Siddaganga Cements (P) Ltd. Vs. the Commissioner of C. Excise - Court Judgment

Excerpt:
1. this appeal arises from order-in- appeal no 166/2003-ce dated 26.3.2003 confirming the demand on the allegation of clandestine removal of final products, namely 900 bags of cements. the department has proceeded on the basis of the statements recorded from the accountant of the appellant's company, namely shri h. c.chandrasekhariah and on the basis of private registers maintained by him; there is no evidence pertaining to the purchase of inputs and excess manufacture & clearance of cements in terms of excess utilization of electricity, purchase of raw materials, flow back of funds, etc. the appellants strongly challenged the proceedings on the ground that the confirmation of the demand without giving an opportunity of cross examination of shri h.c. chandrasekhariah is bad in law. the appellant has seriously contended that there is no evidence in any nature to confirm the excess production of cements to the extent indicated in the show cause notice. it is submitted in the light of several judgments relied on that a mere endorsement in the private register and the statements given by office staff are not sufficient to confirm the demand. the commissioner (appeals) has rejected their prayer of cross examination of shri h.c. chandrasekhariah on the plea that nothing can be revealed in the cross examination.2. the learned advocate submits that the entire order-in-original was passed based on the statements of shri h.c. chandrasekhariah and the private registers maintained by him. in these circumstances, he was required to have been produced for cross examination when the appellants have made specific requests for the same. he submits that the commissioner (appeals) has not discussed the evidence but merely upheld the charges and the order is also not a speaking order. he relies on a large number of judgments that no demand can be confirmed without proper evidence in the allegations of clandestine removal of the goods. he also submits that non-granting of cross examination of main witnesses will lead to a denial of principles of natural justice.he relied on the judgment rendered in the case of kedia overseas ltd. . further citations relied on are as follows : it is clear beyond any shadow of doubt that the principles of natural justice must be followed by the excise authorities at all levels in all proceedings under the ce & sa or the ce rules and the order passed in violation of principles of natural justice will be a nullity and can be ignored with impunity. all principles of natural justice revolve round fair play in action, justice should not only be done but also seem to have been done. the opportunity to prove the correctness of a fact would, therefore, necessarily carry with it the right to examine witnesses and that would include equally the right to cross examine witnesses. when assessee is not permitted to examine his witnesses and produce statutory records in defence, there is denial of natural justice. natural justice is also violated if the opportunity to cross examine the witnesses relied upon by the department is denied. the denial of cross examination of any witnesses, the evidence of whom is likely to be relied upon by the adjudicating authority, amounts to violation of principles of natural justice. specifically when the request for cross examination of such witnesses is made by the person against whom such evidence is likely to be used. the discretion to allow or not to allow cross examination has to be exercised not arbitrarily or capriciously but judiciously, while considering the request for cross examination, the adjudicating authority is required to bear in mind the nature of the allegations, the defence taken, the motive behind seeking cross examination and further whether rejection of the request would result in grave miscarriage of justice.3. the learned sdr defends the order and submits that there is a clear admission made by shri h. c. chandrasekhariah with regard to the private registers maintained by him that clearly shows the excess production and clearance proofing the clandestine removal of cements.therefore confirmation of demand and imposition of penalty are justified.4. on a careful consideration, i notice from the charge sheet and the impugned orders that the entire case has been built on the basis of the statements given by shri h. c. chandrasekhariah and the private registers maintained him. it is also submitted in the appeal memo that shri h.c. chandrasekhariah has retracted his statements. in these circumstances, shri h.c. chandrasekhariah was required to be produced for cross examination when specific request has been made by the appellants. it is also submitted that the entries in the private register requires to be clarified and no reasonable person can come to a conclusion with such entry does not refer to excess manufacture and clandestine removal and these submissions made by the appellants in the light of several judgements cited supra. it is to be concluded that non-grant of cross examination of shri h.c. chandrasekhriah has violated the principles of natural justice. in these circumstances, the impugned order is set aside and the matter is remanded to the original authority with a direction to grant an opportunity to the appellants for cross examination of shri h.c. chandrasekhariah with regard to his statements and private registers seized by the revenue. the appellants are also entitled to raise all their claims with regard to the non-clearance of goods clandestinely. all the issues are kept open. the original authority shall observe the principles of natural justice and pass a detailed order in the light of evidence and several judgments relied on by the appellants in the matter. the entire proceedings shall be concluded within a period of four months from the receipt of this order.(operative portion of the order has been pronounced in the open court on conclusion of hearing)

