Sampad Narayan Mukherjee vs Union Of India & Ors

September 6, 2018 passed by the adjudicating authority exercising

jurisdiction under the provision of the Customs Act, 1962 in the

present writ petition.

Learned Senior Advocate appearing for the petitioner has

submitted that, the petitioner assails the order in original, even

though there exists a statutory alternative remedy with regard

thereto, on the ground that the order in original stands vitiated by

the breach of principles of natural justice. 2

Learned Senior Advocate appearing for the petitioner has

submitted that, the petitioner was served with a show cause notice

dated February 13, 2017. The petitioner had replied to such show

cause notice. In the reply, the petitioner had requested for cross-

examination of the witness of the prosecution. He has referred to the

impugned order in original and submitted that, although, the

adjudicating authority has noted that, the petitioner wanted to cross-

examine the prosecution witnesses, the adjudicating authority

disallowed the same on the ground that, the evidence in adjudication

proceedings need not be like the one in criminal cases. Moreover,

according to the adjudicating authority, the circumstantial evidences

corroborated the statements made under Section 108 of the Customs

Act, 1962. The persons making the statements under Section 108 of

the Act of 1962 made the same voluntarily and did not retract from

the statements. Such witnesses were conversant with the facts of the

case and the role of the petitioner. Moreover, the petitioner did not

make out any specific reason or point for seeking cross-examination.

Therefore, the request for cross-examination was denied. He has

submitted that, an adjudicating authority cannot deny the right of

cross-examination to a noticee in a proceedings under the Act of 3

1962. He has referred to Section 138B of the Act of 1962 and has

submitted that, a statement of a witness will become relevant

without cross-examination, only if, the grounds stipulated in sub-

Section (1) thereof stands fulfilled. In the present case, such grounds

have not been fulfilled. There is no finding by the adjudicating

authority that, any of the grounds enumerated in sub-Section (1) of

Section 138B of the Act of 1962 exists. Therefore, the decision of the

adjudicating authority, in not allowing cross-examination of the

witnesses, is wrong. The impugned order therefore stands vitiated by

breach of principles of natural justice.

In support of the contention that, when a cross-examination is

denied, the impugned order stands vitiated by breach of principles of

natural justice and renders the impugned order as a nullity, learned

Senior Advocate appearing for the petitioner has relied upon 2016

(15) Supreme Court Cases page 785 (Andaman Timber

Industries v. Commissioner of Central Excise, Kolkata II), 2005

Volume 10 Supreme Court Cases page 634 (Lakshman Exports

Ltd. v. Collector of Central Excise), 2008 Volume 3 Supreme

Court Cases page 279 (New India Assurance Company Ltd. v.

Nusli Neville Wadia & Anr.), 2017 Volume 3 WBLR (Cal.) page 4

386 (M/s. V.K. Udyog Limited v. Union of India & Anr.), 2017

(353) Excise Law Times 421 (Cal.) (Skyrise Overseas Pvt. Ltd.

(earlier known as Saraf Impex Pvt. Ltd.) & Anr. v. The

Commissioner of Customs (Port) & Anr.), judgment and order

dated May 8, 2018 passed in W.P. No. 56 of 2018 (Sadguru

Forwarders Pvt. Ltd. v. The Commissioner of Customs (Port)

Kolkata & Anr.), judgment and order dated May 14, 2018 passed

in W.P. No. 85 of 2018 (Sadguru Forwarders Pvt. Ltd. v. The

Commissioner of Customs (Port) Kolkata, 2018 (362) Excise Law

Times 401 (Cal.) (Ankit Kapoor v. the Commissioner of Customs

(Port) West Bengal), 2018 (362) Excise Law Times 439 (Cal.)

(Shiva Sahu v. Union of India & Ors.), judgment and order dated

September 17, 2018 passed in W.P. No. 448 of 2018 (Lakshman

Lal Das v. The Chief Commissioner of Customs & Ors.),

judgment and order dated August 23, 2018 passed in G.A. No.

