Clipped from: https://taxguru.in/excise-duty/denying-cross-examination-witnesses-non-supplying-records-renders-proceeding-untenable.html
Gopi Biri Factory Vs Commissioner of CGST & Excise, Siliguri (CESTAT Kolkata)
CESTAT Kolkata held that denial of cross examination of witnesses and non-supply of relevant records is clear violation of principle of natural justice and accordingly impugned order is unsustainable.
Facts- The appellants were issued a show-cause cum demand notice for manufacture and storage of 20,13,500 sticks of biris found in excess as on 2nd September, 2009 without accounting for the same in the Daily Stock Account. The Department alleged that the noticee had cleared 1,41,000 sticks of biris from its factory on 22.11.2009 without issuing any invoice and without reflecting production and clearance of the same in their Daily Stock Account.
On the basis of investigations undertaken by the Department, it was alleged in the show-cause notice that the appellants had clandestinely manufactured and cleared 13,34,36,375 sticks of hand‑ made branded biris from its factory between January, 2007 to September, 2008 without issuing any Central Excise Invoice and without accounting for the same in their official records.
The Departmental proceedings culminated into issuance of a show-cause notice demanding Excise duty, proposing confiscation of seized goods, imposition of penalty and demand for interest under relevant provisions of law.
Conclusion- It is settled law that the noticee has to be offered all reasonable opportunity of defence and any levy fastened denying natural justice is clearly unsustainable. As discussed herein above, the twin facets of non-supply of certain records more particularly DSA inform RG-12A and the lack of opportunity of cross examination of the witnesses are in clear violation of legal principles rendering the impugned order unsustainable. In fact, non-consideration of a contention raised in defence is not only prone to mis-carriage of justice, but is also reflective of non-application of mind.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The impugned appeal has been filed by M/s Gopi Biri Factory against Order-in-Appeal No. 116/SLG-CEX/2018-19 dated 19.06.2018 passed by Commissioner (Appeals) of CGST & Excise, Siliguri.
2. The Department has also filed a Memo of Cross Objection in the impugned appeal along with an application for condonation of delay, which was allowed by this Tribunal on 20.07.2022.
3. The appellants were issued a show-cause cum demand notice for manufacture and storage of 20,13,500 sticks of biris found in excess as on 2nd September, 2009 without accounting for the same in the Daily Stock Account. The Department alleged that the noticee had cleared 1,41,000 sticks of biris from its factory on 22.11.2009 without issuing any invoice and without reflecting production and clearance of the same in their Daily Stock Account.
3.1 On the basis of investigations undertaken by the Department, it was alleged in the show-cause notice that the appellants had clandestinely manufactured and cleared 13,34,36,375 sticks of hand‑ made branded biris from its factory between January, 2007 to September, 2008 without issuing any Central Excise Invoice and without accounting for the same in their official records.
3.2 The Departmental proceedings culminated into issuance of a show-cause notice demanding Excise duty to the tune of Rs.19,38,504/- [Basic Excise Duty = Rs.10,83,852/-, NCCD = Rs.1,33,441/-, Biri Cess = Rs.6,67,186/-, Education Cess = Rs.37,693/- & SHECess =Rs.16,332/-] besides proposing confiscation of seized goods, imposition of penalty and demand for interest under relevant provisions of law.
3.3 The show-cause notice was adjudicated vide order dated 30.08.2011. Further, it is noticed that the order passed by the ld.Adjudicating Authority is an exparte order inasmuch as the ld.Authority who had heard the matter failed to adjudicate it as he was transferred out of the jurisdiction. The incumbent adjudicating authority thus had given three specific dates to appear before the adjudicating authority by way of one single communication. However, on the plea that the earlier authority had already heard the noticee and their “reluctance” to appear for personal hearing, he proceeded to adjudicate the matter.
3.4 In their response before the adjudicating authority, while refuting the allegations in the show-cause notice, the appellant had submitted that they have been denied an opportunity to defend themselves and thus the principles of natural justice were grossly violated. They stated that they were not handed-over the requisite records like, DSA/ER-I in Form RG-12A Register that was seized by the Central Excise Officers on 2nd September, 2009, and also denied an opportunity to cross-examine the key witnesses whose testimonies were relied upon in the proceedings. It is indicated that the only response received from the Department to repeated requests before the lower authorities for the records was that DSA inform of RG 12A, was not a relied upon document in the matter. It is the claim of the appellant that the said contention of the Department is not correct, since seizure of 19,25,425 (labelled biri 10,02,000 sticks and unlabelled biri 9,23,425 sticks) out of a total stock of biri 20,13,500 (labelled 10,02,000 sticks and unlabelled 10,11,500 sticks) physically found in the factory of the appellant on 02.09.2009, after deduction of 88,075/- sticks of unlabelled biri as has been noted in the seizure memo. They also assailed the show-cause notice in lacking any corroborative evidence in the matter.
