Tibrewala Industries (P) Limited Vs Commissioner of Central Excise And Service Tax (CESTAT Chandigarh)
CESTAT Chandigarh remanded the matter to the Adjudicating Authority for a fresh re-consideration as cross-examination to key witnesses was not allowed.
Facts- M/s Tibrewala Industries Pvt. Ltd. are engaged in the manufacture of sheathing compound; they obtain their main raw material i.e. plastic granules from M/s Gas Authority of India Limited (GAIL).
On an investigation conducting by the officer of DGCEI on the appellants and R.K Trading Company, a stockist of M/s GAIL, it appeared to the Department that the appellants were diverting the plastic granules, purchased from M/s GAIL, through the stockist M/s R.K. Trading Company, and were availing CENVAT credit fraudulently. Search of the premises of the appellants, the stockist and other places; it also appeared that there were certain other violations committed by the appellant; statements of different persons were recorded.
On the completion of investigation, show cause notice dated 05.04.2002 was issued to the appellants seeking to seize the unaccounted raw material/ process material found at the premises of appellant No.1 and SCN dated 30.04.2003 seeking to recover CENVAT credit of Rs.55,29,455/-alleged to have been fraudulently availed by the appellant No.1 along with interest and seeking to impose penalties.
Conclusion- In the first round, they have not given copies of the relied upon/ non-relied upon documents, opportunity to participate in the proceedings by giving sufficient time to submit a written reply and to be heard personally. In the second round, no opportunity for cross-examination of the key witnesses was provided even though a specific request was made to the Adjudicating Authority.
Held that not allowing the cross-examination of key witnesses vitiates the proceedings even under the quasi-judicial proceedings. Therefore, as requested by the learned Counsel for the appellants, we are inclined to accept the contention and the request of learned Counsel for the appellants that the interest of justice would be properly served if the case goes back to the Adjudicating Authority to adjudicate the case afresh after giving the opportunity to the appellants to cross-examine the key witnesses whose statements have been relied upon by the impugned order.
In the result, we find that in the interest of justice, the matter requires to go back to the Adjudicating Authority. Therefore, we set aside the impugned order and remand back the cases, in all the three appeals to the Adjudicating Authority for a fresh re-consideration of the issue involved after duly allowing, the appellant No.1, to cross-examine key witnesses.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
These appeals are filed against OIO No.09-10/Commr./SU/08/CE dated 29.02.2008 (impugned order), passed by the Commissioner of Central Excise, Rohtak, in remand proceedings consequent to the Final Order No.391-393/07-EX dated 04.07.2007 of CESTAT.
2. Brief facts of the case are that M/s Tibrewala Industries Pvt. Ltd. (Appellant No. 1, Appeal No. E/908/2008-Ex-DB) are engaged in the manufacture of sheathing compound; they obtain their main raw material i.e. plastic granules from M/s Gas Authority of India Limited (GAIL). On an investigation conducting by the officer of DGCEI on the appellants and R.K Trading Company (appellant in Appeal No. E/1159/2008), a stockist of M/s GAIL, it appeared to the Department that the appellants were diverting the plastic granules, purchased from M/s GAIL, through the stockist M/s R.K. Trading Company, and were availing CENVAT credit fraudulently. Search of the premises of the appellants, the stockist and other places; it also appeared that there were certain other violations committed by the appellant; statements of different persons were recorded and on the completion of investigation, show cause notice dated 05.04.2002 was issued to the appellants seeking to seize the unaccounted raw material/ process material found at the premises of appellant No.1 and SCN dated 30.04.2003 seeking to recover CENVAT credit of Rs.55,29,455/-alleged to have been fraudulently availed by the appellant No.1 along with interest and seeking to impose penalties on appellant No.1, Shri Anil Kumar Tibrewala, Director of appellant No.1 (Appeal No.E/909/2008-EX-DB) and the stockist R.K. Trading Co. (Appeal No. E/1159/2008), the said SCNs were adjudicated vide Order-in-Original No. 05-6/Commr./RP/2007 dated 16.01.2007.