2241 of 2018, G.A. No. 2242 of 2018, A.P.O.T. No. 57 of 2018

with W.P. No. 56 of 2018 (Commissioner of Customs (Port),

Customs House & Anr. v. Sadguru Forwarders Pvt. Ltd.) and

judgment and order dated August 23, 2018 passed in G.A. No.

2234 of 2018 G.A. No. 2235 of 2018, A.P.O.T. No. 56 of 2018 5

with W.P. No. 85 of 2018 (Commissioner of Customs (Port),

Customs House & Anr. v. Sadguru Forwarders Pvt. Ltd. & Anr.).

Learned Senior Advocate appearing for the petitioner has

submitted that, provisions of Section 138B of the Act of 1962 is pari

materia as that of Section 9D of the Central Excise Act, 1944. He has

submitted that, Section 138B of the Act of 1962 and Section 9D of

the Act of 1944 were considered by diverse High Courts. The

unanimous view of the other High Courts is that, a noticee is entitled

to a right of cross-examination in an adjudication proceedings under

the Act of 1962. In support of such contentions, he has relied upon

2013 (294) Excise Law Times 353 (Basudev Garg v.

Commissioner of Customs), 2016 (336) Excise Law Times 15

(HIM Logistics Pvt. Ltd. v. The Principal Commissioner of

Customs), 2018 (362) Excise Law Times 465 (Bom.) (Ciabro

Alemao & Ors. v. The Commissioner of Customs, Goa & Ors.),

1994 (69) Excise Law Times 212 (Kallatra Abbas Haji v.

Government of India), 2017 SCC Online Ker. 21780 (Krishna

Brothers v. Commissioner of Customs). He has submitted that, the

impugned order be set aside with a direction upon the adjudicating

authority to allow cross-examination of the witnesses in respect of 6

those that the petitioner has applied for cross-examination, in

accordance with law.

Learned Additional Solicitor General appearing for the

respondents has submitted that, a noticee is not entitled to a right of

cross-examination in an adjudication proceedings. Persons who have

made statements under section 108 of the Act of 1982 cannot be

allowed to be cross-examined by a noticee in an adjudication

proceedings. A statement made under Section 108 of the Act of 1962

is not evidence. When a person makes a statement under Section

108 of the Act of 1962 he is not giving evidence as in examination of

chief requiring a cross-examination by the noticee. He has drawn the

attention of the Court to the fact that, Section 108 appears in

Chapter XIII of the Act of 1962. Chapter XIII deals with searches,

seizures and arrest. Section 138B appears under the Chapter XVI

which deals with offences and prosecution. When, a prosecution of

any offences committed under the Act of 1962 is launched, the

provisions of Section 138B of the Act of 1962 gets attracted.

Provisions of Section 138B of the Act of 1962 are not attracted to an

adjudication proceedings. In support of his contentions, learned

Additional Solicitor General, has relied upon 1997 (89) Excise Law 7

Times 646 (Surjeet Singh Chhabra v. Union of India), 1973

Volume 2 Supreme Court Cases page 438 (M/s. Kanungo &

Company v. Collector of Customs & Ors.) and 1996 Volume 63

ECR 546 (Tapan Kumar Biswas v. Union of India (UOI) & Ors.).

The petitioner is working as a supervisor (office) at the office of

the Airport Authority of India. The petitioner is presently under

suspension by an order issued by his appointing authority. The

petitioner suffered a show cause notice issued by the customs

authorities on February 13, 2017. The petitioner submitted a reply

thereto dated July 24, 2018. In the reply, the petitioner had asked

for cross-examination of 11 of the prosecution witnesses. In

aggregate, the petitioner wanted to cross-examine 11 witnesses. More

than 11 witnesses were examined by the prosecution in the

adjudication proceedings. The authorities initiated an

adjudication proceedings in respect of the show cause notice dated

February 13, 2017 and the replies filed by the noticees with regard

thereto. The petitioner is one of the noticees of the show cause notice

dated February 13, 2017.