Judgment:
1. This appeal arises from Order-in- Appeal No 166/2003-CE dated 26.3.2003 confirming the demand on the allegation of clandestine removal of final products, namely 900 bags of Cements. The Department has proceeded on the basis of the statements recorded from the Accountant of the appellant's company, namely Shri H. C.Chandrasekhariah and on the basis of private registers maintained by him; There is no evidence pertaining to the purchase of inputs and excess manufacture & clearance of Cements in terms of excess utilization of electricity, purchase of raw materials, flow back of funds, etc. The appellants strongly challenged the proceedings on the ground that the confirmation of the demand without giving an opportunity of cross examination of Shri H.C. Chandrasekhariah is bad in law. The appellant has seriously contended that there is no evidence in any nature to confirm the excess production of cements to the extent indicated in the show cause notice. It is submitted in the light of several judgments relied on that a mere endorsement in the private register and the statements given by Office staff are not sufficient to confirm the demand. The Commissioner (Appeals) has rejected their prayer of cross examination of Shri H.C. Chandrasekhariah on the plea that nothing can be revealed in the cross examination.

2. The learned Advocate submits that the entire Order-in-Original was passed based on the statements of Shri H.C. Chandrasekhariah and the private registers maintained by him. In these circumstances, he was required to have been produced for cross examination when the appellants have made specific requests for the same. He submits that the Commissioner (Appeals) has not discussed the evidence but merely upheld the charges and the order is also not a speaking order. He relies on a large number of judgments that no demand can be confirmed without proper evidence in the allegations of clandestine removal of the goods. He also submits that non-granting of cross examination of main witnesses will lead to a denial of principles of Natural Justice.

He relied on the judgment rendered in the case of Kedia Overseas Ltd. . Further citations relied on are as follows : It is clear beyond any shadow of doubt that the principles of natural justice must be followed by the excise authorities at all levels in all proceedings under the CE & SA or the CE Rules and the order passed in violation of principles of natural justice will be a nullity and can be ignored with impunity.

All Principles of natural justice revolve round fair play in action, justice should not only be done but also seem to have been done.

The opportunity to prove the correctness of a fact would, therefore, necessarily carry with it the right to examine witnesses and that would include equally the right to cross examine witnesses.

When assessee is not permitted to examine his witnesses and produce statutory records in defence, there is denial of natural justice.

Natural justice is also violated if the opportunity to cross examine the witnesses relied upon by the department is denied.

The denial of cross examination of any witnesses, the evidence of whom is likely to be relied upon by the adjudicating authority, amounts to violation of principles of natural justice.

Specifically when the request for cross examination of such witnesses is made by the person against whom such evidence is likely to be used.

The discretion to allow or not to allow cross examination has to be exercised not arbitrarily or capriciously but judiciously, while considering the request for cross examination, the adjudicating authority is required to bear in mind the nature of the allegations, the defence taken, the motive behind seeking cross examination and further whether rejection of the request would result in grave miscarriage of justice.

3. The learned SDR defends the order and submits that there is a clear admission made by Shri H. C. Chandrasekhariah with regard to the private registers maintained by him that clearly shows the excess production and clearance proofing the clandestine removal of cements.

Therefore confirmation of demand and imposition of penalty are justified.

4. On a careful consideration, I notice from the charge sheet and the impugned orders that the entire case has been built on the basis of the statements given by Shri H. C. Chandrasekhariah and the private registers maintained him. It is also submitted in the appeal memo that Shri H.C. Chandrasekhariah has retracted his statements. In these circumstances, Shri H.C. Chandrasekhariah was required to be produced for cross examination when specific request has been made by the appellants. It is also submitted that the entries in the private register requires to be clarified and no reasonable person can come to a conclusion with such entry does not refer to excess manufacture and clandestine removal and these submissions made by the appellants in the light of several judgements cited supra. It is to be concluded that non-grant of cross examination of Shri H.C. Chandrasekhriah has violated the principles of Natural Justice. In these circumstances, the impugned order is set aside and the matter is remanded to the Original Authority with a direction to grant an opportunity to the appellants for cross examination of Shri H.C. Chandrasekhariah with regard to his statements and private registers seized by the Revenue. The appellants are also entitled to raise all their claims with regard to the non-clearance of goods clandestinely. All the issues are kept open. The Original Authority shall observe the principles of Natural Justice and pass a detailed order in the light of evidence and several judgments relied on by the appellants in the matter. The entire proceedings shall be concluded within a period of four months from the receipt of this order.

(Operative portion of the order has been pronounced in the open court on conclusion of hearing)