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M/s SM Industries & Other Versus CC, CE & ST, Hyderabad-IV And (Vice-Versa)

2017 (7) TMI 437 - CESTAT HYDERABAD

Clandestine manufacture and removal - Sponge iron - natural justice - Held that: - the appellants were seeking the cross examination of various persons and the same having not been granted to them, the impugned order is unsustainable on this ground only - there is violation of principles of natural justice and the impugned order needs to be set aside - matter remitted back to the adjudicating authority to reconsider the issue afresh after following the provisions of Section 9D of the CEA, 1944 i .....

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dated 29.12.2006. 2. The brief relevant facts that arise for consideration are appellant M/s SM Industries were manufacturing sponge iron for which they procure iron ore and coal which are required in equal quantity as the production process of the SM Industries is coal based. The department officials on a visit to the appellants factory and office premises and resuming various records, after recording statements of several persons held a view that appellant had clandestinely manufactured and cl .....

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granting cross examination of only 5 people confirmed demands raised along with interest and also imposed penalties. 3. Ld. Counsel took us through the entire records and submitted in detail the issue involved. He was vehemently arguing that the adjudicating authority has relied upon the statements of those persons who were been produced for cross examination. Hence, the conclusion reached by the adjudicating authority by relying upon the statements of these individuals is incorrect and hence t .....

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s have been established by the adjudicating authority in the impugned order. 5. On careful consideration of the submissions made by both sides and perusal of records, we find that the entire issue is regarding the appreciation of the evidences in respect of the allegation of clandestine removal of sponge iron by the main appellant and imposing of penalties on other appellants for aiding/assisting such an activity. We find from the records that the adjudicating authority as in the impugned order .....

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6, 21.07.2006 and 29.08.2006 giving different opportunities to appear for cross examination on 27.06.06, 18.07.06, 21.08.06 and 14.09.06. In all these instances, these witnesses requested for another date and finally, they have not attended for the said cross examinations on any of these dates. The statements of Shri S. Vijayanand & Shri R. Vijay Kumar can be relied upon. Further, the statements of the following 5 persons viz., Shri. Nathurmal Gour, D. Raja Gopal Reddy, A. Shankar Rao, S. Na .....

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2016 (340) ELT 67 (P&H)]. In the said judgment, their Lordships have considered the provisions of Section 9D of the Central Excise Act, 1944 in detail and in paragraph 16 to 25 held how the provisions will apply in respect of the adjudication procedure in the Central Excise matters. We respectfully reproduce the same. 16. 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 pro .....

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the interests of justice. 17. There is no justification for jettisoning this procedure, statutorily prescribed by plenary Parliamentary legislation for admitting, into evidence, a statement recorded before the Gazetted Central Excise Officer, which does not suffer from the handicaps 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 confe .....

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ments. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D(1) mandates that the evidence of the witness has to be recorded before the adjudicating authority, as, in such an atmosphere, there would be no occasion for any trepidation on the part of the witness concerned. 19. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a Gazetted Central Excise Officer dur .....

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ore the Gazetted Central Excise Officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for proving the truth of the contents thereof, he has to first admit the statement in evidence 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 adjudication proceeding, and arrive at an opinion that, havin .....

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ng authority, and (ii) the adjudicating authority arrives at a conclusion, for reasons to be recorded in writing, that the statement deserves to be admitted in evidence, that the question of offering the witness to the assessee, for cross-examination, can arise. 22. Clearly, if this 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 .....

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s cannot be considered as evidence." 24. That adjudicating authorities are bound by the general principles of evidence, stands affirmed in the judgment of the Supreme Court in C.C. v. Bussa Overseas Properties Ltd., 2007 (216) E.L.T. 659 (S.C.), which upheld the decision of the Tribunal in Bussa Overseas Properties Ltd. v C.C., 2001 (137) E.L.T. 637 (T). 25. In the light of the above, respondent no. 2 is directed to adjudicate the show cause notice issued to the writ petitioners by followin .....

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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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is made available to the assessee, it would be open to the assessee to seek permission to cross-examine the persons who have made the said statements, should it choose to do so. In case any such request is made by the assessee, it would be incumbent on the adjudicating authority, i.e., on Respondent No. 2 to allow the said request, as it is trite and well-settled position in law that statements recorded behind the back of an assessee cannot be relied upon, in adjudication proceedings, without al .....

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