Gujarat High Court

M/S. Svm Cera Ltd vs Union Of India on 3 January, 2025

Author: Bhargav D. Karia

Bench: Bhargav D. Karia

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                            C/SCA/17565/2024                                     JUDGMENT DATED: 03/01/2025

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                                      IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                       R/SPECIAL CIVIL APPLICATION NO. 17565 of 2024


                        FOR APPROVAL AND SIGNATURE:


                        HONOURABLE MR. JUSTICE BHARGAV D. KARIA
                        and
                        HONOURABLE MR.JUSTICE D.N.RAY

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                                     Approved for Reporting                     Yes           No

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                                                        M/S. SVM CERA LTD. & ANR.
                                                                  Versus
                                                          UNION OF INDIA & ANR.
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                        Appearance:
                        MR HASIT DAVE(1321) for the Petitioner(s) No. 1,2
                        MR ANKIT SHAH(6371) for the Respondent(s) No. 1,2
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                          CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
                                and
                                HONOURABLE MR.JUSTICE D.N.RAY

                                                            Date : 03/01/2025
                                                            ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1. Heard learned advocate Mr. Hasit Dave for

the petitioners and learned advocate

Mr. Siddharth Dave for learned advocate

Mr. Ankit Shah for the respondents

appearing on advance copy.

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2. By this petition, under Article 227 of the

Constitution of India, the petitioner has

challenged the Order-in-original dated

24.09.2024 passed by the respondent No.2-

Commissioner of Central Excise and CGST-

II, Vadodara.

3. Brief facts of the case are as under:

3.1 The petitioner is engaged in the

manufacture of Ceramic Glaze Mixture

(Frit) falling under Chapter 32 of the

Schedule to the Central Excise Tariff

Act,1985. The DGCEI, on the basis of the

inquiry, made an investigation in the Year

2008 and issued a show-cause notice dated

27.03.2010 which was replied by the

petitioner and such show-cause notice was

adjudicated by the then Commissioner of

Central Excise and Customs, Surat-II vide

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the Order-in-original dated 08.01.2013

holding as under:

"(i) Confirmed and ordered recovery of Central Excise duty amounting to Rs. 2,93,95,281/[Rupees Two Crore Ninety Three Lakhs Ninety Five Thousand Two Hundred Eighty One only) short paid by M/s SVM Cera Tea Limited by way of undervaluation under proviso to sub-section (1) of Section 11A.

(ii) Confirmed and ordered recovery of Central Excise duty amounting to Rs.7,25,92,302/(Rupees Seven Crores Twenty Five Lakhs Ninety Two Thousand and Three Hundred Two only] not paid by M/s SVM Cera Tea Limited by way of clandestine removal under proviso to sub-Section (1) of said Section 11A of Central Excise Act.

(iii) Appropriated the amount of Rs.

25,00,000/[Rupees Twenty Five Lakhs) paid by M/s. SVM during the investigation against the aforesaid demand of duty amounting to Rs. 10,19,87,583/(i.e. 2,93,95,281/- Rs.7,25,92,302/-).

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(iv) Ordered recovery of Interest as applicable rate on the above duty, mentioned at Sr. No. (i) &

(ii) above, under the provisions of Section 11AB of the Central Excise Act, 1944.

(v) Imposed Penalty amounting to Rs. 10,19,87,583/-on M/s SVM Cera Tea Limited under the provisions of Section 11 AC of the Central Excise Act, 1944 and Rule 25 of Central Excise Rules, 2002.

(vi)In terms of proviso to Section 11AC ibid in case, the duty amount alongwith interest and the reduced penalty amount is paid within 30 days of the receipt of the order, then the amount of penalty shall be:

reduced to 25% of the amount confirmed at S.No. (v) above.

(vii) There shall be no penalty on Shri K. M. Bhandari."

3.2 Being aggrieved by the aforesaid

order, the petitioner filed Excise Appeal

No. 10320/2013 and cross appeal was also

filed by the department being Excise

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Appeal No. 10999/2013 before CESTAT,

Ahmedabad.

