Customs, Excise and Service Tax Appellate Tribunal, Ahmedabad (‘CESTAT’), recently passed an order in the case of Indu Oversea Private Ltd. v. Commissioner of Central Excise & Service Tax, Rajkot (30.04.2013), setting aside the order of the Adjudicating Authority on the ground of violation of natural justice since the request of the assessee for cross examination was denied by the adjudicating authority.
Brief Facts:
The Directorate of Revenue Intelligence (‘DRI’) conducted an investigation against M/s. Indu Overseas Private Limited (‘Appellant’) alleging that the 100% EOU unit was inflating the weight of their brass item shipments in export documents to falsely claim fulfilment of their export obligations. After a thorough investigation, a show cause notice (‘SCN’) was issued to the Appellant on 17.01.2012. During the adjudication proceedings, the Appellant had sought to cross-examine specific individuals whose statements were relied upon in the SCN. The request for cross examination was denied. Vide order dated 30.03.2013, the demands raised in the SCN were confirmed without giving an opportunity to the Appellant to cross examine the concerned individuals.
The Appellant filed an appeal before CESTAT contending a serious breach of natural justice principles. The Appellant argued that the Adjudicating Authority's refusal to grant cross examination was arbitrary and unreasonable and failed to acknowledge the importance of cross-examination in the defence of the Appellant. The Appellant further argued that the statements made by the mentioned individuals lacked corroboration with documentary evidence and that the adjudicating authority grossly erred in drawing conclusions from such statements without verifying these statements through cross-examination.
Held:
The CESTAT quashed the order passed by the Adjudicating Authority on the ground that the order was passed without providing an opportunity for cross-examination of the witnesses to the Appellant and thus the was vitiated on account of breach of principles of natural justice.
The CESTAT observed that the adjudicating authority is obliged under the law to allow cross examination of the witnesses. The CESTAT relied on the Hon’ble Supreme Court’s decision in the case of Swadeshi Polytex Ltd. v, CCE, Meerut, wherein the Hon’ble Supreme Court had emphasized the importance of granting the Appellant the opportunity to cross-examine any person whose statement is relied upon by the adjudicating authority.
The CESTAT also relied on the decision of the Hon’ble Delhi High Court in the case of Basudeb Garg which highlighted the significance of Section 9D of the Central Excise Act, 1944 and Section 138B of the Customs Act, 1962. These sections provide for the relevance of statements under certain circumstances where the person who gave the statement is deceased, untraceable or unable to testify. In the absence of such circumstances, the CESTAT held that the Appellant retains the right to cross-examine the individual whose statements are being relied upon by the adjudicating authority.
The CESTAT therefore held that it is absolutely crucial for the adjudicating authority to uphold the principles of natural justice and allow cross examination of witnesses.
Analysis & Conclusion:
The CESTAT's decision emphasizes the importance of procedural fairness even in quasi-judicial proceedings. The principle of natural justice requires that all parties have the opportunity to be heard and cross-examine the witnesses if the statements of such witnesses forms an integral part of the case against the noticee. The opportunity for cross examination ensures that the statements are truthful, reliable and not given under any duress or coercion.
This decision lays down the correct legal position in law that a statement given to customs officers under Section 108 of the Customs Act, 1962 cannot simply be relied upon in the adjudication proceedings and these statements have to be tested before they can be relied upon.
Authored by Purvi Garg, Associate at Metalegal Advocates. The views are personal and do not constitute legal opinion.