The petitioner was heard by the adjudicating officer. In the

course of the hearing, the petitioner reiterated his request for cross- 8

examination. The adjudicating authority, by the impugned order

dated September 6, 2018 had dealt with the request for cross-

examination. It noted that, the petitioner wanted to cross-examine

the persons who gave statements under Section 108 of the Act of

1962 and which were relied upon in the show cause notices. The

adjudicating authority held that, evidence in the adjudication

proceedings need not be like the one in criminal cases. He found

that, they are enough circumstantial evidences which provide for a

reliable basis for corroboration of the statements given under Section

108 of the Act of 1962. He noted that, the witnesses gave the

statements voluntarily and did not retract from the same. The

witnesses were conversant with the facts of the case and the role of

the noticee. The petitioner did not make out any specific reason or

point for seeking cross-examination. He relied upon M/s. Kanungo

& Company (supra) in denying the right of cross-examination.

The proceedings initiated against the petitioner are under the

provisions of the Customs Act, 1962. The preamble to the Act of

1962 states that, the Act consolidates and amends the law relating to

customs. The Act of 1962 deals with goods imported into the country

which are prohibited. It provides for confiscation of goods and 9

conveyances, impose penalty when any goods are imported contrary

to any prohibition imposed by any law. It provides for prosecution of

persons who are involved in importing goods which are prohibited by

law. The Act of 1962 is divided into 17 Chapters. It contemplates

enquiry, adjudication and prosecution. It stipulates the adjudicating

authority, the appellate authority and revisional authority in respect

of any proceedings under the Act of 1962. It provides for prosecution

of offenders. Chapter XIII deals with searches, seizures and arrest.

Four sections are relevant for the consideration of the present writ

petition. They are Sections 108, 122, 122A and 138B. They are as

follows:-

"108. Power to summon persons to give evidence and produce documents. -

(1) Any gazetted officer of customs shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making under this Act.

(2) A summons to produce documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under control of the person summoned.

(3) All persons so summoned shall be bound to attend either in person or by an authorised agent, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting 10

which they are examined or make statements and produce such documents and other things as may be required:

Provided that the exemption under section 132 of the Code of Civil Procedure, 1908 (5 of 1908), shall be applicable to any requisition for attendance under this section.

(4) Every such inquiry as aforesaid shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Indian Penal Code, 1860 (45 of 1860).

122. Adjudication of confiscations and penalties. - In every case under this Chapter in which anything is liable to confiscation or any person is liable to a penalty, such confiscation or penalty may be adjudged, -

(a) without limit by a Principal Commissioner of Customs or Commissioner of Customs or a Deputy Commissioner of Customs.

(b) where the value of the goods liable to confiscation does not exceed five lakh rupees, by an Assistant Commissioner of Customs or Deputy Commissioner of Customs.

(c) where the value of the goods liable to confiscation does not exceed fifty thousand rupees, by a Gazetted Officer of Customs lower in rank than an Assistant Commissioner of Customs or Deputy Commissioner of Customs.

122A. Adjudication Procedure. -

(1) The adjudicating authority shall, in any proceeding under this Chapter or any other provision of this Act, give an opportunity of being heard to a party in a 11

proceeding, if the party so desires.

(2) The adjudicating authority may, if sufficient cause is shown, at any stage of proceeding referred to in sub-

section (1), grant time, from time to time, to the parties or any of them and adjourn the hearing for reasons to be recorded in writing:

Provided that no such adjournment shall be granted more than three times to a party during the proceeding.

138B. Relevancy of statements under certain circumstances. -

(1) A statement made and signed by a person before any gazetted officer of customs during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, -

(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the court considers unreasonable; or

(b) when the person who made the statement is examined as a witness in the case before the court and the court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. (2) The provisions of sub -section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a court, as they apply in relation to a proceeding before a court."

