in their statements dated 5-1-1991, 6-1-1991 and 5-1-1991 respectively stated that the gate passes so taken over from the appellants showing M/s. Sonu Iron Store, Mandi Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded on 15.1.91. According to these persons the Gate passes in question against which a quantity 333.215 MTs of Iron and Steel scrap was received by the appellants had not been issued by any of their firms in favour of either M/s. Dee Kay Steel Corporation and M/s. Sonu Iron Store, Mandi Gobindgarh. They have further stated that the gate passes bearing the same serial numbers as appearing on the gate passes taken over by the Central Excise Officers from the appellants had actually been issued by them in favour of other parties. During the proceedings before the Additional Collector, the appellants had made a request that they should be given an opportunity for cross-examination of the persons whose statements had been relied upon by the Department. We are of the view that since the Department s case regarding the gate passes in question being fictitious mainly rests on the evidence of the Partners/Director of the concerned firms at Alang (Rajkot), the denial of opportunity to cross-examine the concerned persons was violative of the principles of natural justice. On these grounds, we hold that the impugned Order is not sustainable. We, therefore, set aside the order appealed against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not given any opportunity to cross-examine the witnesses. The alleged statements of the witnesses recorded during investigation behind the back of the appellants cannot therefore be taken into consideration and has to be disregarded. If that is so, nothing survives for consideration for this Tribunal. He submitted that for the same reasons, the impugned Order-in-Appeal is also cannot be sustained. 6 On merits, he submitted that the appellants correctly availed the credit of duty on the inputs received in the factory, along with the gate passes evidencing payment of duty of excise and used by them in the manufacture of their final product. All the 20 gate passes in question bear the seal and stamp of the officers of the Central Excise Department of Alang. The entire material so received under the said gate passes was entered in Raw Material Account (Form IV) as well as in RG-23 Part-I and Part-II. The said material was used in the manufacture of final products and the inputs as well as the final products were mentioned in monthly returns in RT-12. These were finalised and the gate passes in question were defaced. All the payments were made by crossed Account Payee s cheque. All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for 27-10-1992, 9-11-1992, 12-12-1992, 23-1-1992, 10-2-1992, 30-3-1993 which was finally held on 17-5-1993. None of the witnesses turned up for cross-examination, except for written statements tendered by two of the witnesses one partner of Ganpat Rai Jai Gopal and other AB Gujrati, Partner of Madhaw Industrial Corporation. 9. From the above findings of the adjudicating authority, it is obvious that the opportunity was not given to the appellants to cross-examine third parties on whose statement reliance was placed by the Department and, in fact, on whose statements the present demand has been confirmed. It is an elementary principle of natural justice and fair play that a person who is sought to be proceeded against and penalised in adjudication on the basis of third party statements should be afforded effective opportunity to challenge the correctness of the same as per law by cross-examination, if he so desires. If witness do not turn up for cross-examination, it is open to the adjudicating authority to proceed with the adjudication without relying on these statements against the person so charged. Failure of a witness to appear for cross-examination will not be a ground to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of witness will not be a ground to penalise the appellant in law when the appellant is entitled to an opportunity of cross-examination of third parties on whose statements reliance is placed. The proceedings are penal in nature....". (Emphasis ours) 10. Besides, the case of Pahar Chand Sons v. The State of Punjab, (1972) 30 STC 211, decided by the Division Bench of the Punjab Haryana High Court (cited by the appellants in the memo of appeals) also applies on all fours to the present case. In that case also, the Sales Tax Assessing Authorities under the Sales Tax Act were treating the sales recorded in the books of accounts as fictitious and the assessing authorities relied upon the testimony of the witnesses without giving opportunity of cross-examination to the assessee therein. Setting aside the assessment, the Court observed (1) that if the assessing authority was relying on the testimony of a witnesses, the assessee should have been afforded an opportunity to cross-examine. It was not open to the assessing authority to get over this hurdle on the plea that the witness had not been produced by the assessee; and (2) that the assessing authority acted on material which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how Cause Notice, but have brought on record both the documentary and circumstantial evidence to demolish the case of the Department. That is to say, the present case is not merely a case of statement against the statement, but is a case where the witnesses who have made the statement during the investigation/enquiry behind the back of the appellants are keeping themselves away and are not ready to stand the test of cross-examination against the statement (defence) of the appellants duly corroborated by the facts and circumstances of the case and the undisputed documentary evidence on the record. To wit, as per Rule 55 read with Rule 173D of the Central Excise Rules, 1944, a manufacturer is required to maintain the raw-material account in the prescribed form and furnish information to the authorities concerned. As per Rule 54, the manufacturer is required to submit the monthly returns. As per amended Rules 54 and 173G, the manufacturer is required to submit the duty paying documents on which credit has been taken along with extract of RG-23A, Part I Part II, and on submission of the duty payment documents the same are verified and defaced by the Superintendent of Central Excise b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. v. Commissioner of Income-tax, Bombay City, (1962) 45 ITR 206, wherein the Supreme Court has observed as follows : The Income-tax Officer is not bound by any technical rules of the law of evidence. It is open to him to collect materials to facilitate assessment even by private enquiry. But if he desires to use the material so collected, the assessee must be informed of the material and must be given an adequate opportunity of explaining it. It will be noticed that if the sales tax authorities refused the prayer of the assessee to cross-examine the wholesale dealers, then such a refusal would not amount to an adequate opportunity of explaining the material collected by the assessing authority. [Extracted from State of Kerala v. K.T. Shaduli Yusuff, (1977) 39 STC 478 - SC]." 12.1 The reason for holding so is not far to seek for, to quote the Apex Court again : .... It is difficult to conceive as to how the assessee would be able to disprove the correctness of the accounts of Haji P.K. Usmankutty or the other wholesale dealers, unless he is given a chance to cross-examine them with respect to the credibility of the accounts maintained by them. It is quite possible th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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