TMI Blog2023 (11) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... n held in a catena of judgments including M/S JINDAL DRUGS PVT. LTD. AND ANOTHER VERSUS UNION OF INDIA AND ANOTHER [ 2016 (6) TMI 956 - PUNJAB HARYANA HIGH COURT ] that section 9D is a mandatory provision and if the procedure prescribed therein is not followed, statements cannot be used as evidence in the proceedings under Central Excise Act. Therefore, the 35 statements relied upon in the SCN are not relevant and hence also not admissible. Once the registration is issued by the department, the buyer of goods can procure goods from such a registered trader and take credit on the strength of such invoices. The case of the Revenue is that the traders and the manufacturers never existed but they issued Cenvatable invoices only on paper and had not supplied duty paid scrap at all and they could have supplied bazar scrap (post consumer scrap) against such invoices - As per the SCN, the manufacturers and traders did not exist and for that reason Cenvat credit taken by the assessee needed to be reversed but the manufacturers and traders also existed at the addresses indicated therein and they were asked as to why penalties should not be imposed on them - according to the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Appeal No. 52611/2018 to assail the penalty imposed on him. 3. Shri Anand Choudhary [Choudhary] filed Excise Appeal No. 52610/2018 to assail the penalty imposed on him. 4. The operative part of the impugned order is as follows: (a) I disallow the Cenvat credit amounting to Rs. 3,90,48,579/- (including cess) (Rupees Three Crores Ninety Lacs Forty Eight Thousand Five Hundred and Seventy Nine only) and order for its recovery from the Noticee No. 1 under Section 11A (4) of the Central Excise, Act, 1944 read with Rule 14 of the Cenvat Credit Rules, 2004 and the amount of Rs. 3,20,82,192/- which was already paid/reversed by them is ordered for appropriation from the confirmed demand. (b) I order for recovery of interest from the Noticee No. 1 under the provisions of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AA of the Central Excise Act, 1944. (c) I impose penalty of Rs. 3,90,48,579/- (including cess) (Rupees Three Crores Ninety Lacs Forty Eight Thousand Five Hundred and Seventy Nine only) upon the Noticee No. 1 under Rule 15 (2) of the Cenvat Credit Rules, 2004 read with Section 11AC (1) (c) of the Central Excise Act, 1944. (d) I impose a penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture of final products on which it paid duty. All statutory records were also maintained. (ii) The SCN was part of the larger investigation involving allegations of the same intermediate parties qua different sets of ultimate manufacturers and all those cases which reached this Tribunal were decided in favour of the assessees and against the department. These are: (a) Ashok Sharma vs CCE Raipur decided by Final Order No. 50426-50430/2019 dated 27.3.2019 passed in Excise Appeal No. 53371-53373 of 2018, 53433/2018 and 53741/2018 (b) Fortune Metaliks Ltd. vs CCE Raipur decided in Final Order No. 51708-51709/2021 dated 6.8.2021 passed in Excise Appeal No. 51044-51045/2019 (c) Trishul Mehta Industries vs CGST in Final Order dated 27.12.2021 in Excise Appeal No. 52313/2019 (iii) There is no evidence in the SCN to support the alleged illegal availment of Cenvat credit. Requests for cross examination of witnesses were made. (iv) The SCN relies heavily on statements recorded by the Central Excise officers which are relevant only if the procedure prescribed in section 9D of the Act is followed and it was not followed in this case by the Adjudicating Authority. Neither was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals which may be dismissed and the impugned order may be upheld. Findings 11. The submissions advanced by both the sides have been considered and the records and the evidence available on record have also been considered. 12. The Show Cause Notice relied on 62 documents in support of the allegations made in it, of which 35 are statements of various persons recorded by the Central Excise officers under section 14 of the Act, 16 are panchnamas drawn at various locations, 2 are summons issued to Mr. Rajiv Drolia, 1 is a letter sent to Mr. Drolia calling for information and 1 is his response. The remaining 6 are letters exchanged between officers. The details are as follows: Statements made by various persons before central excise officers under section 14 - Relied upon documents 8,23,24,25,26,27,28,31,32,33,34,35,36,37,38,40,41,42,43, 44,45,46,47,48,49,50,51,52,53,54,55,56,61 and 62 Panchnamas- Relied upon documents 6,9,10,11,12,13, 14,15, 16,17,18,19,20,21,22 and 39 Summons issued to Shri Drolia - Relied upon documents 57 58 Letter sent to Shri Drolia calling for information - Relied upon document 59 Reply of Shri Drolia - Relied upon document 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icating authority, admitted in evidence. This has not been done in respect of any of the 35 statements. Therefore, all the statements are not relevant to the proceedings. 