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J & J Precision Industries and Others Versus Commissioner of Central Excise, Goa

2015 (10) TMI 372 - CESTAT MUMBAI (LB)

Relevancy of statements under certain circumstances - principles of natural justice - Cenvat Credit - allegation of fake/manipulated documents - non receipt of the goods - difference of opinion is whether the lower authorities have violated the principles of natural justice by denying cross examination for the appellant and whether the matter needs reconsideration by the adjudicating authority for following the mandate of Section 9D of the Central Excise Act, 1944.

Held that:- the pro .....

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s of natural justice, non-speaking and further violates the provisions of Section 9D of the Central Excise Act. Thus, the impugned order is set aside and the matter is remanded back to the adjudicating authority with a direction to provide opportunity of hearing to the appellants in accordance with law, more particularly to provide opportunity of cross-examination of persons, the statements to whom have been relied upon by the Revenue and to consider the evidence on record or now produced in the .....

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SEKHARAN AND ANIL CHOUDHARY, JJ. For The Appellant : V.M. Doiphode, Stebin Mathew and Devang Parikh, Advocates for the Appellant. For The Respondent : K.M. Mondal, Spl. Counsel ORDER P.R. Chandrasekharan, Technical Member - The appeals are directed against Order-in-Original No. 05/Commissioner/ Goa/CX/2007 dated 29/03/2007 passed by Commissioner of Customs, Central Excise & Service Tax, Goa. Vide the impugned order, the learned adjudicating authority has confirmed a duty demand of ₹ 4, .....

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lty imposed (in Rs.) 1 M/s. Annapurna Impex Pvt. Ltd-. 3,06,03,937/- 2 Navneet Agarwal, Managing Director of S. No. 1 above 3,06,03,937/- 3 M/s. Mardia Samyoung Capillary Tubes Co. Ltd. 70,48,480/- 4 M/s. Mardia Tubes Pvt. Ltd. 10,04,622/- 5 Ravindra Mardia, Managing Director of S.No. 3 above 80,53,102/- 6 Jay Wire & Conductors 5,17,445/- 7 Ramesh Ratilal Chauhan, Partner of S. No. 6 above 5,17,445/- 8 M/s. Deepak Glass & Plywoods 37,38,809/- 9 Ambalal Jain, Proprietor of S. No. 8 above .....

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dia Samyoung Capillary Tubes Co. Ltd., M/s Mardia Tubes Pvt. Ltd., M/s Jay Wire & Conductors, M/s. Deepak Glass & Plywoods, M/s. Uttam Glass Co., M/s. Lata Steels, Shri Joit Kumar Jain, Shri Navneet Agrawal, Shri Ravindra Mardia, Shri Ramesh Ratilal Chauhan, Shri Ambalal Jain, Shri Bhavarlal Jain, Shri Pawan Lata, Shri Pravin Singh, M/s. Gullchem Industries and Shri Narayan Walvalkar are before us. 2. The case against the main appellant, M/s. J&J Precision Industries, is that they av .....

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glass and sheet glass alleged to have been supplied by M/s. Deepak Glass & Plywoods; (vi) ₹ 9,91,379/-. on float glass and sheet glass alleged to have been supplied by M/s. Uttam Glass Co.; and (vii) ₹ 6,45,875/- on Stainless Steel/HR Coils/Sheet, etc. alleged to have been supplied by M/s. Lata Steels. 2.1 It is the case of the Revenue that copper ingots/bars/rods and float glass/sheet glass are not at all required for manufacture of wristwatch cases and wristwatch straps, which .....

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to have undertaken the supplies are also relied upon. In addition, some of the documents seized were subjected to forensic examination which revealed the bogus/fake nature of the documents. Accordingly show-cause notice was issued which was adjudicated upon by the impugned order and the demands were confirmed and penalties imposed. Aggrieved of the same, the appellants are before us. 3. The learned Counsel for the main appellant, J & J Precision Indsustries and its proprietor, Shri. Joit Ku .....

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937/- 2. M/s. Mardia Samyoung Capillary Tubes Ltd. Copper/ Brass ₹ 70,48,480/- 3. M/s. Mardia Tubes Ltd. Copper/ Brass ₹ 10,04,622/- 4. M/s. Jay Wire & Conductors Copper ₹ 5,17,445/- 5. M/s. Deepak Glass & Plywoods Float Glass ₹ 37,38,809/- 6. M/s. Uttam Glass Company Sheet Glass ₹ 9,91,379/- 7. M/s. Lata Steels Stainless Steel ₹ 6,45,875/- Total credit availed Rs.4,45,50,547/- 3.2 The appellant cleared on payment of Central Excise duty Watch Cases and .....

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e - VIII, Ludhiana, regarding purchase of raw materials from M/s. Annapurna Impex with a request to verify the records and confirm the facts to the Superintendent of Central Excise in charge of appellant's factory. 3.3 On 25/4/05, the officers of Directorate General of Central Excise Intelligence searched the factory premises of the appellant. A detailed investigation was conducted by recording statements of the employees and the proprietor of the appellant's firm. Enquiries were made at .....

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ted the request for cross examination on the ground that they are co-noticees/co-accused and cross examination need not be allowed. This fact is recorded in the minutes of personal hearing held on 19/6/06. Request for cross examination of other witnesses, particularly of employees of the appellant's firm, who had retracted their statements, was rejected which is also recorded in the minutes of personal hearing held on 30/6/06 by relying upon the decision of the Tribunal judgement in the in t .....

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r has relied upon other evidences which are as under : (a) Invoice Nos. 307 dated 23/3/05 and 310 dated 24/3/05 issued by M/s. Annapurna Impex Pvt. Ltd. and on these dates, there was no physical stock available with the said supplier. (b) Panchnama proceedings drawn on 18/5/2005 at the factory of M/s. Annapurna Impex Pvt. Ltd., as per which they did not have any facility to manufacture Copper ingots, and no quantity of copper ingots were found during the course of search. (c) Vehicle Verificatio .....

