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Excise Misc. Application No. E/Misc./50757/2018 in Excise Appeal No. E/51867/2018 [DB] and Final Order No. 52948/2018

Decided On: 13.09.2018

Appellants: Miraj Products Pvt. Ltd.
Respondent: C.E. & S.T., Udaipur

Hon'ble Judges/Coram:
C.L. Mahar, Member (T) and Rachna Gupta


Rachna Gupta, Member (J)

1. Present is the Appeal against the Order of Commissioner communicated vide their letter No. 4649 dated 08.06.2018 vide which the request of the appellant to cross examining the person as named in their application dated 20.12.2017 has been declined.

2. The facts relevant for the purpose are that the appellant is engaged in manufacture of chewing tobacco falling under Chapter 24 of Central Excise Tariff Act 1985. The income tax authorities had conducted an investigation against the appellant in September 2013 during which the appellant had surrendered unaccounted income of Rs. 129.41 crores. In pursuance of the said information alongwith the documents received by the Excise Commissionerate, Udaipur from the income tax Department, the Department after necessary investigations, alleged that the assessee/appellant has evaded the Central Excise duty amounting to Rs. 1,63,06,00,000/- in respect of the notified goods i.e. chewing tobacco produced/manufactured by them without declaring the number of machines and part of section/place of manufacture and cleared without recording the production in the stock, without assessing and without payment of duty thereby contravening the provisions of Rule 6, 7 and 9 of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 thus rendered these goods cleared without payment of duty i.e. being clandestine removal, liable to confiscation under Rule 25 of Central Excise Rules, 2002 read with Rule 18 of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010.

3. Resultantly, a Show Cause Notice bearing No. 5341 dated 03.05.2017 was served upon the appellant proposing the recovery of the alleged unpaid, aforesaid amount of duty alongwith appropriate interest and the penalties under Central Excise Act, 1944 and also under Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. After being served with the said Show Cause Notice, the appellant made the request for cross examination vide the letter dated 20.12.2017. The said request was declined vide the order under challenge, hence the present Appeal.

4. We have heard Mr. Narasimhan, Ld. Advocate for the appellant and Mr. H.C. Saini, Ld. DR for the Department.

5. Ld. Counsel for the appellant has impressed upon the Order of Hon'ble High Court Rajasthan at Jodhpur in a civil writ petition No. 11179/2018 titled as M/s. Miraj Products Vs. Union of India dated 14.08.2018 vide which this Tribunal has been directed to decide the Appeal of the petitioner within a period of one month from the date of the Order. It is submitted that before this Tribunal also, the application praying for early hearing of impugned Appeal were filed but they never got listed. Resultantly, the aforementioned writ petition was filed and the Appeal accordingly has to be disposed of in terms of directions therein. It is further submitted that the Order under challenge is liable to be set aside as the same has been passed in violation of principles of natural justice. The Show Cause Notice in the instant case has proposed the demand by placing reliance on various letters/reports due to which vide letter of 20.12.2017 the appellant requested the Department for being provided with an opportunity to cross examine the authors of those letters to examine the veracity of the contents of letters/reports. However, the permission has been denied vide the impugned order. The findings that "on making further enquiry in respect of the various brands mentioned by you in your above mentioned letter, it has been observed that almost all of the documentary and circumstantial evidences relied upon in the Show Cause Notice are consistent and do not need to be corroborated or disproved by cross examination" are alleged unreasonable and thus unsustainable. Order is accordingly prayed to be set aside.

6. While rebutting these arguments, it is submitted on behalf of the Department that the letter of 20.12.2017 was a pre-mature letter and the adjudicating authority below had no option but to decline the permission as was asked for, for want of the stage to have arrived for the purpose as prayed therein. Ld. DR has relied upon Kanpur Cigarettes Ltd. Vs. Union of India MANU/UP/3043/2013 : 2016 (344) ELT 82, Uma Nath Pandey Vs. State of UP MANU/SC/0401/2009 : 2009 (237) ELT 241 (S.C.), Oriental Carbon & Chemicals Ltd. Vs. CCE MANU/UP/1561/2015 : 2016 (331) ELT 219 (All.) and CE, Mumbai Vs. CEAT Ltd. MANU/CM/0169/2014 : 2014(308) ELT 99 (Tri.-Mumbai)