3.3 The CESTAT, by order dated

25.10.2023, disposed of both the appeals

holding as under:

"4. On careful consideration of the submission made by both the sides and perusal of record, we find that the appellant in the reply raised specific issue that certain documents relied upon/non relied upon were not provided to the appellant. The appellant also requested for cross-examination of the witnesses whose Statements were heavily relied upon to confirm the charge of clandestine removal and consequential demand of Excise duty. We find that from the entire adjudication order the Adjudicating Authority has not given any heed to the request of the appellant in as much as they have specifically asked to provided relied upon/ Non relied upon documents and cross examination of the witnesses. We prima facie find that the case is mainly based on statements of various persons. it is statutory mandate in terms of Section 35D of the Central Excise

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Act, 1944 that the Adjudicating Authority that it ts incumbent upon the Adjudicating Authority to examine/cross examine the witnesses before accepting the statements of those witnesses as evidence for adjudication of the case. in the present case even despite retraction by the witnesses the adjudicating authority has not granted the cross examination of the witnesses. In this fact the entire order of the Adjudicating Authority based on mainly statements of the various persons, without allowing cross examination, is not sustainable. Accordingly, we are of the view that the adjudicating authority must allow the cross-examination of the witnesses and also provide the documents required by the appellant, if not earlier provided. We find that the adjudicating authority has gravely erred in violating the principles of natural justice. Therefore, the order without following the principle of natural justice cannot be sustained as held by the Apex Court in number of judgments.

5 We are therefore of the view that entire matter needs to be reconsidered. Hence, we set aside the impugned order and remand the matter to the Adjudicating authority for passing a fresh de-novo order, Since the matter is very old of the

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period 2004-05 to 2007-08 it is expected from the Adjudicating Authority to pass the de novo order within a period of three months from date of this order. Needless to say that after making all efforts for providing all documents and allowing the cross examination, the Learned Adjudicating Authority is net precluded from passing a de-novo order on the basis of the records available. The appeals are allowed by way of remand to Adjudicating authority. MA also stands disposed of)"

3.4 Pursuant to the remand, the

respondent No.2 proceeded further with the

adjudication process and after hearing the

representative of the petitioner and

considering the submissions made on behalf

of the petitioner, passed the following

order:

"ORDER

(i) I confirm the demand of Central Excise duty of Rs.

7,25,92,302/-. (Rupees Seven Crores Twenty Five Lakhs Ninety Two Thousand Three Hundred Two only) not paid on Ceramic Glaze Mixture (called as

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frit) clandestinely cleared by them as detailed in Annexure F-5 to the show cause notice and order the same to be recovered from M/s. SVM Cera Tea Ltd., Ankleshwar under the provisions of Section 11A of the Central Excise Act, 1944, by invoking extended period of 5 years as per proviso to sub-section (1) of Section 11A ;

(ii) I also confirm the demand of Central Excise duty amounting to Rs. 4,64,64,274/(Rupees Four Crores Sixty Four Lakhs Sixty Four Thousand Two Hundred Seventy Four only) not paid by them on Ceramic Glaze Mixture (called as frit) by way of undervaluation, as detailed in AnnexureF-1 to F-4 to the show cause notice, and order the same to be recovered from M/s. SVM Cera Tea Ltd., Ankleshwar under the provisions of Section 11-A of the Central Excise Act, 1944 by invoking extended period of 5 years as per proviso to sub-section (1) of said Section 11A.

(iii) I hereby order to appropriate the amount of Rs. 25,00,000/[Rupees Twenty Five Lakhs only} paid, by M/s. SVM Cera Tea Ltd, Ankleshwar during the investigation, against the aforesaid demand of total Rs. 11,90,56,576/-.

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(iv) I order to recover the interest on the amount of duty confirmed above from M/s. SVM Cera Tea Ltd, Ankleshwar under the provisions of Section 11-AB of the Central Excise Act, 1944.

(v) I impose Penalty of Rs.

