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2016 (6) TMI 919 - PUNJAB AND HARYANA HIGH COURT

2016 (6) TMI 919 - PUNJAB AND HARYANA HIGH COURT - TMI - Demand of duty of excise - Relevancy of statements under certain circumstances u/s 9D of CEA, 1944 - Wrong availment of Area Bases Exemption at Jammu - Concededly, all the 4 petitioners, claimed, and were granted, the benefit of Notification 56/2002-CE - investigations were stated to have revealed that they were not engaged in the manufacture of finished products at all. - Held that:- the case of the petitioners is essentially premise .....

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ing order in that regard, which is amenable to challenge by the assessee, if aggrieved thereby. - If none of the circumstances contemplated by clause (a) of Section 9D (1) exists, clause (b) of Section 9D (1) comes into operation. The said clause prescribes a specific procedure to be followed before the statement can be admitted in evidence. - There is no justification for jettisoning this procedure, statutorily prescribed by plenary parliamentary legislation for admitting, into evidenc .....

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.2016 and 01.06.2016 supra, that Respondents No.2 has, in the said Orders-in-Original, placed extensive reliance on the statements, recorded during investigation under Section 14 of the Act. He has not invoked clause (a) of sub-section (1) of Section 9D of the Act, by holding that attendance of the makers of the said statements could not be obtained for any of the reasons contemplated by the said clause. That being so, it was not open to Respondent No.2 to rely on the said statements, without fo .....

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UL AND MR. AMIT RAWAL, JJ. For The Petitioner : Mr. C. Harishankar, Sr. Advocate with Mr. Man Mohan, Advocate For The Respondent : Mr. V.K. Kaushal, Advocate for Union of India M.JEYAPAUL, J. 1. The petitioners, in these 4 writ petitions, claim to be manufacturers of menthol, dementholised oil, deterpenated fractionated menthol oil, and other similar products, for which they are registered with the Central Excise authorities. The premises, in which the petitioners claim to manufacture the said p .....

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d Cenvat Credit is not subject matter of dispute in the present case, no further reference is required to be made thereto. 2. By virtue of the geographical location, i.e. in notified areas in the state of Jammu and Kashmir, the petitioners claim the benefit of areabased exemption from payment of duty, under the Central Excise Act, 1944 (hereinafter referred to as the Act ), in terms of Notification 56/2002-CE, dated 14.11.2002. Under the said Notification, manufacturers located in the areas noti .....

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tion 56/2002-CE supra, on the clearances, effected by them, of the products stated to have been manufactured in their premises and cleared to SMIL and other downstream manufacturers. 4. Subsequently, Show Cause Notices were issued to all 4 petitioners, by the Commissioner of Central Excise, Jammu, alleging that the petitioners had wrongfully availed the benefit of exemption, under Notification 56/2002-CE supra, as investigations were stated to have revealed that they were not engaged in the manu .....

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d 29/10/2012, issued to M/s Fine Aromatics (hereinafter referred to as Fine ), covered the period November 2007 to 2010, and iv) Show Cause Notice, dated 04.10.2012, issued to M/s Shiva Mint Industries (hereinafter referred to as Shiva ), covered the period October 2007 to 2010. 5. The above-mentioned demands, in the Show Cause Notices referred to herein above, were all raised under Section 11A of the Act, which entitles the proper officer , empowered for the said purpose under the Act, to issue .....

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e assessee through its PLA, was liable to be recovered by the Revenue, under Section 11A of the Act. It is not necessary to embark, in detail, on the specifies of the allegations contained in the said Show Cause Notices; suffice it to state that all the said Show Cause Notices relied on the same evidence, which was, primarily, in the form of statements, recorded under Section 14 of the Act, from the following persons, during the course of investigation : a) Shri D.K. Jain, authorised signatory o .....

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eventive), Central Excise Commissioner, Lucknow. 7. For the sake of completion of the record, it may be mentioned here, that, in addition to the above, Show Cause Notice, dated 07/12/2011, alleging undervaluation, in respect of the clearances effected by it during the period December 2006 to February 2010, was also issued, to Ambika, by the Directorate General of Central Excise Intelligence. 8. Replies, to the above-mentioned Show Cause Notices, were filed by all the 4 petitioners. 9. The above- .....

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e said Orders-in-Original confirm, against Ambika and Jay Ambey, the entire duty demand proposed in the Show Cause Notices issued to them, with interest, and also imposed equivalent amounts as penalties on the said assessees. 11. These Orders-in-Original, dated 19/05/2016 in the case of Ambika and 01/06/2016 in the case of Jay Ambey, form subject matter of challenge in CWP 12615 of 2016 and CWP 12617 of 2016 which pray for issuance of writs of certiorari, quashing and setting aside the said Orde .....

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ubmitted that, had Respondent No.2 admitted the said statements in evidence, in accordance with the procedure prescribed by Section 9D of the Act, the petitioners would have been in a position to exercise their option to test the said evidence by cross-examining the authors of the said statements. Owing to the flawed procedure that Respondent No. 2 has chosen to follow, by relying on statements recorded under Section 14 of the Act without admitting them in evidence, it is the said petitioners .....

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Service Tax Appellate Tribunal (hereinafter referred to as the Tribunal ), the petitioners, i.e. Ambika and Jay Ambey seek to justify invocation of the writ jurisdiction of this Court essentially on the ground that any appeal, to the Tribunal would, by virtue of the amended provisions of Section 35F of the act, had to be accompanied by pre-deposit of 7 ½% of the duty demand confirmed against them by the Orders-in-Original passed by Respondent No. 2, which, they contend, would, in view of .....

