2024-VIL-1706-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Clandestine Manufacture, Cross-examination – Issue of Show Cause Notice to appellants and Director alleging clandestine manufacture and removal of goods without payment of excise duty - Demand based on incriminating documents recovered from the residential premises of the co-appellant and statements of employees. The appellants sought cross-examination of the witnesses whose statements were relied upon, but it was not granted - Whether the denial of cross-examination to the witnesses whose statements were relied upon to implicate the appellants is admissible – HELD - Denying the appellants the opportunity to cross-examine the witnesses whose statements were relied upon to implicate them in the proceedings is in violation of the principles of natural justice and the provisions of Section 9D of the Central Excise Act, 1944 - The Supreme Court in Andaman Timber Industries v. CCE and the Delhi High Court in Flevel International v. CCE, have held that unless exceptional circumstances exist, the noticee has a right to cross-examine the persons whose statements are being relied upon - the entire case of the Revenue was based on the documents seized from the possession of an employee and his statement - in cases of alleged clandestine manufacture and clearance, the Revenue needs to establish certain fundamental criteria, such as tangible evidence of clandestine activities, excess raw materials, instances of actual removal of unaccounted finished goods, statements of buyers, proof of transportation, etc. In the absence of such corroborative evidence demand cannot be raised solely on the basis of the documents recovered from a third party and the statements recorded - the impugned order is set aside and appeal is allowed
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