11,90,56,576/on M/s. M/s. SVM Cera Tea Ltd, Ankleshwar under Section 11- AC of the Central Excise Act, 1944 read with Rule 25 of Central Excise Rules'2002. However, in terms of the first proviso to Section 11AC of the Central Excise Act, 1944, where such duty as determined under sub-section (2) of Section 114, and the interest payable thereon under Section 11AB, is paid within thirty days from the date of communication of this order, the amount of penalty liable to be paid by them under this section shall be twenty-five percent of the duty j so determined. In terms of the second proviso to Section 11AC of the Central Excise Act, 1944, the benefit of such reduced penalty under the first proviso shall be available if the amount of penalty so determined has | also been paid within the period of thirty days referred to in that proviso."

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4. Learned advocate Mr. Hasit Dave for the

petitioner submitted that the order passed

by the respondent No.2 is in flagrant

breach of the principle of natural justice

as the opportunity to cross-examine the

witnesses was not provided though it was

directed by the CESTAT that failure to

provide the opportunity to cross-examine

the witnesses would be in violation of

principle of natural justice.

4.1 Learned advocate Mr. Dave invited

the attention of the Court that the

CESTAT, in order of remand, has directed

the respondent No.2 to make all efforts of

providing all documents and allowed the

cross-examination and thereafter, passed a

de novo order on the basis of the records

available.

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4.2 It was submitted that the

respondent No.2 granted only one

opportunity of cross-examination by

issuing the notice to Ten witnesses to be

remained present on 21.08.2024 i.e. five

witnesses at 11.45 am and another five

witnesses at 3.30 p.m. It was submitted

that usually three opportunities are given

to the witnesses to remain present.

However, the respondent No.2 did not

provide any further opportunity for cross-

examination of the witnesses resulting

into breach of principle of natural

justice.

4.3 Learned advocate Mr. Dave

submitted that though the petitioner

demanded various documents from the

respondent No.2 pursuant to the direction

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issued by the CESTAT, the respondent No.2,

without considering the request made by

the petitioner for documents required by

the petitioner to defend the show-cause

notice, contrary to the direction issued

by the CESTAT, brushed aside such demand

in para 7.1 of the impugned Order-in-

original by observing that the show-cause

notice with all relied upon documents were

supplied to the petitioner and therefore,

the request made by the petitioner is

nothing but a delay tactic.

4.4 It was further submitted that in

spite of the fact that in similar demand

raised by the Excise Department being

dropped by the CESTAT in nine other cases

and the though the order of the CESTAT

being confirmed by the High Court by

dismissing appeals filed by the

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department, respondent No.2 ignored such

facts and order of the higher authorities

and confirmed the demand in case of the

petitioner. It was therefore, submitted

that the impugned Order-in-original passed

by the respondent No.2 is therefore,

liable to be quashed and set aside on all

the three counts i.e. (i) no adequate

opportunity to cross-examine the witnesses

was provided; (ii) respondent No.2 ignored

the directions issued by the CESTAT for

providing documents sought by the

petitioner and; (iii) in the identical

facts, the CESTAT allowed the appeals of

the similarly situated assessees, the

respondent No.2 ignored the same and

proceeded to adjudicate the show-cause

notice by raising the demand.

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5. On the other hand, learned advocate

Mr. Siddharth Dave for the respondent-

authority submitted that there is

alternative efficacious remedy available

to the petitioner to challenge the

impugned Order-in-original before the

CESTAT raising all the contentions which

are raised in this petition. It was

submitted that respondent No.2 has

followed the direction issued by the

CESTAT by making suitable observations in

the impugned order regarding supply of

the documents as well as documents sought

by the petitioner as well as the request

for cross-examination made by the

petitioner. Learned advocate Mr. Dave

invited the attention of the Court to the

observation made by the respondent No.2 in

Paragraph No. 4.1.1 to point out that

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learned advocates appearing for the