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2005 showed that the amounts allegedly paid for the supplies made were withdrawn in cash immediately. (e) The transporters, M/s. Satkar Tempo Transport Union and M/s. New Satkar Tempo Transport Union at Ludhiana whose vehicles were mainly used for transport of the goods from M/s Annapurna Impex as reflected in the transport documents corroborated the fact that transactions were fictitious. (f) M/s. Multi-Arc Ltd., Umargam had not plated wristwatch cases made out of copper on the basis of invoice .....

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ny of these endorsements showed that though the endorsements appeared to show the receipt of the consignments by the appellant, the said handwriting tallied with the handwriting showing receipt of the consignments at Bangalore on the same dates which fact been confirmed by the Central Govt. Examiner on Questioned documents, Hyderabad, in his expert opinion. (i) M/s. Dharti Road Corporation and M/s. Bhimandi Andhra Transport Company who allegedly transported inputs from M/s. Uttam Glass Co., Hyde .....

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found, or is incapable of giving evidence, or kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or (b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. (2) .....

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pholding the validity of Section 9D also held that the right of cross examination in any quasi-judicial proceedings is a valid right given to a noticees as these proceedings may have adverse consequences to the accused while at the same time, under certain circumstances this right of cross examination can be taken away. Such circumstances have to be exceptional as stipulated in said Section 9D. It is thus clear that unless such circumstances exist, the noticee has a right of cross examination, e .....

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hen he must offer them for cross examination and if they are not offered for cross examination, the Adjudicating authority cannot rely upon the contents of those statements. Therefore, the Ld. Commissioner has erred in relying upon the contents of the various statements without granting cross examination of the deponents. In the absence of exceptional circumstances as enumerated in Section 9D exist, the Commissioner is not justified in refusing cross examination. 3.7 In the alternative, it is su .....

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ring the period 7/11/03 to 24/3/05 and the reliance is placed on the Panchnama dated 18/5/05. There is no dispute that M/s. Annapurna Impex Pvt. Ltd., has paid duty in respect of these invoices. Therefore, if subsequent to that date, if no machinery was found for manufacture of copper ingots, no adverse conclusion can be drawn against the appellant, particularly when the appellant, vide letters dated 2/12/03 and 4/8/04 had written to Superintendent Central Excise to verify regarding purchase of .....

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The appellant submits that since the subject inputs were delivered at their factory, they cannot be blamed for the wrong registration numbers declared on the L.Rs. At worst, Cenvat credit attributable to these vehicles which were incapable of carrying the inputs could be demanded from them and the Ld. Commissioner could be asked to quantify the demand in respect of inputs pertaining to these vehicles. 3.9 The Ld. Commissioner has relied upon the statement of bank account of M/s. Annapurna Impex .....

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o the total consideration paid by the appellant. 3.10 The Ld. Commissioner has also relied upon the Purchase Tracking Register. However, each and every order in the purchase Register has not been mentioned in Purchase Tracking Register as it was maintained for only casual items requiring emergency supplies. 3.11 The Appellants had submitted Form ST.XXIV-A obtained from the Excise & Taxation Dept. of Punjab (as recorded by Commissioner in para 68 (xii) to show the goods were sent through the .....

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few models, no conclusion can be drawn that appellant has not used copper. 3.13 In the RT-12 Return and in Annexure VI to Form 3CD, which forms part of the Audit Report for the financial year 2003-04, appellant has mentioned the raw material as brass and not copper. Appellant submits that he was mentioning brass everywhere, as brass and copper are the same except that brass is an alloy of copper. Therefore, this cannot be considered as a direct evidence in support of the case that the appellant .....

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led has been reversed by debit in PLA, the Ld. Commissioner ought to have given credit to the extent of ₹ 59,21,157/- reversed by the Appellants in RG-23 Part II. 3.15 The Appellant, in respect of Central Excise invoices Nos. 307 dated 23/3/05 and 310 dated 24/3/05, had reversed cenvat credit of ₹ 5,65,000/- as observed in para 4 of the Show Cause Notice. However, no credit has been given in respect of these reversals while computing the duty demand. 3.16 In the light of the above su .....

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& J Precision Industries. The charge against the main appellant is availment of Cenvat credit without receipt of materials. The job-work activities undertaken by the appellant has nothing to do with availment of cenvat credit. Even if it is assumed that they showed in the job-work documents of having undertaken gold plating without having actually undertaken the said activity, it would not alter the position. Therefore, the charge against the appellant of having aided/abetted M/s J & J .....

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G 23 D register maintained by them and also in the form C issued for inter-state sales. The charge that one of the vehicles used for transportation as mentioned in the invoices was a tanker which was incapable of transportation of the goods supplied by them, it is their contention that it is the buyer who had arranged for the transportation and therefore any mistake in this regard could not be attributed to them. It is also submitted that if any wrong credit has been taken, the same has to be re .....

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f ineligible cenvat credit by M/s J & J Precision Ind. Ltd. and therefore, no action lies against them. They have admitted before the investigating officer about issue of invoices without supply of goods and they have nothing more to add in this regard. They have done nothing illegal and there is no provision in law providing imposition of penalty on the co-appellants who merely issued the documents and therefore, the imposition of penalties on the co-appellants is clearly unsustainable in l .....

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. They also dispute the statements of the transporters who have denied having transported the goods from their premises to Goa. In any case, it is their submission that since the goods supplied by them are not liable to confiscation, they are not liable to any penalty under Rule 26 of the Central Excise Rules, 2002. 5. The learned Special Consultant for the Revenue made the following submissions:- 5.1 The appellant M/s. J & J Precision Industries, Goa is a proprietary firm of Shri Joit Kumar .....

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f DGCEI, Mumbai caused detailed enquiries at various places. In the course of such enquires, the officers made searches of the premises of the appellant-firm, its purported suppliers of inputs and also of the transporters and resumed various incriminating documents examination of which revealed that during the period April 2003 to April 2005, the appellant-firm had availed irregular and inadmissible Cenvat Credit of ₹ 4,45,50,547/- on the inputs, namely, copper, float glass, sheet glass, e .....

