Bhagwati Traders vs Commissioner, CGST And Central Excise

The instant appeal has been filed by the Appellant impugning the order No. RPR-EXCUS-000-APP-001-20-21 dated 29.04.2020 passed by the Commissioner of Central Excise (Appeals), Raipur.

The appellant is a trader of Iron & Steel products and is engaged in purchase and sale of CTD/TMT bars. According to the department this is a case of clandestine removal of CTD/TMT bars from the premises of the appellant, which were received by him without invoices and without payment of Central Excise duty, with the intention to evade payment of Central Excise duty during the period 2011-12 and 2012-13 which was unearthed during a search conducted in the premises of the appellant in the month of February, 2013 by the Central Excise Officers. In order to prove the case against the appellant, the department mainly relied upon various statements of Mr. Krishna Kumar Sahu [proprietor of the Appellant], Mr. Tirupati Rai [Proprietor of M/s. Sai Deva Steels] and Mr.Suresh Agarwal [Proprietor of M/s. Swastik Steels], which were recorded during the course of investigation. After investigation, a show cause notice dated 8.10.2016 was issued demanding Excise duty from M/s. Swastik Steels i.e. the manufacturer of TMT bars and for imposing penalty on the Appellant and on M/s. Sai Deva Steel (broker) on the ground that the appellant had purchased TMT bars from M/s. Swastik Steels clandestinely through M/s. Sai Deva Steel. The Adjudicating Authority vide Order-in-Original dated 30.3.2019 confirmed the demand of duty against M/s. Swastik Steels and imposed penalty of Rs.3 lakhs on the Appellant and of Rs.2,000/- on the broker i..e M/s. Sai Deva Steels who helped the appellant to purchase the CMD/ TMT bars from M/s. Swastik Steels. On Appeal being filed by the Appellant, the learned Commissioner vide impugned order dated 29.4.2020 rejected the same and upheld the order of the adjudicating authority imposing penalty of Rs.3 lakhs on the Appellant.

The preliminary issue raised by the learned counsel is that the provisions of Section 9D of the Central Excise Act have not been followed by the Adjudicating Authority, which are mandatory in nature, the absence of which vitiates the adjudicating process and a prayer was made for remanding the matter to the Adjudicating Authority for denovo adjudication. According to learned counsel, the allegations against the appellant are based on the statement of third party which were not subjected to examination-in-chief or cross-examination and in the absence of following the procedure as prescribed under section 9D they could not have been relied upon by the department or by the authorities below for establishing their case. In support of his submissions, learned counsel relied upon the following decisions:-

(i) G-Tech Industries vs. UOI 2016(339) ELT 209 (P&H);

(ii) Hi-Tech Abrasives Ltd. vs. CCE & C, Raipur 2018(362) ELT 961 (Chhattisgarh);

(iii) CCE, Delhi-I vs. Kuber Tobacco India Ltd. 2016(338) ELT 113 (Tri-Del).

He further submits that the appellant has also not filed the reply to the show cause notice. He further submits that even if department goes by its own case then it is M/s. Sai Deva Steel, the broker, who was the facilitator but still the penalty of only Rs.2,000/- was imposed on him and on the other hand a much higher penalty of Rs.3 lakhs was imposed on the appellant against whom the allegation was that he purchased the TMT bars from M/s. Swastik Steels through the broker M/s. Sai Deva Steel. Learned Authorised Representative on the other hand reiterated the findings recorded in the impugned order and prayed for dismissal of the appeal filed by the appellant. He further submits that despite various opportunities granted, the appellant chose not to appear before the adjudicating authority and therefore now it is not open to the appellant to raise the issue regarding non-following of section 9D procedure.

I have heard Shri Abhas Mishra, learned counsel for the appellant and Shri Ravi Kapoor, learned Authorized Representative on behalf of the Revenue and perused the case records including the written submissions and the case laws. A plain reading of Section 9D(i) ibid makes it clear that clauses (a) and (b) therein set out the circumstances in which a statement made and signed by a person before the Central Excise Officer of a gazetted rank, during the course of inquiry or proceeding under the Act, shall be relevant, for the purpose of proving the truth of the facts contained therein. The use of the word ‘shall’ in the said section makes it clear that the provisions contemplated in the said sub-section are mandatory. It means that the procedure prescribed in Section 9D(i) ibid has to be followed mandatorily in the adjudication proceedings and if without following the procedure stated therein, the adjudicating authority relies upon the statements recorded during investigation then it vitiates the adjudication process. Either the adjudicating authority follow the procedure prescribed in Section 9D or if it is not possible to follow then to discard those statements. So far as clandestine removal cases are concerned, mainly they are based on the statements/evidences recorded during the course of investigation. Although in the instant case, opportunities were granted by the adjudicating authority to the appellant but they chose not to participate in the proceeding as I gathered from the findings recorded by both the authorities below. Be that as it may, justice must not only be done, but must also be seen to be done. When the legislature has laid down a procedure to be followed then it has to be done in that way only and no shortcut can be adopted. Therefore on this ground alone, without going into the merits of the matter, I deem it proper to set aside the impugned order and remand the matter back to the adjudicating authority for de novo adjudication after giving an opportunity of hearing to the appellant. The appellant is also directed to attend the hearing before the adjudicating authority on the days fixed by the said authority.

The appeal is accordingly disposed of in the above terms.

(Pronounced in the open Court on 6.1.2022)