petitioner requested to decide the matters

on the lines of the judgement of the

Tribunal in case of similar 13 parties and

as per the additional submission filed by

the petitioner as none of the witnesses

remained present on 21.08.2024 pursuant to

the notice issued by respondent No. 2 for

cross-examination and accordingly,

respondent No.2 proceeded for adjudication

of the show-cause notice. It was submitted

that if the petitioner is aggrieved by the

impugned order on merits, the only remedy

available to the petitioner is to prefer

an appeal before the CESTAT. In support of

his submissions, reliance was placed on

the decision of this Court in case of

Pramodgiri Premgiri Goswami vs. Union of

India reported in 2024(0) AIJEL-HC 248470

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wherein, in similar facts, this Court

relegated the petitioner to file appeal

before the CESTAT for raising all the

contentions which are raised before this

Court.

6. Considering the submissions made by both

the learned advocates for the respective

parties, it is true that the CESTAT has

remanded the matter to the respondent

No.2 to supply the documents sought for by

the petitioner as well as to provide the

opportunity of cross-examination of the

witnesses in compliance with the

provisions of section 9D of the Central

Excise Act,1944. The respondent No.2,

pursuant to the order of remand made by

the Tribunal, issued the notice to 10

witnesses to remain present on 21.08.2024,

however, on 21.08.2024, none of the ten

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witnesses remained present nor any request

was made for adjournment, or any

submissions were made by any of the

witnesses. The respondent No.2 therefore,

recording the statement made by learned

advocates appearing for the petitioner for

hearing, proceeded to adjudicate the show-

cause notice. Paragraph No. 4.1.1 of the

impugned order reads as under:

"4.1.1 Accordingly, on 21.08.2024, when the matter was posted for cross- examination, none of the above persons appeared nor have submitted any request for adjournment or submitted any submission. Shri K.V. Subrahmanyam Advocate and - Shri K.M. Bhandari CEO, appeared and requested to decide the matter on the lines of judgment by Tribunal in case of similar 13 parties and as per their additional submission today. Shri K.M. Bhandari ji stated that he joined company in April 2007 an case pertains to 2003-04 - 2007-08. He is just an employee and having no interest in company except for salary. Appointment letter copy produced by him and taken on record."

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7. With regard to supply of the documents and

providing cross-examination, respondent

No.2 has observed in Paragraph Nos. 7.1

and 7.2 as under:

"7.1 Accordingly, in view of the above directions, noticee was asked vide this office letter dated 14.05.2024 to specifically list the documents needed which department is to supply. They supplied list on 31.07.2024 during the PH in the form of written submission and it was noticed that the list only contained the documents already supplied to them as RUD. There is no dispute on the receipt of show-cause notice along with all RUDs by the noticee, therefore this request seems to be a delaying tactic only. In view of the above discussion, it is evident that the spirit of the Tribunal's judgment has been completely followed and there is no fresh document, which still needs to be provided to them.

7.2 With regard to Cross examination of the witnesses, during the course of personal hearing on 31.07.2017, the cross examinations of 10 witnesses was allowed

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as detailed above in para 4 to 4.1.1. However, none of the witnesses responded to the notices issued to them for appearing on 21.08.2024. In fact, in some of the cases, the notices sent to their address available on records appears to be either closed or shifted. Since, matter is very old pertaining to the period 2004-05 to 2007-08 accordingly, after allowing their request for cross examination, the remand proceeding is proceeded with based on records available as agreed to as well by the noticee detailed in para 4.1.1 above. Therefore, this direction of the Hon'ble Tribunal is waived"

in view of the request of the noticee only; who wishes to conclude the matter without further wait on the basis of available records on merit."

8. With regard to issue of following the

decision of the CESTAT in similar cases,

the respondent no.2 has observed as under:

"11.3 In this regard, I also find that the noticee in their submission placed reliance on the decision of Hon'ble Tribunal in case of Belgium Glass & Ceramics Pvt. Ltd. v. Commissioner reported in 2015 (5}

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TMI 528-CESTAT for setting aside the demand of central excise duty. The noticee contended that all the cases are based on similar investigation conducted in the analogous manner relating to clandestine removal is based on excess fuel consumption and undervaluation would be covered by the aforesaid final order of the Hon'ble Tribunal. They also claimed that revenue filed appeal before the Hon'ble High Court of Gujarat who dismissed the appeals filed by the Revenue as reported in Commissioner v. Belgium Glass & Ceramics Pvt. Ltd. - 2017 (356) ELT A 46 (Guj.).