3.5 In appellate proceedings, the appeal filed by the party against the impugned order-in-original, was, however, rejected. The Commissioner (Appeals) too did not find merit in the plea of the appellant seeking cross-examination of the buyers, whose statements to the effect that they had received biris from the appellant without cover of invoices. For rejecting the cross-examination, the ld.Commissioner (Appeals) has observed that none of the said buyers who rendered those statements had made any claim that their statements were given under duress nor did the said buyers expressed a desire to retract the same. He thus found merit in the lower authority’s claim, denying the opportunity of cross-examination to the appellants.
4. Heard both sides and considered the rival submissions.
5. The present case is essentially made out to be a case of clandestine manufacture of labelled and unlabelled biris and their clearance without payment of duty and without issuance of proper The department, at the time of visit on 02.09.2009, seized labelled and un-labelled biris that were lying in the various rooms of the appellants’ house and factory, besides the recovery of certain loose sheets, private and other statutory records. The demand for the alleged duty evasion for the period January, 2007 to September, 2008, is purportedly an outcome of the details contained in these private records.
5.1 While recovery of the private records from the premises of the appellant have not been disputed. The appellants have denied lack of complete knowledge thereto as well as its contents. It has been their case that the said register does not belong to them and could have been left behind at their premises by one of the several traders visiting their premises. It is on the basis of this register that the charge for duty evasion during the period January, 2007 to September 2008 has been worked upon. The appellant has however disputed the very ownership of the same, alleging that his signatures were forcibly obtained thereon. Be as it may, it is well settled that mere entries in a diary/register or other records, without any corroborative evidence cannot be the basis to fasten the short-levy and uphold the charge of clandestine manufacture and clearance. To sustain the charge of clandestine manufacture and clearance without duty payment, other corroborative evidence is required in support and merely on the strength of statistical data, the charge of duty evasion cannot be upheld. The appellants in support relied on the ratio of the law in the case of Kashmir Vanaspati Vs. CCE – 1989 (39) ELT 655 (CEGAT), wherein it was held by the Tribunal that entries contained in a note book said to be maintained by labourers bearing no authentication was not a dependable piece of evidence, to affirm the charge of clandestine clearance unless the same were independently corroborated by other evidence like raw material consumption and actual manufacturing and packing of goods. The Courts have repeatedly held that the charge of clandestine clearance cannot be affirmed merely on the basis of some notes/diaries etc. recovered from the premises, but their independent corroboration by other piece of evidence is vital to substantiate the said charge and fix up the liability. This however has not been done and to further compound the shortcomings for the sustenance of their charge, even an opportunity to cross-examine the witnesses to establish the truth has not been favourably considered by the revenue. This is against all cannons of jurisprudence and in violation of settled legal principles (Hindustan Lever Vs. CCE, Raipur – 1996 (87) ELT 385 (T), M.H.Textiles Vs. CCE, Calcutta II – 2004 (173) ELT 80 (T).
5.2 The charge of clandestine clearance is required to be proved beyond an iota of doubt and by irrefutable evidence. Then only can imposition of duty liability on the said goods is sustainable. Thus other tangible, sufficient and corroborative piece of evidence is necessary to establish the charge of clandestine manufacture and clearance. Each link in the process is required to established. Reliance in this regard is placed on the law propounded in the cases – [K. Raja Gopal Vs CCE, Madurai – 2002 (142) ELT 128 (T) Shakti Chemical Industries Vs. CCE, Baroda – 1995 (76) ELT 410 (T), CCE, Calcutta II Vs. Tube Bend (Cal) Pvt. Ltd.- 2001(136) ELT 839 (T)] amongst several others.
5.3 The burden to establish the factum of clandestine clearance is upon the revenue and required to be established beyond all reasonable doubt and mere suspicion or sole entries in certain records whose authenticity itself is under challenge cannot be the singular yardstick to uphold such a contention – Sharma Chemicals Vs. CCE – 2001 (130) ELT 271 (Tri.). Further, it may be pointed out that let alone unimpeachable corroboration, there is no semblance or even an attempt to cross-verify the said entries in the records seized from the possession of the appellant. The mere testimony of some buyers without going into specific details of the numbers of biri sticks received without cover of invoices on a given day and its corroboration with clearance of the finished goods/the alleged private records is a crass failure to investigate the matter properly.