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er been received in the factory & copper ingots as such had never been/cannot be used in the factory. During recording of his statement, he was shown two invoices, invoice no. 307 dated 23/03/05 & invoice no. 310 dated 24/03/05 of M/s. Annapurna Impex Pvt. Ltd., Ludhiana under which Copper Rods valued at ₹ 480/- per Kg. was shown to have been consigned to the appellant firm and cenvat credit was availed on it. On a query, Shri Mahale admitted that no such material was received in t .....

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ated 14/11/2003 of M/s. Matiz Metals Pvt. Ltd., Meghalaya, under which copper ingots were shown to have been received, though no goods were physically received by the appellant firm. (ii) Shri A.N. Nagraj, Production in-charge, in his statement recorded on 25/04/2005 had, inter alia, stated that he had been in the employment for the past six months and he had never seen copper being received in the factory. He also stated that for manufacture of components of Wrist Watch Cases & Straps, the .....

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r alia, categorically stated that no such materials were received in the factory. (iv) Smt. Namrata Vaze, Accounts Assistant, in her statement recorded on 25/04/2005 had, inter alia, stated that she was working for the last two months and was responsible for preparing the Goods Receipt Note (GRN) of raw materials received in the factory. On being shown the relevant pages of the stock register for receipt of copper rods, she stated that entries in the register had not been made by her. 5.4 Statem .....

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in his statement recorded on 18/05/2005 had, inter alia, stated that he was operating his transport business in the states of Punjab, Himachal Pradesh, Delhi, Haryana and Uttar Pradesh with vehicles having load bearing capacities of 2 to 4 tons only and hence the said vehicles could not carry the consignments of 10 to 15 tons from Ludhiana to Goa. (ii) Shri Kulwinder Singh, Proprietor of M/s. New Satkar Tempo Transport Union, in his statement recorded on 18/05/2005 had, inter alia, stated that h .....

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Splendor, Scooter & Motor Cycle Hero Honda. 5.6 Factory Premises of M/s. Annapurna Impex were searched under Panchnama dated 18/05/2005. The officers found that there was no facility to manufacture Copper Ingots or Copper Wire Rods nor was there any stock of copper in the factory. (i) Shri Purushottam Lal, Office Attendant of M/s. Annapurna Impex, in his statement recorded on 18/05/2005 had, inter alia, stated that M/s. Annapurna Impex had no Melting Furnace in their factory and hence no man .....

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opper items. On a further query, he stated that he had never used copper ingots as raw material in his manufacturing process. He was asked as to whether he purchased the material directly from M/s. Annapurna Impex, he stated that he purchased through a broker named Ashok and the material was delivered at the factory gate and he had never made any payment towards freight. He also stated that no gate register was maintained at his factory for recording such receipt of materials. He was shown the s .....

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alawalkar, the person in-charge of design, development and quality of the appellant-firm, in his statement recorded on 06/07/2005, had, inter alia, stated that the main raw materials used were brass, stainless steel and mineral glass in the thickness range of 0.8 to 1.2 mm in the manufacturing process of Wrist Watch Cases and Straps. He also stated that float glass and sheet glass of higher thickness shown to have been received by the appellant firm from M/s. Deepak Glass & Plywoods, Bangalo .....

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angalore revealed that most of the Central Excise invoices issued to the appellant firm bear the same vehicle number and L.R. number as shown in the corresponding supplier's invoice issued to M/s. Deepak Glass & Plywoods, Bangalore. For example, invoice no. 3032481 dated 03/09/2004 of M/s. Gujarat Guardian Ltd. in the name of M/s. Deepak Glass & Plywoods shows vehicle number used for transportation as KA- O1/D-0979 under L.R. No. 9527276 dated 03/09/2004 of East India Transport Agenc .....

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erial from M/s. Gujarat Guardian was actually off-loaded at the premises of Deepak Glass & Plywoods and none of the transporters had transported the same onward to the premises of the appellant-firm at Goa. On scrutiny of the LRs, it was revealed that on the reverse side of LRs acknowledgements of delivery had been obtained by the transporters concerned from the consignee, i.e. Deepak Glass & Plywoods. It was further observed that some of the LRs bear rubber stamps of Deepak Glass & .....

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on, thus clearing the doubt that the consignment had never been transported to Goa. 5.11 Shri Ambalal Jain, proprietor of Deepak Glass & Plywoods, Bangalore, in his statement recorded on 28/10/2005, had, inter alia, stated that no material had ever been sent to the appellant firm at Goa and bogus invoices had been prepared to facilitate availment of cenvat credit. On a query as to why the rubber stamp of J & J Precision Industries, Goa was affixed on the LRs, he stated that it was affixe .....

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hicle no. MHT-5458 which was a Fiat Car, Shri Jain confirmed that he or his son put some number as vehicle no and that glass sheet could not be transported in Fiat Car. 5.13 Shri Ravindra Mardia, Managing Dierctor of M/s. Mardia Samyoung Capillary Tubes Co. Ltd., Silvassa and Director of M/s. Mardia Tubes Ltd., Tarapur, in his statement recorded on 22/09/2005, had, inter alia, stated that no goods had been physically sent to M/s. J & J Precision Industries, Goa under 40 invoices. On a query, .....

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ed that base metal for these wrist watch cases/straps was brass or stainless steel only and added that he had never come across any pure copper-based wrist watch cases/straps. 5.15 A statement of Shri K. Lakshripathy, Managing Director of M/s. Jayashree Horologicals Pvt. Ltd., Bangalore was recorded on 10/10/2005 wherein he had, inter alia, stated that he had supplied to the appellant firm mineral glass of thickness ranging from 0.80 to 1.20 mm. On a specific query, he stated that Float glass/Sh .....

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ases/straps of copper for plating. 5.17 The case of the Department is based not only on the statements of various persons, but also on numerous documentary evidences which are discussed herein below: (i) Panchnama dated 6/7/2005 drawn at the factory premises of the appellant firm: On 6/7/2005, the factory premises of the appellant-firm were searched by the officers of DGCEI, Mumbai and various incriminating documents were seized under a Panchnama drawn in the presence of Shri Joit Kumar Jain, Pr .....