11.3.1 On considering their above plea, I find that the said matter is sub-judice before Hon'ble Supreme Court by way of Departmental Civil Appeal No. 003133 - 003135 / 2018 Registered on 19-03-2018 along with 7 other tagged appeals.

11.3.2 Further, I also find that each offence case based on the evidence brought on record needs to be weighed against the counter evidence adduced by the litigant assessee in their defence and thereafter the final conclusion can be drawn. It is in this context, I hold that the evidence discussed above not only at the end of the noticee but when the same were correlated with the incriminating

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evidence found at the end of their buyers are getting matched, makes no room for any other conclusion as drawn. above in relation to both clandestine removal and undervaluation resulting into evasion of central excise duty running into crores. Moreover, when the same were duly corroborated with the corresponding statements of the authorized personnel of the respective assessees who have not only explained the incriminating documents but also admitted about their contumacious conduct in such an evasion. As against the same, the noticee's submission are merely based on theoretical pleas without controverting the above factual evidence which are treated by them as stray instances or no evidence at all. The facts of the relied upon cases, the evidence thereto, their gravity and corresponding defence adopted by those litigant assessees are not before me to draw a parallel. Infact, I also find that had the entire investigation and its manner of conduct was so similar then they would have succeeded in their appeal which is not the case on hand. Hence, it proves beyond doubt that each offence case is distinct even though based on the same modus operandi yet each thread of evidence when put against the controverting evidence in defence which unfortunately is lacking jn

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this case on hand, results into knitting of open and shut case against the noticee. Accordingly, such a reliance is not helping their case and is distinguishable on the facts and circumstances discussed above thread barely."

9. From the above observations made by the

respondent No.2 in the impugned Order-in-

original, it appears that the respondent

No.2 has taken into consideration all the

grievances of the petitioner with regard

to the violation of principle of natural

justice which are again reiterated in this

petition. Be that as it may, we are not

inclined to entertain this petition on the

ground of breach of principle of natural

justice in view of the above observation

made by respondent No.2 which may be

considered by the CESTAT in the appeal

which may be filed by the petitioner under

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section 35E of the Central excise

Act,1944.

10. This Court, in case of Pramodgiri

Premgiri Goswami vs. Union of India

(supra), in similar situation, has

observed as under:

"59. It also appears from the record that after the hearing which took place on 12.10.2021 and submission of reply on behalf of the petitioner, no further hearing was scheduled by the adjudicating authority and the impugned order was issued on 29.11.2021 without deciding the request of the petitioners to grant cross- examination.

60. The decision relied upon by the petitioners in support of the request for cross-examination resulting into violation of principle of natural justice as well as there are also decisions relied upon on behalf of the respondent that whether to grant cross-examination to the petitioners is a matter of discretion of the adjudicating authority which can be considered in the Order-in-

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original. Thus, there are two sets of decisions appearing on the record of these petitions wherein in one of the set it is held that granting of cross-examination is violation of principle of natural justice whereas on the side of the respondent, the decision cited clearly shows that when there is an alternative efficacious remedy is available to the petitioner, such ground can be taken by the appellate authority as the appellate authority is nothing but an continuation of the original proceedings.

61. Therefore, it would be necessary to refer to the various decisions vis-a-vis facts emerging from the record as to in the facts of the case whether the petitioners can raise such issue of cross- examination, supply of documents before the appellate authority or not."

11. Needless to say, that we have refrained

ourselves from going into the merits so as

to enable the petitioner to raise all the

contentions which are raised in this

petition otherwise the right of the

petitioner would be jeopardized by any

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observations to be made by this Court on

merits.

12. In view of the foregoing reasons, the