7. After hearing both the parties and perusing the entire record, we observe and hold as follows:-

The Order under challenge was passed on 08.06.2018 and the Appeal thereof was filed before this Tribunal on 29.06.2018. Perusal of record shows that since the day of filing till 31.08.2018, the appellant did not appear before this Tribunal when it was placed before the Single Member Bench. Due to the findings recorded in the said order, the said bench directed registry to list the appeal before the Division Bench. It is also apparent from the said order that by that time the order of Hon'ble Rajasthan High Court was in existence with a time bound direction of disposal of this Appeal within a month. Accordingly Ld. Member Technical directed the registry for putting up the matter for urgent consideration. There is no single utterance about any request of the appellant to ever has prayed for early hearing of the matter. At this stage, if the order of Hon'ble High Court is perused, it is apparent that the appellant made a submission before the High Court that despite the request for early hearings made by the petitioner, the Tribunal is not considering the Appeal and on the other hand, the assessing authority is bent upon to pass the final order. In view of above observations from record the said submission is held to be a mis-statement before the Hon'ble High Court. It is also apparent that the submission on merits by the appellant before the High Court was also a mis-statement/mis-communication as he requested for his cross examination during assessment proceedings to be allowed which otherwise was rejected by the Commissioner, Central Excise, Udaipur. Both these wrong submissions are sufficient for us to form an opinion that the appellant is in hurry of taking a decision that suits his need without following a proper procedure and rather going to the extent of making wrong statements even before the Hon'ble High Court. Since the demand in the present case is a substantive one, it would not be wrong on our part to hold that the strategy of appellant is just to evade the adjudication or at least it is a time game strategy. The relief as prayed for under the impugned appeal is a discretionary relief and the Law has been settled that a person seeking aid of the Court for exercising its discretionary powers is expected to state correct facts and not to state lies before the Court as it was held by Hon'ble Apex Court in the case Balbant Singh Vs. Jagdish Singh MANU/SC/0487/2010 : 2010 Volume-IV CCC 551 (S.C.). From the above discussion, the impugned appeal is opined to be an abuse of process of Law.

8. However, coming to the merits of the case, we observe that what actually to be adjudicated in the present Appeal is as to whether the appellant has a right to call upon the Department to make available the witnesses for cross examination even before they being examined or even before the adjudication has begun. For the purpose, we need to look into the law in this respect. Section 14 of the Central Excise Act, 1944 empowers the Central Excise officer to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any enquiry which such officer is making for any of the purposes of this Act. Proviso 2, sub rule 2 and Rule 3 thereof makes it clear that while exercising this power the relevant provisions of Civil Procedure Code, 1908 (CPC in short) and that of Criminal Procedure Code, 1973 (Cr.P.C. in short) are applicable. Order 16 and Order 18 of CPC prescribes the stage and the procedure for examination of the witnesses. As per Order 16 Rule 1 CPC, the Court has to summon witness after the issues in the case, to be adjudicated, are settled by the Court i.e. after the trial has begun. As per Order 18, it is first party to the suit who has to begin examination of his witnesses and as per Rule 4 CPC thereof, examination in Chief of witness has first to be recorded which is to be followed by cross examination and re-examination of the said witness.

9. If the procedure scheme in a criminal case is seen, the date of evidence arrives after the charge against the accused is framed i.e. after the trial of criminal adjudication begins. In the criminal matter, prosecution is the first party to begin the evidence as per Section 230 and Section 242 of Cr. PC. It is thereafter that the accused/opponent may make a request to the adjudicating authority to permit him to cross examine any of the witness. The perusal of Section 231(2) and 242(3), the proviso thereof Cr.PC makes it abundantly clear that permission to cross examine is discretion of the adjudicating authority. Both these procedural codes make this clear that the examination in chief of a witness is a pre-requisite for the cross examination thereof and the former begins only after the trial begins, as is also held in Section 135 of Indian Evidence Act. Section 139 of Indian Evidence Act gives a further clarification that a person summoned to produce a document does not become a witness by the mere fact that he produces it and cannot be cross examined unless and until he is called as a witness. Section 137 of the Evidence Act defines cross examination to mean the examination of a witness by the adverse party who has already been examined in chief. The said scheme is applicable to the cases under Central Excise Act in view of Section 14 as discussed above.