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by the officers of DGCEI, Ludhiana on 18/05/2005 in the presence of its employees and a Panchnama was drawn. No relevant records were found in the factory. However, the officers noted the machinery installed in the factory. They found that there was no facility to manufacture copper ingots or copper wire rods nor was there any stock of copper ingot or copper wire rods in the factory. (iii) Purchase order tracking register : The appellant-firm maintains a register called 'Purchase Order Track .....

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s of some other parties have been entered in the said register. These are shown below in the tabular form: Sr. No P.O. No. & Date Identical/Parallel P.O. No. & Date 1. 229/2005-2006 dtd. 11.3.2005 placed on M/s. Annapurna Impex Pvt. Ltd., Ludhiana does not find any entry in the PO Tracking Register. 229/2005-2006 dt. 11.3.2005 placed on M/s. Loki Enterprises, Bangalore for Mineral Glass Gasket finds entry in the PO Tracking Register and also shows receipt of items. 2. 185/2005-2006 dtd. .....

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acking Register and also shows receipt of items. 4. 147/2004-2005 dtd. 2.12.2004 placed on M/s. Mardia Samyoung Capillary Tubes Co. Ltd., Silvassa does not find any entry in the PO Tracking Register 147/2004-2005 dtd. 2.12.2004 placed on M/s. Jaico Tools for supply of Store Items finds entry in the PO Tracking Register and also shows receipt of items. From the above it can be safely inferred that the genuine POs have been entered in the PO Tracking Register, whereas the fictitious POs have not b .....

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no. 36 dated 14/04/2005 for manufacture of watch straps. These entries were compared with the seized document no. 3, i.e. Annexure-V register maintained at Unit-III for receipt of inputs or partially processed goods under Rule 57F(4) and/or notification no. 214/86-CE dated 25/03/1986 for the period 01/01/2005 to 01/07/2005, but no such receipt of copper rods was shown in the said register. It is, therefore, quite evident that no such copper rods were sent to Unit-III. Consequently, no entry was .....

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Ltd. All the invoices clearly show decorative coating charges for brass watch cases or brass watch straps only. There was no invoice showing decorative coating charges on copper watch cases/straps. (vii) Application for renewal of factory licence for the year 2005 The appellant had filed an application for renewal of the factory licence for the year 2005 with the Chief Inspector, Inspectorate of Factories & Boilers, Government of Goa along with a list of raw materials used. The said list of .....

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goods as Copper Bar. (ix) Seized documents No. 54 is a file containing 1 to 53 pages of design input and output maintained by the Design Department of the appellant-firm. On scrutiny of this document, it was found that all the models are to be developed either in brass or in stainless steel. (x) Documents No. 14 submitted by the appellant-firm under summons on 25/04/2005 revealed that it contains product data for wrist watch cases. Annexure - II of this document describes the press shop operatio .....

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. From the above documentary evidences, there is no doubt that the appellant-firm used only brass and stainless steel in making wrist watch cases and straps. 5.18 Cross Examination (i) The grievance of the appellant-firm is that the Commissioner has denied the cross-examination of the witnesses, though their statements have been relied upon in the impugned order. Consequently, there has been violation of principles of natural justice. It is submitted that the grievance of the appellant-firm is n .....

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n'ble Madras High Court has observed that "the right to cross-examine is not necessarily a part of reasonable opportunity. Whether in a particular case, a particular party should have the right to cross-examine or not depends upon the facts and circumstances of the case and it very largely depends upon the adjudicating authority who is not guided by the rules of evidence as such". (iii) In the case of Indru Ramchand Bharvani V/s. Union of India - 1988 (38) ELT 459 (Del.) in para 23 .....

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State of Jammu & Kashmir v. Bakshi Gulam Mohammad AIR 1967 (SC) 122, the Hon'ble Supreme Court has also observed that the right to cross-examination must depend upon the circumstances of each case and must also depend on the statute under which the allegations are being enquired into. (v) There is no express provision under the Central Excise Act or the Rules made thereunder that cross-examination of witnesses must be allowed. This, however, does not mean that no cross-examination of wi .....

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e appellant were not required in the manufacture of wrist watch cases and straps. Therefore, the statements of various persons which merely corroborate the documentary evidences need not be tested again by way of cross-examination of those persons. (vi) In the present case, though the employees of the appellant-firm had retracted the original statements dated 25/4/2005, in their subsequent statements, they re-confirmed the same as true and correct. They also said that they had given the retracti .....

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has observed that the cross-examination of witnesses, wherever necessary, has to be allowed in Departmental Proceedings. But it is not required that in each and every case cross-examination should necessarily be allowed. There is no absolute right of cross-examination provided in the Customs Act. Hence, it cannot be demanded as a matter of right. The presumption is that unless the noticee makes out a case for cross-examination, he will not be granted cross-examination. (viii) In the present case .....

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and the judgment of the Allahabad High Court in the case of Parmarth Iron (P.) Ltd. (supra). In the case of J&K Cigarettes Ltd. (supra) the Hon'ble High Court has observed that though the right of cross-examination in any quasi-judicial proceeding is a valuable right, it can be taken away under certain circumstances. In other words, it is not necessary in each and every case. In the case of Parmarth Iron Pvt. Ltd. (supra) the Hon'ble High Court has held that cross-examination of witn .....

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the basis of invoices given by the purported suppliers. Having regard to these facts and circumstances, there has been no violation of principles of natural justice by not allowing cross examination of the witnesses. 5.19 Penalties under Rule 26 of the Central Excise Rules on the co-noticees It is submitted that the co-noticees are guilty of aiding & abetting the appellant-firm in availing irregular & inadmissible cenvat credit. But for their active assistance and co-operation, the appe .....

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rder dated 29/06/2007 passed by the Commissioner is required to be confirmed. 6. We have carefully considered the submissions made by both the sides. 7. Our findings and conclusions are enumerated in the ensuing paragraphs. 7.1 M/s J & J Precision Industries, the main appellant contends that the principles of natural justice have been violated inasmuch as no opportunity of cross examination was given in spite of request of the various deponents of the statements recorded under Section 14 of .....

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Section 14 shall be relevant for the purpose of proving an offence under the said Act, and therefore, right of cross examination of the deponents of statements has to be given if they are relied upon by the Revenue to prove the charge against the accused. Only in certain situations, namely, when a person who made statement is dead or cannot be found, or incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or .....

