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2015 (4) TMI 812 - CESTAT NEW DELHI

2015 (4) TMI 812 - CESTAT NEW DELHI - 2015 (327) E.L.T. 596 (Tri. - Del.) - SSI Exemption - Clandestine removal - The appellants are engaged in manufacture and trading of excisable goods - Statements of some suppliers - Invocation Section 9D - Held that:- While the allegation of duty evasion against the appellant is based on the statements of suppliers, admittedly their cross examination has not been allowed. If the adjudicator wants to invoke clause (a) of Section 9D(1), a finding has to be giv .....

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lay, or expense which is unreasonable nor the witnesses who are available, have been made available for cross examination which, in our view, is necessary. - Impugned order is set aside and the matter is remanded to the Commissioner for De novo adjudication in accordance with our observations in this order. - Decided in favour of assessee. - Excise Misc Application No. E/59894 & 55854/2014, Excise Appeal No. E/1408 & 2182/2009 -Ex[DB] - Final Order No. 50535-50536 /2015-Ex(Br) - Dated:- 4-3-2015 .....

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ri Saurabh Khattar is their managing director. The period of dispute in these appeals is from 2002-2003 & 2005-2006 and during this period the appellant company was availing SSI exemption. In addition to manufacturing unit in Narayana Industrial Area, they also have a trading unit from where they trade in the same products. 1.2 Om 27.12.2005 during the course of patrolling by the Jurisdictional Central Excise Officers in Narayana Industrial Area, a truck HR-47-5887 was found parked outside t .....

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the goods loaded in the truck. The officers visited the factory premises of the appellant company, and inquiry was made with Sh. Suresh Khattar, Managing Director of the appellant company, who was asked about the duty paying documents in respect of the goods loaded in the truck parked outside in the factory, but he could neither produce any invoice showing payment of duty nor he could explain as to why no invoice or bill has been issued. The goods found in the truck and which had been loaded fr .....

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entire goods manufactured in their factory at Narayana Industrial Area were directly sold to the customers from the factory, and that the goods sold from their trading division located at a different premises, were being purchased outside. As per the Appellant s record they were purchasing slotted angles, cable trays etc., for trading purpose from 23 suppliers, namely; M/s Bhartia Industries; Nehatek Engineers; Western Eastern Industrial Enterprises; SSP MFG. & TDG. Co.; Ruchika Furnishers; .....

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the suppliers, some of the suppliers were not found at their address. Some suppliers were found to be the residential premises of the individuals. Some of the suppliers were found to be manufacturing units but manufacturing totally different goods and some other suppliers were found to be trading premises, but were dealing with totally different goods. A number of existing suppliers stated that they had not supplied any goods to the appellant company and that the payments received by them from t .....

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original dated 27.01.2009 confirmed the duty demand of ₹ 1,48,60,803/- against the appellant company in respect of clandestine clearances alleged to have been made by them during period from 2002-2003 to 2005-2006 along with interest thereon under section 11AB and beside this, while imposed penalty of same amount was imposed on the appellant company under section 11AC, penalty of ₹ 50 Lakh on Shri Subhash Khattar, Director of the appellant company under Rule 26 of the Central Excise .....

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nt was that the appellants had sought of the cross examination of certain suppliers whose statements had been used against them in support of the allegation of the duty evasion, but their cross examination was not allowed, but this plea was dismissed by the Tribunal with observations that it was for the assessee to insist on for cross examination and that the authority is not forbidden from relying upon such statements, and that no obligation is cast upon the adjudicating authority to issue fres .....

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i) 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? ii) Whether the CESTAT has failed to appreciate that failure on the part of the Central Excise Department to produce witnesses on whose statements they are relying upon, does not mean that the appellant has given up its right for cross examining the witnesses? 1.6 Hon ble Delhi Hi .....

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as having given up their right of cross examining the witness. Hon ble High Court decided this question in favour of the appellant company, holding that the appellants cannot be treated as having given up their right for cross examining the witness. Accordingly, Hon ble High Court, remanded the matter to the Tribunal for De novo decision. 1.6.1 On the question as to whether section 9D of the central Excise Act 1944 can be invoked for relying upon the statements of the witnesses on whose stateme .....