5.4 Further reliance on the statement of the buyers that they used to receive goods without cover of invoices also, without independent substantiation and cogent proof in support, is fraught with risk and is required to be corroborated by other factual assertions. This has not been so done in the present matter. Therefore, acceptance of the testimony of buyers merely on its face value is inappropriate and cannot be sustained in law. A half baked investigation cannot catapult the department to affix the grave charge of clandestine manufacture and clearance in the absence of evidence to back it up and ascertain it by way of documented proof of clearance and manufacture of the said goods and or independent corroboration of the testimonies of the relied upon witnesses.
5.5 The appellants have also questioned the legitimacy of the seizure by the authority and also stated that they in fact had entered 19,25,425 biri sticks in their stock register RG 12A,which the department choose to ignore and therefore, the subsequent release of the said goods provisionally and their confiscation was not warranted as the same were duly recorded in the Daily Stock Account (DSA). Further, this record to substantiate their case, though recovered from the appellant, has not been made over to them despite repeated requests. The appellants have thus been denied a fair opportunity for putting up appropriate defence in the matter.
6. I, however, find substantive merit in the plea of the appellant that it cannot be stated that DSA is not a relied upon documents in the instant case. Even if for the sake of argument, it is taken that DSA has not been taken into account as a relied upon document, it is incumbent upon the Department to hand-over and return the said record seized from the possession of the appellants, at least after the issuance of the show-cause notice. It is also observed that the adjudicating authority has observed that only stock of biris indicated in the DSA had been taken for computation by the officers. It is, therefore, amply clear that it would be incorrect to impute that the DSA in RG-12A form was not a part of the relied upon documents, as no computation can be worked out in the absence of any credence to the stock of biris listed in the said statutory records. Needless to reiterate that the Department is obliged to return to the appellant both relied upon and un-relied upon documents recovered from the premises of the appellant. The fact that the appellant sought them in writing in support of their defence and the summary rejection of the said request has dealt a fatal blow to the opportunity of an appropriate defence to the appellants. For this reason alone, the departments’ case cannot be upheld. Also the assertion of clearance of goods on a predated invoice cannot be considered to implicate repeated clearance of goods, in the absence of any other independent evidence to corroborate the said facts.
7. Further, the appellants have strongly contended that they have been denied natural justice and were not offered cross-examination of the witnesses/buyers whose statement have been relied upon by the Department. I find that this request of the appellant, which is an important cannon for ascertaining the truth and justice delivery, has been cursorily brushed aside by the lower authorities. It is noted that both at the time of original adjudication and again in appellate proceedings, the appellant sought to cross-examine their buyers, who purportedly had stated in their statement, recorded before the authorities that they were supplied biris by the appellants without invoices. Cross examination is a substantive legal tool adopted in order to bring to the fore the truth and corroborate the testimonies of the witnesses to establish the contention beyond any measure of doubt.
8. It is settled law that the noticee has to be offered all reasonable opportunity of defence and any levy fastened denying natural justice is clearly unsustainable. As discussed herein above, the twin facets of non-supply of certain records more particularly DSA inform RG-12A and the lack of opportunity of cross examination of the witnesses are in clear violation of legal principles rendering the impugned order unsustainable. In fact, non-consideration of a contention raised in defence is not only prone to mis-carriage of justice, but is also reflective of non-application of mind.
8.1 The noticee had in proceedings before lower authority made a very strong assertion requesting for copies of said documents containing references of Central Excise Invoices and by non-supply thereto, he has been denied an appropriate opportunity for his defence. Likewise, for want of recovery of any non-duty paid stocks from the buyers as well as other independent records in support of the claim of clandestine manufacture and clearance, the charge cannot be sustained on a mere bland statement/allegation made by purchasers. Moreover, denial of cross-examination of these witnesses only accentuates the claim in pursuit of a free, fair exploration of truth and justice. The Hon’ble Allahabad High Court in the case of CCE, Meerut I Vs.Parmarth Iron – 2010 (255) ELT 496 (All) had gone to the extent of stating that if Revenue choose not to examine any witnesses in adjudication, their statements cannot be considered as evidence.
9. The impugned order, therefore, suffers from this inherent infirmity for failure to comply with natural justice and for this reason alone, the same cannot be sustained. In the circumstances, the appeal is allowed and the order of the ld.Commissioner (Appeals) is set aside. Cross objections filed by the Revenue, are also disposed off in the aforesaid terms.
(Pronounced in the open court on 17.04.2023)