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anted to the noticee. It is the contention of the appellant that these rights have been denied to them inasmuch as Revenue has heavily relied upon these statements, in support of the charge against the appellants and therefore, the principles of natural justice violated in the present case. It is therefore, pleaded that the matter be remanded back to the adjudicating authority for grant of cross examination of the deponents of the statements which have been relied upon and thereafter, for passin .....

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examination depends on the facts and circumstances of the case. 7.3 In their request for cross examination vide letter dated 09/06/2008, the appellant M/s. J & J Precision Industries had sought cross examination of M/s. Annapurna Impex Pvt. Ltd., Mardia Samyoung Capillary Tubes Co. Ltd., M/s. Mardia Tubes Ltd., M/s. Jay Wire and Conductors, M/s. Deepak Glass & Plywoods, M/s. Uttam Glass Co., & M/s. Lata Steels. Nowhere in the said letter they have made any specific request as to who .....

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depends upon the adjudicating authority who is not guided by the rules of evidence as such but who must afford such opportunity to the party concerned as would ensure him proper opportunity to defend himself. Similarly in the case of Mehek Glazes (P.) Ltd. v. Union of India [Application No. 2358 of 2013, dated 28-2-2013] the Hon'ble High Court of Gujarat held that the right to cross examine has to be examined by the adjudicating authority separately and a decision taken thereon. The adjudica .....

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mpleted, then it cannot be said that there is any denial of principles of natural justice. 7.5 In the present case, we notice that before the proceeding with the final adjudication, the adjudicating authority had given a hearing on the request of the appellant with regard to cross examination and had rejected the request giving reasons for such denial. The record of personal hearing dated 19/06/2006 & 30/06/2006 clearly shows the consideration of the request made by the appellant for cross e .....

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ed under Section 14 and have stated so before the adjudicating authority. Their only plea before the' adjudicating authority was that the mistakes committed by them be' condoned and a lenient view be taken. In view of this factual position, the denial of cross examination of the co-appellants, namely, M/s. Mardia Samyoung Capillary Tubes Co. Ltd., M/s. Mardia Tubes Ltd., M/s. Deepak Glass & Plywoods and M/s. Uttam Glass Co. could not said to have caused any prejudice to the appellant .....

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nly credit was taken without receipt of the goods, both in respect of M/s. Annapurna Impex Pvt. Ltd., and M/s. Matiz Metals Pvt. Ltd., Meghalaya. Though some of these statements were retracted, they were re-confirmed in the subsequent statements and the deponents have also admitted that they were forced to retract their original statements in view of the pressure exerted by Shri Joit Kumar Jain, Proprietor of the main appellant firm. This is also corroborated from the statement of Shri Narayan W .....

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f the employees of the main appellant which are corroborated by the incriminating documents seized during investigation can be fully relied upon as provided for under the exceptional circumstances specified in section 9D as exerting undue influence to retract the statement would also amount to "keeping out of the way by the adverse party". 7.7 Now let us see whether denial of cross-examination of M/s Annapurna Impex has caused any prejudice to the appellant. When the factory of M/s Ann .....

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e transporters were found to be M/s Satkar Tempo Transport Union and M/s New Satkar Tempo Transport Union, Ludhiana. When the proprietors of these firms S/Shri Inderjeet Singh and Kulwinder Singh were examined, they had clearly stated that they had never transported any goods from M/s Annapurna, Ludhiana to M/s J & J Precision Ind. at Goa. These statements were never retracted nor the appellant had sought any cross examination of these transporters. Further some of the vehicles, whose regist .....

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evenue establishes by way of documentary evidence/statements the non-receipt of the goods on which credit has been taken, the onus of proof that the appellants did receive these goods shifts to the appellant. The appellant has not discharged this onus cast on them in any meaningful manner. In these circumstances, the cross examination, if given, would have led to only inordinate delay and expense which, under the circumstances of the case, could be considered as unreasonable. It is also pertinen .....

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g to supplies form Annapurna was also not found in the purchase tracking register maintained by the appellant. Thus the evidences available on record as discussed above clearly reveals non-receipt of any goods from M/s Annapurna. Similar is the case in respect of purchase of copper bars/rods from M/s Matiz Metals Pvt. Ltd., Meghalaya. The statement of the transporter clearly shows that no such material was transported. In this case also, the purchases were effected through a broker called Vastim .....

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. Sri Ratnakar Mahale, Accountant and authorized signatory in his statement dated 25/4/05 has confirmed that copper ingots had never been used in their factory. He had also voluntarily debited sums of ₹ 6,08,057/- and ₹ 6,06,780/- in respect of invoice nos. 306 dated 23/3/05 of M/s Annapurna and invoice nos. 78 dated 11/11/03 and 80 dated 14/11/03 of M/s Matiz Metals on 25/04/05. Similarly Sri Nagaraj, Production in-charge of the appellant firm had also stated that he had never seen .....

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of copper rods. These statements of the people concerned with the production, inventory and accounts of the appellant firm corroborate the non-receipt and non-use of copper rods and sheet/float glass in the manufacture of watch cases/straps by the appellant. It is also on record that the appellant did not maintain any record in respect of receipt of raw materials in its factory. These admissions coupled with the statements of the transporters, Shri Inderjeet Singh, Proprietor of M/s. Satkar Tem .....

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used to be scooters and motor cycles, fortifies the case against the appellant. Shri Joit Kumar Jain, Proprietor of the main appellant has also confirmed in his statement that they had never used copper ingots in the manufacturing process. 7.9 More evidences have been unearthed by the investigation to prove their case. Shri Anirudha Narayan Walvalkar, the person-in-charge of design, development and quality of the appellant firm, in his statement, has admitted that float glass and sheet glass ar .....

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ifications recovered during the search proceedings clearly indicated the raw materials used for various types of watch cases to be brass/stainless steel. These corroborative evidences available on record also establish the fact the appellant never used any copper rods/bars and sheet/float glass in their manufacturing activities. 7.10 A major buyer of the appellant's products namely, M/s. Titan Industries Ltd., Hosur, has confirmed that they were procuring wrist watch cases/straps from the ap .....

