2026-VIL-1633-CESTAT-ALH-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Fake invoices without physical supply of goods, Denial of credit on basis of statements recorded during investigation, Admissibility of statements under Section 9D of Central Excise Act, 1944 - Whether CENVAT credit can be denied and penalty imposed on basis of statements recorded during investigation which were retracted during cross-examination and when mandatory procedure under Section 9D of CEA was not followed – HELD – Section 9D(1)(b) of CEA prescribes a mandatory and non-derogable procedure for admitting statements recorded during investigation. The person who made the statement must first be examined as a witness before the adjudicating authority and the adjudicating authority must form an opinion that having regard to circumstances of the case, the statement should be admitted in evidence in the interests of justice, before cross-examination can occur - The rationale is that statements recorded during investigation have high possibility of being recorded under coercion or compulsion. Multiple High Courts have consistently held this procedure is mandatory and failure to comply means statements cannot be used as evidence - The adjudicating authority in the present case did not provide cross-examination opportunity to all witnesses whose statements were relied upon and admitted retracted statements without properly examining the deponents under Section 9D - The investigation had significant gaps including no physical stock verification, no inquiry from the appellant's customers, contradictory statements from transporters left unresolved. The appellant purchased only from registered dealers, made payments through banking channels, maintained complete records in books of accounts, was subject to regular departmental audit without any prior allegation, and had no knowledge of the improper dealings of the supplier - The adjudicating authority gave no specific findings on the appellant's case but merely reiterated general allegations without countering the defense submissions. Reliance on the fact that some parties opted for SVLDRS cannot constitute evidence against other parties. The impugned order proceeded with conviction that investigation was sacrosanct without properly evaluating the evidence or cross-examination results – The demand for reversal of CENVAT credit along with penalty is set aside – The appeal is allowed
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