2026-VIL-1327-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Clandestine removal of MS ingots - Appellant, Managing Director of a steel manufacturing company, along with related companies and individuals, was accused of causing clandestine removal of MS ingots to four buyers. During the course of investigation, statements were recorded from the CEO and Managing Director of the company. The noticees initially did not file a formal reply to the SCN but during the personal hearing in March 2016, they sought cross-examination of the persons whose statements were recorded in the SCN, claiming the statements were not voluntary and obtained under duress. The adjudicating authority rejected the request for cross-examination without providing satisfactory reasons and proceeded to decide the case solely on the basis of the allegations in the SCN without affording the noticees an opportunity to file a final reply on merits - Whether the allegation of clandestine removal can be upheld when the adjudicating authority violates the principles of natural justice by denying cross-examination and refusing to afford a proper opportunity to defend - HELD - The order has been passed in serious violation of the principles of natural justice, specifically the principle of Audi Alteram Partem. When the adjudicating authority itself observes that the reply filed was interim, the officer is obligated to communicate the rejection of cross-examination to the parties and give them an opportunity to file a final reply on merits. There is no precedent supporting the proposition that no such second opportunity should be afforded when a request for cross-examination is rejected - Further, there are two ways of denying an admission under statement: one is to retract it entirely and the second is to seek cross-examination of the person giving the statement. The mere fact that statements were not retracted does not become conclusive or the end of the matter when cross-examination was properly sought. The adjudication proceedings were conducted as mere formality without substantive consideration. The allegation of clandestine removal stands not proved. The individual penalties under Section 26 of the Central Excise Rules 2002 imposed on the contesting Appellants also cannot be sustained as they have not been given reasonable opportunities to put forth their defence. The impugned order is set aside and the appeals are allowed
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