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/s Plasma Gold Coatings Pvt. Ltd. who were engaged in ion-plating of wrist watch cases/straps for the appellant have also confirmed that they had never received from the appellant firm any wrist watch cases/straps of copper for plating. 7.11 As regards the purchase of copper/brass bars/rods from M/s Mardia Samyoung Capillary Tubes Co. Ltd. and M/s Mardia Tubes Ltd. under 40 central excise invoices during the period March 2003 to December, 2004 is concerned, Sri Ravindra Mardia has categorically .....

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of Cenvat credit to the extent of ₹ 80,53,102/- is on the strength of bogus/fake documents issued by these two firms. 7.12 As regards the supplies made by M/s Deepak Glass & Plywood and Uttam Glass Co., Sri Ambalal Jain and Sri Bhavarlal Jain, Proprietors of these firms respectively, have admitted that no material was sent to M/s J & J Precision Ind. and the documents issued in this regard were bogus/fake. The goods procured by M/s Deepak Glass & Plywood from M/s Gujarat Guardi .....

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Similarly in the case of supplies allegedly made by M/s Lata Steels, the vehicle used for transportation was found to be a tanker. 7.13 From these substantial evidences available on record, it is abundantly clear that the main appellant M/s J & J Precision Industries never received any copper bars/rods, float glass/sheet glass or stainless steel materials from the suppliers mentioned in paragraph 2 above and cenvat credit was availed on the strength of bogus/manipulated documents. In the lig .....

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in the case of Viraj Alloys Ltd. vs. CCE, Thane - II 2004 (177) ELT 892 (Tri-Mumbai). In that case, enquiry with the RTO revealed that the registration numbers of the vehicles mentioned in the invoices were mostly non-transport vehicles and the assessees were not able to produce the gate registry for entry of the vehicles. In that context it was held by this Tribunal that the assessees are not eligible to avail CENVAT credit covered by those invoices. A similar view was taken by this Tribunal i .....

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the goods were duly received by them. In the case of A.N.Guha & Co. vs. Collector [1996(86) ELT 333], this Tribunal held that it is not necessary for the department to establish a fact with mathematical precision. Once the presumption as to the existence of a fact is raised against the assessee that the input has not been transported in the vehicle mentioned in the invoices, it is reasonable to say that the inputs were not received in the factory. In our considered view, the ratio of these .....

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fined in Section 3 of the Indian Evidence Act, 1872 is one and the same. A fact is said to be 'proved' when, if considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of a particular case, to act upon the supposition that it exists. It is the evaluation of the result drawn by applicability of the rule, which makes the difference. "The probative effects of evidence in civil and .....

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pecially when the offence charged amounts to treason or felony, a much higher degree of assurance is required. (BEST, S. 95). While civil cases may be proved by a mere preponderance of evidence, in criminal cases the prosecution must prove the charge beyond reasonable doubt." Similarly in the case of Collector of Customs v. D. Bhoormull [Civil Appeal No. 1142 of 1973, dated 3-4-1974] the hon'ble Court further held as follows: "It cannot be disputed that in proceeding for imposing p .....

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r the Department is not required to prove its case with mathematical precision to a demonstrable degree, for, in all human affairs, absolute certainty is a myth, and as Prof. Brett felicitously puts it all exactness is a fake" El Dorado of absolute proof being unattainable, the law accepts for it, probability as a working substitute in this work-a-day world. The law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probab .....

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in appellant has not been able to produce any evidence in support of receipt of the goods or its utilization. 7.16 From the evidences available on record as discussed in detail in the preceding paragraphs, it is evident that the main appellant played a fraud on the exchequer by availing ineligible credit without receipt of materials on the strength of fake/forged/bogus documents. The hon'ble apex court in Commissioner of Customs (Preventive) vs M/s Aafloat Textiles (I) Pvt Ltd [2009-TIOL-42- .....

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nd as a response to the conduct of the former either by words or letter. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by willfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations, which he knows to be false, and injury ensues there .....

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he application of any equitable doctrine including res judicata.' This observation of the hon'ble apex court applies on all fours to the facts of the present case. 7.17 In view of the foregoing discussion, we uphold the confirmation of demand of ₹ 3,86,29,390/- (Rs. 4,45,50,547 minus ₹ 59,21,157, already reversed in respect of the material returned to M/s Annapurna) along with interest thereon under the provisions of Rule 12/14 of the Cenvat Credit Rules, 2002/2004 read with .....

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ty imposed on the proprietor Sri Joit Kumar Jain. 7.19 As regards the penalties on Annapurna Impex Pvt. Ltd., Mardia Samyoung Capillary Tubes Co. Ltd., Mardia Tubes Pvt. Ltd., Jay Wire & Conductors, Deepak Glass & Plywoods, Uttam Glass Company, Lata Steels Shri Navneet Agrawal, Shri Ravindra Mardia, Ramesh Ratilal Chauhan, Shri Ambalal Jain, Shri Bhavarlal Jain, Shri Pawan Lata, Shri Pravin Singh, Gullchem Industries and Shri Narayan Walvalkar, the said penalty has been imposed under Rul .....

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to 2007, the said penalty cannot be sustained. However penalty is imposable on them under the residuary Rule 27 of the Central Excise Rules, for violation of the provisions of these Rules. At the relevant time, the maximum penalty imposable under the aforesaid Rule was only ₹ 5000/-. Therefore, we impose a penalty of ₹ 5000/- each on Annapurna Impex Pvt. Ltd., Mardia Samyoung Capillary Tubes Co. Ltd., Mardia Tubes Pvt. Ltd., Jay Wire & Conductors, Deepak Glass & Plywoods, Ut .....

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follows: - 9. Having considered the rival contentions, it is seen that some of the material concerns raised by the appellant, particularly evidence on the record have not been considered and/or given due weightage in the impugned adjudication order. 10.1 The appellant contends that on receipt of inputs it prepared Goods Receipt Note and when the material is issued from the store, Material Requisition Note (MRN) are prepared when the goods are required for production. Thus, the entire receipt of .....

