Witness relied upon by Central Excise Authorities not acceptable Evidence in absence of Cross-Examination: CESTAT [Read Order]

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that witness relied upon by the central excise authorities not acceptable evidence in absence of cross-examination.

Shortage of finished products and inputs on which cenvat credit had been availed were noticed during visit of officers of central excise which was regularized promptly by discharge of differential duty and reversal of credit. That was also the starting point of investigations that culminated in issue of show cause notice.

The case of the central excise authorities, in a nutshell, is that raw materials procured from the open market was utilized to enable unreported production which is evidenced by inflated consumption of electricity during the reported heat cycles preferring to take cover under inefficient performance per cycle.

Evidencing of clandestine removal must rest upon preponderance of probability as direct evidence is rarely possible, but interferences must indicate both probability and preponderance. Normally, it should happen that goods that have reached the market are traced to the assessee through a backward trail or raw materials that originated from a source be traced through forward trail to assessee. Ideally, both should converge but, for the purpose of ordering clandestine removal, one or the other would suffice; that is the true spirit of preponderance of probability.

A Two-Member Bench comprising CJ Mathew, Technical Member and Ajay Sharma, Judicial Member observed that “The witnesses relied upon by the central excise authorities are not acceptable evidence in the absence of cross-examination that was denied. The impugned order fails on that ground but, as the request for cross-examination had been rejected deliberately, availability or amenability to production for cross-examination is not in question. To enable such cross-examination, we set aside the impugned order and remand the matter back to the original authority for fresh determination on the facts and evidences limiting reliance to such statements that have crossed the hurdle of ‘relevancy’ prescribed in section 9D of Central Excise Act, 1944.”

To Read the full text of the Order CLICK HERE

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