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2010, the Revenue had not relied upon or referred to Section 9D of the Act during the course of arguments. During the course of hearing before us, learned counsel for the Revenue could not controvert or deny the said statement. It may be noted that both the appellant and the Revenue had filed written submissions before the Tribunal after the hearing was held on 19th March, 2010. We have examined the said written submissions and appellant had not referred to Section 9D of the Act in their written .....

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appellant is right in their contention that the said section could not have been invoked by the Tribunal without the appellant being given an opportunity to meet the said contention. It is the contention of the appellant before us that the pre-conditions of Section 9D are not satisfied and that the said section cannot be invoked. It is submitted that the judgment of this Court in J&K Cigarettes (Supra) requires satisfaction of the said conditions and an opportunity should have been given to .....

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on 9D including condition No. (e) are not satisfied. We may only record that it is a submission of the appellant that the assessing authority had not given or recorded any finding to the effect that presence of witnesses cannot be obtained without undue delay or expense, which the officer concerned considers to be unreasonable. Appellant, in this connection, has relied upon order dated 7th January 2009 and had urged that summons were issued only once but no opportunity was granted to the appella .....

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on. A penalty of ₹ 50 Lakhs has been imposed on the Director. 18. As we find that the matter required 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 s .....

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the Tribunal. In respect of question No. 1, it is directed that the Tribunal will re-examine the question of application of Section 9D of the Act. 20. The appellant during the pendency of the investigation had deposited a sum of ₹ 28 lakhs on account of excise duty. As per the impugned assessment, total duty evaded by the appellant is ₹ 1,48,60,803/-. Penalty of an equal amount has been imposed. Even if ₹ 28 lakhs is reduced from the aforesaid amount of ₹ 1,48,60,803/-, .....

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e assets including fixed plant and machinery without the permission of the Tribunal. Details of existing encumbrances, if any, on the assets, will be stated in the undertaking. The aforesaid direction has been given to cut short delay and on balance of equities. As noticed above, the orders passed on the stay application is itself subject matter of challenge in this appeal on which an order of remand for fresh decision has been passed. 21. the appeal is accordingly disposed of. No costs. 1.7 Acc .....

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ng division, that the trading division of the appellant company was procuring the same goods from a number of other suppliers, that the Department s case is mainly based on the statements of some of the suppliers stating that they had issued only bogus invoices without supply of any goods and had returned the sale proceeds in cash after deducting the sales tax and their commission, that the appellant had sought cross examination on those witnesses, but the same was not allowed, that the statemen .....

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ant company was necessary and the same had been specifically sought by the appellant but the same was not allowed, that while the Department relies upon the statement of one Sh. Mahesh Kaushik, this person is still doing business with the appellant, that the Hon ble High Court in the case of J&K Cigarettes Ltd.vs. Commissioner of Central Excise reported in 2009 (242) ELT 189 Del, has, after discussing section 9D, has held that the right to cross examination, in quasi judicial proceedings can .....

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, whose statement has been relied upon by the Department in support of allegation of duty evasion against an assessee, is available, the statement can be used against that assessee, only if, after permitting the witlessness s cross examination, the Adjudicating Authority is of the opinion that the statement is true and that in the cases where the person who made the statement and which is sought to be used against the assessee is dead or cannot be found, or is incapable of giving evidence, or is .....

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g vs. Commissioner of Customs reported in 2013 (294) ELT 353 Del. while interpreting the provision of section 138B of Customs Act 1962 which is in parameteria That the section 9D of Central Excise Act, 1944, has held that statement of witness cannot be used against an assessee without giving the assessee an opportunity to cross examine the witness, and that cross examination is valuable right of the noticees in quasi judicial proceedings which can have adverse consequences for them, and that it .....