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n respect of transportation of the inputs in question, most of the inputs have come to the appellant's factory on the usage of way-bill/road permit, which is statutory requirement under Sales Tax provisions for transportation of goods across the border of the state as well as intra-state. In most of the cases, such way-bills are machine numbered and issued by the concerned Sales Tax authorities and proper register are maintained, wherein details of the company, invoice no the way bill no., l .....

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ny direct evidence found, save and except presumptions and the retracted statements, do not lead to conclusion of clandestine activity, which have not been considered. Thus, the impugned order is cryptic and non-speaking and is fit to be set aside. 10.4 So far the statement of Shri Ratanlal Mahale is concerned, he has only talked about 4 or 5 invoices. It was never accepted by Shri Mahale that copper was never received. Further, the statement was retracted. No reliance has been placed in respect .....

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he course of search and seizure from procession or control of any person, there is a presumption that the documents have been prepared by the concerned persons connected with the assessee and the same are true and correct unless proved to the contrary. 10.6 The statements recorded by Revenue from the supplier of copper i.e. M/s Annapurna Impex, Ludhiana, of the Office Attendant (Shri Purushotam Lal) are not at all reliable as Office Attendants is not a competent person for the facts or averments .....

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ist Watch Case and Wrist Watch straps among others. Further, there is no dispute that the supplier M/s Annapurna Impex have paid the duty on the copper so supplied. There is no expert opinion on record to conclusively show that such supplier M/s Annapurna Impex could not have manufactured the copper ingots supplied to the appellant. Further, no verification report has been obtained from M/s Annapurna Impex, Ludhiana whether M/s Annapurna Impex have manufactured and/or cleared copper ingots. Furt .....

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t have used copper in manufacturing its output. None of sample of finished goods available have been got tested by the Revenue and thus, there have been miscarriage of justice as the Revenue has relied mainly on evidence being the statements recorded. 10.8 Further, the adjudicating authority has erred in ignoring the fact that the appellant have returned 255 tons of copper rods to M/s Annapurna Impex (being removal of input as such) and had paid duty of ₹ 59,21,157/- by debiting in the PLA .....

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Impex, within a few days of deposit does not stand. 10.10 Further, where transaction is through the Banking Channel, it has been held by the Hon'ble Patna High Court in the case of Addl. CIT v. Bahri Bros. (P.) Ltd. [1985] 154 ITR 244 that the transaction is prima facie genuine and proved. 10.11 Further, the Revenue have failed to exercise jurisdiction as it has not enquired with the majority of the purchasers of the cases like Rishabh, and Prema Industries who are situated at Goa itself an .....

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have not been considered. 10.12 Further, the Revenue has erred by not considering the facts on record that the appellant industry is a jobbing industry where goods or outputs are manufactured as per the requirement and specification of its customers i.e. Watch Makers. The requirement of various inputs varies with each model manufactured by the appellant. Hence, the adverse conclusion drawn by Revenue for the stock of copper found, only on the date of search is erroneous, resulting into miscarria .....

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re are not less than 150 transportation details, and after verifying the entire lot, the department comes out with a case with respect to 4 to 5 such vehicles, which is immaterial as the same are more likely clerical errors in preparing the documents/transport challan, wherein the concerned inputs have been transported by more than 150 vehicles. For such minor error, in less than 3 per cent of total, drawing adverse inference that there is no transportation of inputs is unsustainable and fit to .....

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any Accountant or Director or other responsible persons have been examined by the Revenue in support of its allegation. 10.15 The appellant manufactured about 15 lakhs pieces of straps in the financial year and sent for plating at Multi Arc Ltd., among others. The plating work/processing of about 20,000 pieces by Multi Arc is hardly 1% of the total output and as such adverse finding by the Revenue for the total output based on the findings pertaining to Multi Arc are not tenable and fit to be se .....

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ppellant that they were referring to outputs made in steel and/or copper also as brass for the purpose of job-work etc. Even in the RT-12 returns and in Annexure to Form-3 CA, which is an audit report for the financial year 2003-04 (as applicable under Section 44AB of the Income Tax Act), the appellants have mentioned the material as brass and not copper. It was practice of the appellant to mention brass everywhere, as brass and copper were treated alike. Thus, the adverse inference drawn by the .....

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ed, the payments have been received by the appellant by cheque and thus the finding of the Revenue as to bogus sale, do not stand and are fit to be set aside. 10.17 So far the observation in the impugned order as regards same purchase order no., it was pointed out that the same is clerical error due to purchase order made in haste for business exigencies. The fact that the goods have been received and payment made by cheques are through Banking channel, establishes the genuineness. In view of th .....

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which have been treated as genuine, is not mentioned in the 'purchase order tracking register'. Thus, the Revenue has blown both hot and cold in drawing inference by reference to a few transactions, not found mentioned in the 'purchase order tracking register'. From the statement of Shri Shimpi of M/s Multi Arc, demonstrated that the appellants manufacture straps of various metals but the same are only mentioned as brass, in the job-work, voucher etc. Further, on the basis of som .....

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e same and thus adverse inference drawn on the basis of such statement filed before the Inspector of Boiler, have led to miscarriage of justice. Further, the production process of manufacture of watch case and strap, various inputs like steel, brass, copper or other alloys require the same set of machining and technology. It is further contended that other than Central Excise, under other Tax Laws like, Sales Tax Law, Income Tax Law etc., the Books of Accounts are subject to Audit by the Auditor .....

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tent of ₹ 59,21,157/- have not been considered, which demonstrate that the adjudication order is passed mechanically without much application of mind. 10.19 It is further contended that Ratnakar Mahale, whose statement is relied upon among others, have resulted in erroneous conclusions, as he is having no technical knowledge. Thus, whatever statement on the technical aspects is concerned, given by him, are totally unreliable. 10.20 Further, in view of the evidence in respect of Cystalline .....

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of freight. Further, the purchase of input in almost all the cases being interstate are fully supported by issue of Form-C, which is duly recorded in the records of the Sales Tax Department and such purchase cannot be disbelieved. Form-C is issued normally subsequent to receipt of the goods, after verification of the records. Further, proper register is maintained as per the Sales Tax Rules of the State. Copies of Transport Declaration Form No. ST XXIV-A under Rule 14-B of Excise & Taxation .....