3. On an appeal filed by the appellants, CESTAT, vide Final Order cited above set aside the impugned order and remanded the case back to the Adjudicating Authority with a direction to allow the appellants to file written replies and to accord a personal hearing. Accordingly, the impugned order as cited above has been passed. Learned Adjudicating Authority:
(i) Confiscated seized goods valued at Rs.55,46,830/- under Rule 25 (1) (b) of Central Excise Rules, 2001 read with Rule 13 of CENVAT Credit Rules, 2001; however, the goods were permitted to be redeemed on payment of redemption fine of Rs.5 Lakhs; imposed a penalty of Rs.10 Lakhs on appellant No.1
(i) Ordered recovery of CENVAT credit of Rs.55,29,455/- under Section 11A of Central Excise Act, 1944 read with Rule 57AH (1) of Central Excise Rules, 1944 and Rule 12 of CENVAT Credit Rules, 2001/2002 along with interest, from appellant No.1.
(iii) Imposed an equal penalty on the appellant No.1 under Section 11AC of Central Excise Act, 1944 read with Rule 57AH (2), Rule 173Q of Central Excise Rules, 1944, Rule 13(2) of CENVAT Credit Rules, 2001/2002, Rule 25 of Central Excise Rules, 2001/2002.
(iv) Imposed a penalty of Rs.10 Lakhs on Shri Anil Kumar Tibrewala, Director of appellant No.1.
(v) Imposed a penalty of Rs. 10 Lakhs on R.K. Trading Company.
4. Accordingly, this set of three appeals, No. E/908/2008-EX (DB) by appellant No.1; appeal No. E/909/2008-EX (DB) by Shri Anil Kumar Tibrewala, Director and appeal No. E/1159/2008-EX (DB), have been filed.
5. Shri R.K.Hasija assisted by Shri Shivang Puri, learned Counsels, appearing for the appellant No.1 and its Director, submits that the entire case of the Department is based on statements of different persons and non-corelated documents and that the Department has initiated proceedings against R.K. Trading Company, on the same set of evidence, vide show cause notice dated 05.04.2002; the said show cause notice was dropped vide Order-in-Original dated 30.01.2004, holding that Department has not investigated the matter properly; the said order has been accepted by the Department and no appeal has been preferred. He submits that, therefore, the present proceedings also are liable to be set aside.
6. Learned Counsel for the appellants submits, as far as the first show cause notice involving confiscation, that it is incorrect to state that 67.50 MT of finished goods were lying unaccounted; matter of the fact is that the material was accounted but the records were not available in the factory premises as they were taken to their head office for internal audit and Puja, the re-constructed RG-I reflects the said material. As regards the allegation of re-processed granules of 31.70 MT, he submits that those were semi-finished goods and not reprocessed plastic; the officers took the samples vide Panchnama dated 10.10.2001 but have not produced any testing report till date; he submits that raw material and semi-finished products cannot be seized in the factory premises; sheathing compound cannot manufacture by re-processed plastic. Regarding the EVA Plastic of 3000Kgs, he submits that the same was purchased from M/s Aksh Optifiber and was issued to the shop floor as can be seen from the Entry No.60 dated 29.08.2001 in RG-23A Part-1. Regarding 8325Kgs of granules received from M/s GAIL and 1275Kgs of granules from IPCL found in the factory on 10.10.2001, he submits that 9000Kgs granules of M/s GAIL was lying in balance as on 15.09.2001 and 5675kgs procured from Balaji Polymers (IPCL Stockist) as on 16.09.2001 and both were issued for production. Regarding 18125kgs of granules received from M/s GAIL and 325kgs of granules received from IPCL, he submits that 19,500kgs granules were received from M/s GAIL and 2000kgs of granules received from M/s IPCL were issued for production as can be seen from Entries No. 70-72 and 77 of RG-23A Part-1. He submits that raw material and semi-finished goods cannot be seized as held in the following case law:
