Vulcan Industrial Engineering Co. Ltd. vs Union of India

Sonia Gokani, J.—Heard learned advocates for the parries for final disposal of the petition. In this petition, challenge is made to the order of the Commissioner, Central Excise, Customs & Service Tax, Vadodara-I [Annexure-F to the petition] dated 4th February 2013, whereby, it confirmed various duty demands along with penalties and interest. Against such an order, the petitioners would be entitled to approach the Central Excise, Customs & Service Tax Appellate Tribunal ("Tribunal" for short), however, we have chosen to entertain this petition essentially on the ground of breach of principles of natural justice.

While issuing notice, in the instant case, we had particularly indicated the breach of such principles in the following manner:

Learned counsel for the petitioners placed on record an affidavit dated 5-3-2013 sworn by advocate Shri Nirav P. Shah who had appeared before the learned Commissioner during the course of adjudication proceedings. On the strength of such supporting affidavit as well as contents of the petition, counsel submitted that without disposing of the petitioners'' request for cross-examination of certain witnesses, the Commissioner passed final order confirming demands arising out of the show cause notice. He submitted that in view of the pendency of the request of the petitioners for cross-examination, no hearing on other issues had taken place.

Notice returnable on 21st March 2013. Respondents shall not carry out coercive recovery arising out of impugned Order-in-Original.

Learned senior counsel Shri Devan Parikh appearing for the petitioners has vehemently submitted that the Commissioner was half-way through the adjudication proceedings and at the time of personal hearing, learned advocate Shri Nirav Shah appearing for the petitioner had made a request for cross-examination. He was assured that the Commissioner would go through the files and the records and will decide the issue of cross-examination. It is further urged that without any intimation, or even without any effective hearing, the Order-in-Original came to be passed which is in clear violation of the principles of natural justice and even otherwise, it is an unreasoned order.

Per contra, learned advocate Shri Gaurang Bhatt appearing for the respondent has also strongly objected to any interference by this Court on the ground that the appeal is already available. He further urged that the right to cross-examination is not a right of any party. It is the discretion of the concerned adjudicating authority to either allow or disallow such a request.

Upon thus hearing both the sides, it could be noted that an intelligence was gathered by the officer of the Directorate General of Central Excise Intelligence, Nashik Regional Unit that the present petitioners and others are involved in the manufacture of excisable goods "Drill Rods" but were not paying the Central Excise duties leviable on the said product; as required u/s 3 of the Central Excise Act, 1944, and therefore, investigations were initiated.

During the process, statements of various witnesses were recorded which eventually culminated into issuance of show cause notices dated 7th October 2011 and 1st November 2011. During the course of adjudication proceedings, a request was made before the Commissioner to allow cross-examination of the persons whose statements were recorded by the Department. The Commissioner did not decide such a request of cross-examination separately, but, while passing the Order-in-Original, it denied such a request of cross-examination and concluded thus:

So far as the assessee''s request for cross-examination of persons whose statements were relied upon in this case is concerned, I find that both the Show Cause Notices dated 7th October 2011 and 1st November 2011 wherein, at para 21 and para 30 respectively, it is mentioned that, "In case, the noticees wish to inspect the documents relied upon in this case, they may approach the office of the Assistant Director, Directorate General of Central Excise Intelligence, Nasik Regional Unit, 2nd Floor, Mamta Anand Complex, Shivajinagar on any working day with a formal prior intimation". I find that the persons who have given their statements are working in a responsible position in the Company viz. M/s. Vulcan Industries Engineering Co. Limited, Unit-III, Survey No. 1091, Sunav-Kasor Road, At & Post Piplav, District Anand and some of them are their buyers whose statements are recorded by the Investigating Officer to know the nature and end use of the product supplied by the Company to know about their procurement procedure for maintenance of inventory, accounting system, etc. I find that the entire case is based on the process of manufacturing undertaken by the manufacturer of the subject goods and applicability of Tribunal judgment in the case of 1985 ECR 1704 to the subject goods for non-payment of Central Excise duty on clearance affected by the assessee. Thus, I find that the assessee has been given enough opportunity by the DGCEI, Nasik in this regard. I find that the other persons to whom the Company has supplied their finished goods and whose statements have been recorded by the DGCEI Officer to know mainly contains the nature and end use of the product supplied by the Company, to know about their procurement procedure and procedure for maintenance of inventory, accounting system, etc. I hold that it has no vital role to play to establish the processes of manufacture done at the factory premises, and applicability of Central Excise duty on the subject goods. I hold that the request made by the assessee for cross-examination of the persons whose statements are relied upon in this case does not find any merit on it as discussed above, and hence, I reject the request made by them.

As could be noted from the affidavit filed by learned advocate Shri Nirav Shah, a request was made to the Commissioner for cross-examination of all those persons whose statements have been recorded and he was particularly informed that he had not been prepared in the matter and would enquired as to what the matter is about. It was explained to him and the request was reiterated. He was assured that after going through the record, the Commissioner would decide such a request. Commissioner was also intimated that his senior was likely to appear for such hearing and therefore, it was clearly understood that the Commissioner would communicate his views on the right of cross-examination and would grant another date. Instead, the Order-in-Original was passed without deciding the request for cross-examination of all those persons whose statements have been recorded by DGCEI and particularly when the hearing on the merit was also not completed as the petitioners were given to understand that once such request of cross-examination was decided, further hearing would take place. Identical question came up before this Court in Special Civil Application No. 2358 of 2013. We have chosen to interfere in that petition also, on the ground of breach of principles of natural justice, while passing the final order of adjudication, by holding thus -

Conscious that against such order, statutory appeal before the Central Excise, Customs & Service Tax Appellate Tribunal is available, we had, by recording brief reasons in our Order dated 28th February 2013, issued notice to the respondents. We are prompted to entertain writ petition directly on the ground that the petitioners had prima facie made out a case of breach of principles of natural justice at the hands of the adjudicating authority. Short grievance of the petitioners is that the impugned order was passed without disposing of the petitioners, request for cross-examination of certain witnesses. We notice that in the said order itself, the adjudicating authority dealt with such a request and found that in the facts of the case, cross-examination was not required to be granted. However, the petitioners had been, through their legal representative, taking a firm stand that only after cross-examination be permitted, the petitioners would be in a position to participate in the adjudication proceedings. The petitioners have so also raised demand for supplying certain documents, which according to them were though relevant, were not supplied.

In the impugned order, the Commissioner himself recorded such stand of the petitioners in the following manner:

Finally on 17-1-2013, Shri R.S. Dinkar attending for the Noticee stated that some relied upon legible documents and English translation of statements sought vide their letter dated 1-5-2010 has not been supplied to them; that they had filed preliminary reply and sought cross-examination of the buyers; that the calculation has been done wrongly as benefit of cum-duty has not been given to them; that the calculations should be done correctly, notwithstanding the fact that they are disputing the whole demand; that the estimation done on the basis of gas consumption is patently wrong; that they would present their case further after cross-examination and translation.

He, however, proceeded to deal with the petitioners, request for cross-examination in paragraph 14.1 of the order and rejected such a request. He thereupon proceeded to examine the issues at length and ultimately passed the final order as noted above, confirming various duty demands with interest and penalties.

Having heard learned counsel for the parties, we are inclined to interfere on the short ground of serious breach of principles of natural justice in the process of passing final order of adjudication. We say so because the adjudicating authority, though categorically informed by the representative of the petitioners that the petitioners are serious about exercise of their right to cross-examination and further that any meaningful participation in the adjudicating proceedings can take place only after such cross-examination is granted, the authority proceeded to decide such request only along with the final order of adjudication. Whether the petitioners had a right to seek cross-examination in the facts of the present case, is not our brief at the moment. We, therefore, refuse to comment on the petitioners insistence for cross-examination or authority''s reluctance to grant it. What we, however, find is that the petitioners had at least a right to be told whether such application is being granted or refused before final order was passed. When the petitioners prayed for cross-examination and reasonably expected that the same would be granted, they cannot be expected to participate in the adjudicating proceedings up to the final stage in other words, without dealing, with and disposing of the petitioners'' application for cross-examination, the adjudicating authority could not have finally adjudicated the issues. If he was of the opinion that the request for cross-examination was not tenable, by giving reasons, he could have rejected it. We wonder what would have happened, if he was inclined to accept such a request. In such a situation, he himself could not have finally disposed of the show cause notice proceedings. In either case, the petitioners had a right to know the outcome of their application.

Merely because the Commissioner was of the opinion that the petitioners had made such a request somewhat belatedly, would not permit him to, in the facts of the present case, deal with such an application only in the final order itself. Sum total of this discussion is that we are inclined to set-aside the impugned order and request the adjudicating authority to pass a separate order on the petitioners'' application/request letter for granting cross-examination of the named witnesses. We are conscious that the Commissioner has already decided such an issue, however, since we are quashing the order, this part of the order would also not survive and hence, the requirement of a fresh order. We are informed that the same officer continues to hold the office of the Commissioner of Customs & Central Excise, Surat-II. It would therefore, be not necessary to separately hear the petition once again before passing any such order. This would, however, not preclude the Commissioner from requiring the petitioners to show relevance for seeking cross-examination of the witnesses.

Once such order is passed, the Commissioner shall issue a notice to the petitioners for further hearing of the show cause notice and proceed thereafter in accordance with law.

We, therefore along the very line, in the present petition also, hold without commenting on the merits of entitlement of the petitioners of cross-examination of the witnesses and the right of the Commissioner to decide the same in accordance with law and quash the order impugned. We maintain, however, as mentioned hereinabove, it was incumbent upon the Commissioner to decide the request of cross-examination of the petitioners before finally adjudicating the show cause notice and culminating the proceedings into an Order-in-Original.

In the present petition learned Advocate Shri Nirav Shah for the petitioners personally filed an affidavit and it is clearly made out from the contents of such affidavit that the petitioners were awaiting communication from the Commissioner in respect of the request of cross-examination made reiteratively. It is also further to be noted that on account of pendency of such a request, the petitioners had also not concluded hearing on the merits.

Resultantly, petition is allowed. Order-in-Original dated 31st January 2013 (Annexure-F) to the petition is hereby quashed with a request to the adjudicating authority to pass a separate order on the request of the petitioners for grant of cross-examination of the named witnesses.

The Commissioner, Central Excise, Customs & Service Tax, Vadodara-I shall pass such order on availing opportunity to both the sides and decide the same in accordance with law. Once such order is passed, the Commissioner shall afford further opportunity of hearing and proceed thereafter to conclude finally in accordance with law. No order as to cost.