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view of documentary evidence on record, definitely the transporters - Satkar/New Satkar Temp. Transport Union have lied in their statement(s) for the best reason known to them. This raises ample doubt on the reliability of statement recorded during investigation. 10.22 It is further contended that Section 9D of Central Excise Act provides that statement made by a person on which the Revenue places reliance, such person is to be examined in the course of adjudication proceedings, which includes o .....

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gh AIR 1964 SC 358. Thus, the reliance placed by the Revenue on statements, without examination of the witnesses in the case during adjudication proceedings, and further denial of the opportunity of cross examination of the witness, has led to miscarriage of justice rendering the impugned order cryptic and untenable. Accordingly, the same is fit to be set aside and/or remand of the same for de novo adjudication in accordance with law. 10.23 It is further observed that no proper opportunity of he .....

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and their cross-examination and considering evidence on record. 12. Thus, the appeal is allowed by way of remand. In view of the difference of opinion between the two members, the following points are placed before the Hon'ble President for reference to the third Member: Whether M/s J & J Precision Industries are liable to pay demand of ₹ 3,86,29,390/- along with interest thereon under the provisions of Rule 12/14 of the Cenvat Credit Rules, 2002/2004 read with Section 11A(2) and .....

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of the Central Excise Rules, 2002 as held by the Hon'ble Member (Technical), in view of the detailed findings recorded by him in paras 7.1 to 7.16 of the above order; OR The matter should be remanded back to the adjudicating authority for de novo consideration as held by the Hon'ble Member (Judicial). THIRD MEMBER ORDER M.V. Ravindran, Judicial Member (As a Third Member) - This difference of opinion is listed before me on the direction of the Honourable President to resolve the followin .....

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epak Glass & Plywoods, Uttam Glass Company, Lata Steels, Shri Navneet Agrawal, Shri Ravindra Mardia, Ramesh Ratilal Chauhan, Shri Pawan Lata, Shri Pravin Singh and Gullchem Industries are liable to penalty of ₹ 5,0001- each under Rule 27 of the Central Excise Rules, 2002 as held by the Hon'ble Member (Technical), in view of the detailed findings recorded by him in paras 7.1 to 7.16 of the above order; OR The matter should be remanded back to the adjudicating authority for de novo c .....

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holding the penalty of ₹ 5000/- is accepted hence their appeals be delinked from this difference of opinion. Same is the submission of the learned Counsel Shri Stebin Mathew who appears for other appellants namely the Mardia Tubes Ltd. & Others. On perusal of the difference of opinion, I do find that there is no difference of opinion in respect of the penalty imposed on other appellants; hence the appeals of other appellants except J & J Precision Industries and its proprietor, are .....

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tatements of the various persons including the transporters to hold that the appellant has availed ineligible Cenvat credit. He would draw my attention to the fact that the request as made by the appellant has been rejected without giving any reasons. He would then draw my attention to the order in original and submit that the adjudicating authority has in fact relied on only the statements and come to a conclusion of ineligibility to avail Cenvat credit. It is his submission that paragraph numb .....

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He would then take me through the provisions of Section 9D of the Central Excise Act. He would submit that the said section was interpreted by the Honourable High Court of Delhi in the case of Basudev Garg (supra) and the case of J & K Cigarettes Ltd. (supra) as also Honourable High Court of Allahabad in the case of Parmarth Iron (P.) Ltd. (supra) held that provisions of section 9D needs to be followed by the adjudicating authority before arriving at the conclusion, it is his submission tha .....

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sion that in the case in hand, the cross examination was denied before the passing of the adjudication order specifically indicating the reason thereof. It is his submission that the appellant has asked cross examination of the firms and not the individuals and also has not given any cogent reasons thereof for seeking such a cross examination. He would then submit that the case of the revenue is not based only on the oral statements of the various persons but is also based on the documentary evi .....

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giving specification of various dates of watch cases manufactured by the appellant, 5 containing invoices of Multi Arc India Ltd, application for renewal of factory licence for the year 2005, monthly Excise returns filed by the appellant wherein there was no mention of receipt of copper or imports thereof or it is being used. He would submit that the Honourable High Court of Bombay in the case of Patel Engineering Ltd. v. Union of India 2014 (307) ELT 862 has held denial of cross-examination doe .....

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cross examination for the appellant and whether the matter needs reconsideration by the adjudicating authority for following the mandate of Section 9D of the Central Excise Act, 1944. 8. At the outset I would like to record, that though special Counsel for the revenue in the elaborate submissions made to me through various documents on which reliance was placed for holding against the appellant, in my view, the difference can be decided by reading the provisions of section 9D of the Central Exci .....

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capable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or (b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. (2) The provisi .....

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tion 9D mandates adjudicating authority to examine the witnesses on whose statements reliance has been placed and on exercise of such examination; and if cross-examination thereof is not undertaken, such statement needs to be discarded in the law. The provisions of Section 9D were interpreted by the Honourable High Court of Delhi in the case of J&K Cigarettes Ltd (supra). With great respect, I reproduce the relevant paragraphs "25. Section 9D of the Act stipulates following five circums .....

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the issue that the aforesaid circumstances are not exceptional circumstances. They are the circumstances which naturally would be beyond the control of the parties and it would not be possible to produce such a person for cross-examination who had made a statement on earlier occasion. The provisions under Section 9D of the Act are necessary to ensure that under certain circumstances, as enumerated therein, viz. if the witness has been won over by the adverse party or is avoiding appearance desp .....

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than the statement tendered by witnesses before a quasi-judicial authority. The safeguards which are enumerated in the provision under Section 32 of the Evidence Act are essential as the provision provides for an exception to the rule of exclusion of hearsay evidence, while proving for relevancy of even direct oral evidence of the fact under enquiry, which otherwise is not admissible, to ensure that there is no miscarriage of justice. Similarly, provisions under Section 9D provide for relevancy .....

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the same 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 9D of the Act, which are pari materia with the provisions under Section 32 of .....

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