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ents cannot be used against the appellants without permitting their cross examination. He, therefore, pleaded that the impugned order is not correct. 3. Shri Pramod Kumar, the Ld. Jt. CDR, defended the impugned order by reiterating the findings of the Commissioner and pleaded that in the factory of the appellant company, there was enough infrastructure available to manufacture the goods which were being traded from their trading premises, that though the appellant show a purchase of the slotted .....

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om whom the purchase of slotted angles, shelves, cable trays etc., is shown, have denied having supply those goods and they were either not manufacturing those items or were not dealing in those items and when the appellant company had all the necessary infrastructure and capacity to manufacture those items, the inescapable conclusion would be that the slotted angles, shelves, cable trays etc., sold from the trading premises had actually been manufactured in the appellant company s factory and h .....

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ing treated by them from their trading division located at different premises. The allegation of the Department is that the goods manufactured in the factory premises of the appellant at Narayana Industrial Area were being clandestinely cleared to their trading premises without payment of duty from where the same were being sold and hence, all the goods sold from the trading premises had actually been manufactured by the appellant. It is on this basis that that duty demand of ₹ 1,48,60,803 .....

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emises, are either not traceable or they do not have the facility to manufacture those items or they are not trading in those items and in number of cases, the suppliers have denied having supplied the goods and have admitted that the payments received from the appellant company had been returned by them to the appellant company in cash after deducting their commission and the sales tax. The claim of the appellant company is that all the goods manufactured in their factory premises at Narayana I .....

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has been conducted in respect of the bank accounts of those suppliers to prove that the cheques issued by the appellant company as payment for the goods purchased from them had been deposited in their accounts and immediately, thereafter, the amounts had been withdrawn. Thus, the evidence in support of the allegation of duty evasion against the appellant company is only the statements of suppliers, whose correctness is being disputed by the appellant. Earlier, the Tribunal in its final order dat .....

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epartment is relying upon and whether the failure of the appellant to press for the production of the witnesses for cross examination would amount to the appellant giving up their rights for cross examining those witnesses and Hon ble High Court decided this question in favour of the Appellant and against the Department. Thus, in the cases where the Department relied upon the statements of certain suppliers in support of the its allegation of duty evasion against the appellant, but failed to pro .....

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tion. 6. In terms of section D(1) of Central Excise Act, 1944, a statement made and signed by a person before any Central Excise Officer of a Gazetted Rank during course of any inquiry or proceeding under this act shall be relevant, for the purpose of proving, non-prosecution for an offence made under this act, the truth of the facts which it contains a) When a person who made the statement is dead, or cannot be found, or is capable of giving evidence, or is kept out of the way by the adverse pa .....

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edings before a court and for such prosecution proceedings, any statement given by a person before Gazetted Central Excise Officer under section 14 of the Central Excise Act 1944, would be relevant for proving the truth of the facts which it contains only in two situations. The first situation is that the person who had made the statement is examined as a witness before the court and the court is of the opinion that his statement should be admitted as evidence in the interest of justice. The oth .....

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ay be, applied in relation to any proceedings under this act other than proceedings before the court, as they applied in relation to a proceeding before the court. The implications of sub section (2) of section 9D, is that the provisions of sub section (1) of Section 9D, as far as possible, would be applicable to the Adjudication Proceedings also. Therefore, for the purpose of adjudication proceedings when the adjudicator relies upon the statement of a person in support of the allegation of duty .....

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ty evasion against an assessee without cross- examination are those enumerated in clause (a) of section 9D(1), that is, 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 the adverse parties, or whose presence cannot be obtained without amount of delay or expense which is unreasonable. 8.2. In terms of the judgment of Hon ble Delhi High Court in the case of J&K Cigarettes ltd. Vs CCE reported in 2009 (242) ELT 189 D .....

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ble for cross examination and the situation enumerated under section 9D(1)(a) are not there, his statement would be admissible as evidence only when he has been examined as a witness, that is, his cross examination has been allowed and after cross examination of the Adjudication, consider the statement to be true. 9. Cross examination would be an absolute necessity when the statement of a witness is the only or the main evidence in support of allegation of duty evasion against an assessee and as .....

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