TMI Blog2011 (11) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant that an opportunity should be given to the assessee to offer explanation and contest, when the Revenue relies upon Section 9D of the Act. - matter remanded back to tribunal for fresh decision. - Central Excise Act Case No. 15/2010 - - - Dated:- 8-11-2011 - MR. JUSTICE SANJIV KHANNA, MR. JUSTICE R.V. EASWAR, JJ. For Appellant: Mr. M.P. Devnath, Mr. Amar Pratap Singh Mr. Aditya Bhattacharya, Advocates. For Respondent: Mr. Satish Kumar, Sr. Standing Counsel. SANJIV KHANNA, J. The present appeal by Slotco Steel Products Pvt. Limited under Section 35G of the Central Excise Act, 1944, was admitted on 28th September, 2010, recording inter alia that the following two substantial questions of law arise for consideration:- 1. Whether the CESTAT was correct in dismissing the Appeal of the Appellants by relying upon Section 9D of the Central Excise Act when the adjudicating authority had not invoked the provision in its order-in-original? 2. Whether the CESTAT has failed to appreciate that failure on the part of the Central Excise Department to produce witnesses on whose statement they are relying upon does not mean that the Appellant has given up its r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaken by the appellant and the purchases recorded by them. Statements of Mahesh Kaushik, Naresh Kaushik, Tarun Kaushik, who are related to each other were recorded on different dates in 2005 and 2006. Premises of four concerns associated with them, namely Nahtek Engineers, Rising Steel Industries, Konark Engineers and Shree Krishna Trading were also searched. A search was conducted in the premises of Alpine Industries, Ganapati Enterprises and Instyle Creations and statements of Sandeep Dalmiya and Harish Dalmiya, proprietors of Instyle Creations and Alpine Industries were recorded. Harish Dalmiya was also managing affairs of Ganapathi Enterprises, sole proprietorship of his wife. Searches were conducted in the premises of SBJAY Auto Transmissions and statement of Jagmohan Aggarwal, Director of the said company was also recorded. Statements of Vikas Arora, proprietor of Sudarshan Industries, Anil Kanodia of K.G. Metal Industries and Ashok Arora, proprietor of SSP Manufacturing Trading Co. were recorded on different dates of 2006 and 2007. Statement of Wajinder Singh, proprietor of Continental Steel Sales, Ruchika Furnishers and Western-Eastern Industrial Enterprises, and that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahesh Kaushik vide his letter dated 2.1.2009 addressed to Superintendent (AdJ.) on behalf of himself, Tarun Kaushik and Naresh Kaushik has declined to come for cross-examination and stated that their statements recorded earlier may be relied upon. Notice addressed to Sh Rajender Dutt Sharma and Sh. Jitender have come back from postal authority with the remarks that no such persons have been found on the given address. No communication have been received from other 10 persons called for cross-examination. In such circumstances Learned Advocate very graciously agreed that there is no alternative but to proceed with the personal hearing. He very pains-takingly takes me through written submissions filed by him on behalf of both the notices and submits that it is clear from the written submissions that no case whatsoever has been made out against his clients. It is his submission that there is no evidence on record against his clients except statements recorded from those suppliers. Since they have not turned up for cross-examination, show cause notice has to be considered without relying on the statement of these persons. He seeks one week s time to file additional written submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment to raise the present duty demand. However, none of the above referred witnesses presented themselves for being cross-examined by the Noticees. It is submitted that as none of the witnesses on whose statement Department has relied for raising the demand in the present Show Cause Notice, have been produced for being cross examined by the Noticees. Department cannot rely on their statement to sustain the demands raised on the Noticees. The Noticees submit that as the witnesses on whose statement Department has relied have failed to answer the summon and produce themselves for cross examination no sanctity or credence can be attached to the statements made by them to the Central Excise Officers. It is submitted that therefore the Ld. Commissioner has to adjudicate the present Show Cause Notice without considering or relying on the statements given by the witnesses which have been relied upon in the Show Cause Notice by the Department. The Tribunal in a host of decisions has held that the statements of witnesses who have not been produced for cross examination cannot be relied upon by Department to sustain the allegations made on the assessee or to confirm the demands raised on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in evidence in the interests of justice. (2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceedings under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court. 14. The constitutional validity of the said Section was challenged and rejected by this Court in J K Cigarettes Ltd. vs. Collector of Central Excise, 2009(242) E.L.T. 189 (Del.). A Division Bench of this High Court examined the scope and ambit of Section 9D and held that the said Section is applicable in the following circumstances:- (a) when the person who had given the statement is dead; (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. 