10. The appellant herein is aggrieved of being denied an opportunity of cross examination. The theory of cross examination has to be examined in the perspective of its purpose. The object of cross examination is twofold - firstly to weaken, qualify or destroy the case of the opponent. To impeach the accuracy, credibility and general value of the evidence given in chief, to shift the facts already stated by the witness, to detect and expose discrepancies or to elicit suppressed facts which will support the case of cross examining party. Secondly, it is to establish the parties own case through his opponents own witnesses. Thus cross examination is a powerful weapon in hands of advisory. Non grant of an opportunity to cross examine a witness may even attract the doctrine of fairness and may be held to be violative of principles of natural justice as it was held in the case of K. Raghuram Babu Vs. Director General of Railway Protection Force, New Delhi MANU/AP/0620/2001 : 2001 (6) ALD 18 (AP)(FB). As a general rule evidence is not legally admissible against a party who at the time it was given had no opportunity to cross examine the witness or of rebutting their testimony by other evidence as was held in the case P. Satish Pai Vs. Yashwant Shinoy ILR 2010 (Kar.) 4122 provided there should exist conflict of interest between the parties. However, a witness cannot be crossed examined when he has not been examined in chief i.e. to say when there is nothing in relation to which he could be cross examined as was held by Hon'ble Apex Court in the case Sukhwant Singh Vs. State of Punjab MANU/SC/0305/1995 : 1995 (3) SCC 367. Karnataka High Court in another case Yellappa Vs. Murari MANU/KA/0436/1998 : ILR 1997 (Kar.) 3207 as held that when a witness who has not given his evidence in chief examination is permitted to be cross examined by his opposite party then such evidence is illegal and so inadmissible to be relied upon by the Court or by the Tribunal.

11. By applying all these principles to the fact of the present case we observe that the Department has just issued a Show Cause Notice which is based on prima facie material and is nothing more than constituting a prima facie opinion. At the stage of Show Cause Notice, there is no adjudication. It is only a step in process of adjudication because the Show Cause Notice in itself is not an order of assessment. The said order has to be passed post issuance of Show Cause Notice after affording an opportunity of hearing the parties and after considering the evidence and material which is placed before the adjudicating authority, the Central Excise Commissioner in the present case.

12. As already observed above after receiving the Show Cause Notice, the only proceeding to respond by the appellant was the impugned letter of 20.12.2017 praying for cross examination of the witnesses. The documents relied in Show Cause Notice are merely the letter based on documents recovered during searches not only in the premises of third party but also in the premises of the MD of the present appellant. Thus, those are merely the documents collected at the stage of investigation. The appellants have not appeared as yet before the adjudicating authority. The stage to summon the authors of those documents/those letters (as mentioned in the Show Cause Notice) and to record their statement (examination in chief) has not yet come. The question of cross examination of such persons who are not yet been classified as witness or have not yet been summoned even by the adjudicating authority, does not at all arise. The findings of the Commissioner "that the persons for whom cross examination was sought have not even tendered any factual statement, the cross examination is not needed and therefore the same is denied" are therefore held to have no infirmity. The appellant is first required to submit his reply to the Show Cause Notice received.

13. No doubt, the absence of his reply will not debar him from cross examining the witnesses but the stage of cross examination is post the examination in chief of a person who has been summoned by the adjudicating authority, in his discretion after satisfying himself qua his requirement to be examined as a witness to prove the allegations of the Show Cause Notice. We draw our support from the decision of Hon'ble Apex Court in the case Modula India Vs. Kamakshya Singh Deo MANU/SC/0283/1988 : AIR 1989 S.C. 162 wherein it was held that omission on the second party to file the statement of defence will not deprive him an opportunity to participate in the proceedings even if his defence is struck off. In that case, it would preclude the second party only from adducing the evidence oral or documentary in support of arguments that ought to have been made in the statement of defence if not filed but it shall still be open to him to exercise his rights as follows:

(i) - of cross examining the first party/prosecution witnesses.

(ii) - of pointing to the adjudicating authority the factual and legal infirmity in first party/prosecution case.

(iii) - of addressing the arguments on the basis of evidence as adduced by the first party and tested by the cross examination on behalf of the said second party.

14. We follow the adjudication of Allahabad Tribunal in Kanpur Cigarette (supra) case that the question of cross examination of witnesses would arise only when the adjudication proceedings commence after the stage of filing reply to the Show Cause Notice. Neither statutory nor any principle of natural justice requirement exists for allowing cross examination at a stage of receiving the mere Show Cause Notice.

15. In view of entire above discussion, it is held that the request of the appellant in question was a premature request before the Commissionerate hence the Order under challenge needs no interference. However, the Commissioner is hereby required, irrespective of the appellants filing any reply to the Show Cause Notice or not, to follow the principles of adjudication as far as the examination of the witness and cross examination thereof is concerned, as discussed above. The adjudicating authority below/Commissioner is required to reconsider the request of the appellant at the appropriate stage. However, keeping in view that the basic concept behind the cross examination is fair play, it being the most effective of all the means for extracting truth and exposing falsehood. It is clarified that above observations shall have no effect on the discretionary power of the adjudicating authority below exercised with reasonable care and caution but at the appropriate stage for the same. Appeal accordingly stands disposed of.

[Pronounced in the open Court on 13.09.2018].

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