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U.O.I., 2015 (320) ELT 711 (All), was cautious enough to keep open the avenue of the writ jurisdiction of the High Court conferred by Article 226 of the Constitution of India, in appropriate cases. Ambika and Jay Ambey seeks to contend that the present case is one such case, in which they ought to be permitted to move this Court under Article 226 of the Constitution of India, instead of relegating them to the remedy of appeal available under Section 35B of the Act and the burden of mandatory pre .....

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Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains,- (a) when 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 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 i .....

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that clauses (a) and (b) of the said sub-section set out the circumstances in which a statement, made and signed by a person before the Central Excise Officer of a gazetted rank, during the course of inquiry or proceeding under the Act, shall be relevant,for the purpose of proving the truth of the facts contained therein. 16. Section 9D of the Act came in from detailed consideration and examination, by the Delhi High Court, in J.K. Cigarettes Ltd. vs. CCE, 2009 (242) ELT 189 (Del). Para 12 of th .....

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e circumstances in which a statement, made and signed before a gazetted Central Excise Officer, shall be relevant for the purpose of proving the truth of the facts contained therein. If these circumstances are absent, the statement, which has been made during inquiry/investigation, before a gazetted Central Excise Officer, cannot be treated as relevant for the purpose of proving the facts contained therein. In other words, in the absence of the circumstances specified in Section 9D(1), the truth .....

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s on the statement, recorded during investigation in Central Excise, as evidence of the truth of the facts contained in the said statement, it has to be held that the adjudicating authority has relied on irrelevant material. Such reliance would, therefore, be vitiated in law and on facts. 19. Once the ambit of Section 9D (1) is thus recognized and understood, one has to turn to the circumstances referred to in the said subsection, which are contained in clauses (a) and (b) thereof. 20. Clause (a .....

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sed is, thus conferred, by Section 9D, on the adjudicating authority, it is self-evident inference that the decision flowing from the exercise of such discretion, i.e. the order which would be passed, by the adjudicating authority under Section 9D, if he chooses to invoke clause (a) of sub-section (1) thereof, would be pregnable to challenge. While the judgment of the Delhi High Court in J&K Cigarettes Ltd. (supra) holds that the said challenge could be ventilated in appeal, the petitioners .....

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nge by the assessee, if aggrieved thereby. 22. If none of the circumstances contemplated by clause (a) of Section 9D (1) exists, clause (b) of Section 9D (1) comes into operation. The said clause prescribes a specific procedure to be followed before the statement can be admitted in evidence. Under this procedure, two steps are required to be followed by the adjudicating authority, under clause (b) of Section 9D (1), viz. i) the person who made the statement has to first be examined as a witness .....

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caps contemplated by clause (a) of Section 9D(1) of the Act. The use of the word shall in Section 9D (1), makes it clear that, the provisions contemplated in the sub-Section are mandatory. Indeed, as they pertain to conferment of admissibility to oral evidence they would, even otherwise, have to be recorded as mandatory. 24. The rationale behind the above precaution contained in clause (b) of Section 9D(1) is obvious. The statement, recorded during inquiry/investigation, by the gazetted Central .....

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be no occasion for any trepidation on the part of the witness concerned. 25. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a gazetted Central Excise officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in cla .....

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ence in accordance with clause (b) of Section 9D(1). For this, he has to summon the person who had made the statement, examine him as witness before him in the adjudicating proceeding, and arrive at an opinion that, having regard to the circumstances of the case, the statement should be admitted in the interests of justice. 26. In fact, Section 138 of the Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidence-in-chief has to precede cross-examination, and cross-e .....

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s procedure, which is statutorily prescribed by plenary Parliamentary legislation, is not followed, it has to be regarded, that the Revenue has given up the said witnesses, so that the reliance by the CCE, on the said statements, has to be regarded as misguided, and the said statements have to be eschewed from consideration, as they would not be relevant for proving the truth of the contents thereof. 29. Reliance may also usefully be placed on para 16 of the judgment of the Allahabad High Court .....

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Overseas Properties Ltd v C.C., 2001 (137) ELT 637 (T). 31. It is clear, from a reading of the Orders-in-original dated 19.05.2016 and 01.06.2016 supra, that Respondents No.2 has, in the said Orders-in-Original, placed extensive reliance on the statements, recorded during investigation under Section 14 of the Act. He has not invoked clause (a) of sub-section (1) of Section 9D of the Act, by holding that attendance of the makers of the said statements could not be obtained for any of the reasons .....

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/2016, passed by Respondent No.2 are, therefore, clearly liable to be set aside. 33. Insofar as the writ petitions filed by M/s Ambika International CWP 12615 of 2016 and M/s Jay Ambey Aromatics CWP 12617 of 2016 are concerned, they are allowed by setting aside the Orders-in-Original, dated 19/05/2016 and 01/06/2016, passed by Respondent No 2 and impugned therein. Resultantly, the Show Cause Notices, issued to Ambika and Jay Ambey, are remanded, to Respondent No 2 for adjudication de novo, by fo .....

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that the Revenue would examine them in chief before the adjudicating authority, i.e. before Respondent No 2. (ii) A copy of the said record of examination-in-chief, by the Revenue, of the makers of any of the statements on which the Revenue chooses to rely, would have to be made available to the assessee, i.e. to Ambika and Jay Ambey in this case. (iii) Statements recorded during investigation, under Section 14 of the Act, whose makers are not examined in chief before the adjudicating authority .....

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