15. It has been held in a catena of judgments including Jindal Drugs Pvt. Ltd. versus Union Of India [2016 (340) E.L.T. 67 (P H)] that section 9D is a mandatory provision and if the procedure prescribed therein is not followed, statements cannot be used as evidence in the proceedings under Central Excise Act. The relevant extracts are as follows: 13. Once the ambit of Section 9D(1) is thus recognized and understood, one has to turn to the circumstances referred to in the said sub-section, which are contained in clauses (a) and (b) thereof. 14. Clause (a) of Section 9D(1) refers to the following circumstances : (i) when the person who made the statement is dead, (ii) when the person who made the statement cannot be found, (iii) when the person who made the statement is incapable of giving evidence, (iv) when the person who made the statement is kept out of the way by the adverse party, and (v) when the presence of the person who made the statement cannot be obtained without unreasonable del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Excise Officer, has every chance of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. 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 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 clause (a) of Section 9D(1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scrap to the second stage dealer who, in turn, is supposed to have sold it to the appellant. 18. These panchnamas do indicate that the dealers did not exist at the addresses. 19. Of the remaining relied upon documents are two summons (RUD 57 58) issued to Drolia and after he expressed his inability to appear, a letter (RUD 59) was issued to him calling for information and he replied (RUD 60). In this reply, he stated that they had placed orders, and procured scrap and availed Cenvat credit and had taken all necessary precautions and no irregularity was noticed and they paid Rs. 3,20,82,192/- when pointed out by the department UNDER PROTEST and that they will examine the remaining Cenvat credit of Rs. 69,66,387/-. Nothing in this statement supports the contention in the SCN that the appellant had received only invoices and had not received the duty paid scrap. 20. A letter was sent (RUD 29) by the department to the Commissioner of Commercial Taxes, Raipur, Chattisgarh, who, in reply (RUD 30) confirmed that none of the several firms indicated in his letter including M/s. Jetking Trading and M/s RMS Steel (the two first stage dealers in this case) had shown any purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal is that the manufacturers and the traders did not exist at all but they were still registered by the department. There is no justification for such registrations by the department. The DGCEI or the Commissionerate does not investigated or even questioned the officers who issued these registrations to manufacturers and dealers who did not even exist. Further, if the allegedly non-existent registrants were also filing returns which were also being accepted and scrutinized by the officers as claimed by the learned counsel for the appellants, there does not appear to be any investigation as to how the Returns of the non-existent Registrants were being accepted by the officers. 24. Once the registration is issued by the department, the buyer of goods can procure goods from such a registered trader and take credit on the strength of such invoices. The case of the Revenue is that the traders and the manufacturers never existed but they issued Cenvatable invoices only on paper and had not supplied duty paid scrap at all and they could have supplied bazar scrap (post consumer scrap) against such invoices. 25. What is more interesting is that after investigating and concluding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at the same time. If a cat is put in a box with a vial of toxin and the box is closed, after some time, until the box is opened, the cat is both alive and dead because both are possibilities. Only when the box is opened is this resolved and the cat will be either dead or alive. ] which is both dead and alive, according to the Revenue, these firms both existed and did not exist. Their existence was presumed when they were registered and their existence was denied when their registrations were cancelled. In the SCN and the impugned order, their existence was presumed when the SCN and the notices for personal hearing was sent but in the same SCN and the impugned order their existence is denied to deny the Cenvat credit to the assessee. 28. The case of the appellant is that it had placed orders on the registered traders, received the goods, accounted for them in its records and availed Cenvat credit on the invoices. Balancing the two sides, we find that the issue tilts in favour of the appellant. When the department registered the so called non-existent manufacturers/dealers and it cancelled registrations much later, after this investigation, the irresistible conclusion is that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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