15. It was held that the aforementioned circumstances are exceptional circumstances and not ordinary or normal circumstances. Before Section 9D of the Act is applied or enforced, the authority must examine whether the conditions or pre-requisites mentioned above are satisfied. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame purpose and for the same object, the safe and well known rule of construction is to assume that the legislature, when using well- known words upon which there have been well known decisions, use those words in the sense which the decisions have attached to them. The provisions under Section 32 of the Evidence Act have not been found to be ultra vires of the Constitution. Therefore, the provisions under Section 9-D of the Act, which are pari materia with the provisions under Section 32 of the Evidence Act, cannot be held as ultra vires of the Constitution. 28. The moot question that arises at this stage is as to whether the provision in question is arbitrary. Such a provision can still be held to be offending Article 14 of the Constitution and can be termed as arbitrary if it is established that the provision gives uncanalised and uncontrolled power to the quasi judicial authorities. But, we are of the opinion that it is not so. The safeguards are inherent in the provision itself. In the first instance, only those statements of such persons, which are made and signed before the Central Excise Officer of a gazetted rank, are treated as admissible. Thus, protection is taken to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he exercise of powers. The aggrieved party is not remediless. This order/opinion formed by the quasi judicial authority is subject to judicial review by the appellate authority. The aggrieved party can always challenge that in a particular case invocation of such a provision was not warranted. 30. Therefore, it cannot be said that the provision gives uncanalised or uncontrolled power upon the quasi judicial authority. Granting of opportunity and passing reasoned order are the conditions inbuilt in exercise of power by any quasi judicial authority and, therefore, it is not necessary that these conditions should be specifically mentioned in the provision. The very fact that before power under Section 9- D(2) of the Act could be exercised, the authority has to satisfy itself about the existence of any of the conditions stipulated therein, which provides clear and sufficient guidance to such quasi judicial authority to exercise its power under the section. We may also state that such arguments have been repelled by the Supreme Court on number of occasions. {See Harishankar Bagla v. State of Madhya Pradesh, AIR 1954 SC 465; and Bhatnagars Co. Ltd. v. Union of India, AIR 1957 SC 47 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of discretion should be objective. Test of reasonableness is more strict. The public functionaries should be duty conscious rather than power charged. Its actions and decisions which touch the common man have to be tested on the touchstone of fairness and justice. That which is not fair and just is unreasonable. And what is unreasonable is arbitrary. An arbitrary action is ultra vires. It does not become bona fide and in good faith merely because no personal gain or benefit to the person exercising discretion should be established. An action is mala fide if it is contrary to the purpose for which it was authorised to be exercised. Dishonesty in discharge of duty vitiates the action without anything more. An action is bad even without proof of motive of dishonesty, if the authority is found to have acted contrary to reason. 16. As noticed above, Section 9D of the Act was not relied upon by the Assessing Officer. He did not examine and go into the aspect as to whether the pre-conditions or the prevailing circumstances justified the invoking of Section 9D. The contention of the appellant is that when the matter was heard by the tribunal on 19th March, 2010, the Revenue had not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ummons were issued only once but no opportunity was granted to the appellant to serve the summons on the witnesses. It is stated that the appellant should have been given another opportunity. It is also contended that the question of quantum of demand is also an issue and that the tribunal has accepted the entire quantum/addition. It is pointed out that the assessment order confirms the entire demand mentioned in the show cause notice dated 17th October, 2007 for a sum of Rs.1,48,60,803/- and a penalty of equal amount has been imposed along with an interest thereon. A penalty of Rs.50/- lakhs has been imposed on the Director. 18. As we find that the matter requires a remit for a fresh decision, we are not specifically answering the question whether Section 9D can be invoked and relied upon by the tribunal when the adjudicating authority has not relied upon the said section in its order. This aspect can be examined by the tribunal while deciding the matter on remand. We may, however, note the contention of the Revenue that Section 9D is a procedural section and when conditions mentioned in the said section are satisfied, it comes into operation and can be applied and it is immater ..... X X X X Extracts X X X X X X X X Extracts X X X X
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