12 Section 108 of the Act of 1962 comes under Chapter XIII.

Section 108 of the Act of 1962 empowers any gazetted officer of

customs 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 under the

Act of 1962. Section 108 of the Act of 1962 is an enabling provision

empowering a gazetted officer of the customs powers to enforce

attendance of persons he considers necessary for the purpose of an

enquiry under the Act of 1962. It stipulates that, every such enquiry

to be a judicial proceeding within the meaning of Section 193 and

Section 228 of the Indian Penal Code, 1860. Section 122 of the Act of

1962 is under Chapter XIV which deals with confiscation of goods

and conveyances and imposition of penalties. Section 122 of the Act

of 1962 provides for adjudication of confiscations and penalties. It

stipulates that, in every case under Chapter XIV of the Act of 1962,

in which anything is liable to be confiscated or any person is liable to

a penalty such confiscation or penalty may be adjudged by the

persons as stipulated therein. Section 122A of the Act of 1962 lays

down the adjudication procedure. It requires the adjudicating

authority to give an opportunity of hearing to a party in a proceeding 13

if such party so desires. Section 122A of the Act of 1962 recognises

that, the principles of natural justice are applicable to a proceedings

under the Act of 1962. Principles of natural justice are applicable to

any proceeding which affects the interest of any person to such

proceeding. Applicability of the principles of natural justice to a

proceedings which affects any interest of any person, is to be read

into a statute when it is silent. It can be excluded by a express

provision made in the statute. In the present case Section 122A of

the Act of 1962 makes the principles of natural justice applicable to

an adjudication proceeding undertaken under the Act of 1962.

The Act of 1962 contemplates that, any gazetted officer of the

customs can make an enquiry, with regard to any goods imported,

which are prohibited for import, in breach of such prohibition. Under

Section 108 of the Act of 1962, any gazetted officer of the customs is

entitled to enforce the attendance of any person to give any evidence

or produce a document during such enquiry. The person so

summoned can make a statement under Section 108. The

statements made under Section 108 of the Act of 1962 is recognised

to be distinct and different from statements recorded by Police Officer

during the course of investigation under the Code of Criminal 14

Procedure. Statements made under Section 108 of the Act of 1962

are admissible in evidence. They can be used as evidence in any

adjudicating or any proceeding for prosecution. The relevancy of the

statements made under Section 108 of the Act of 1962 is dealt with

in Section 138B of the Act of 1962. Section 138B of the Act of 1962

appears in Chapter XVI of the Act of 1962. Chapter XVI of the Act of

1962 deals with offences and prosecution. Chapter XVI of the Act of

1962 allows the authorities to initiate criminal proceedings against

persons who are guilty of the offences specified under such chapter.

Section 138B of the Act of 1962 lays down the relevancy of

statements made under certain circumstances. It is an exception to

the general law of evidence.

Although the Evidence Act, 1872 is not applicable to a

proceeding under the Act of 1962 in the strict sense, the principles

thereof are attracted. The adjudicating authority, the appellate

authority and any other authority under the Act of 1962 required to

adjudicate upon any proceeding, is obliged to adhere to the

principles of the Evidence Act, 1872 while deciding on any subject.

The Evidence Act, 1872 envisages and stipulates that, a statement

made by a witness is relevant and is admissible in evidence only 15

when such witness is offered for cross-examination in the

proceeding.

A party to the proceeding, introducing evidence through a

natural person in the proceeding, is obliged to offer such witness for

cross-examination to the opposite party. It is for the opposite party to

either cross-examine such witness or to decline the same. However,

till such time, the witness is offered for cross-examination to the

opposite party, the statement given by such witness, in the

proceeding does not become admissible as evidence in the

proceeding. Such statement cannot be treated as evidence. Section

138B of the Act of 1962 carves out few exceptions from such cardinal

principle in a proceeding. Section 138B (1) of the Act of 1962

stipulates that, a statement made and signed by a person before any

gazetted officer of the customs during the course of any enquiry or

proceeding under the Act of 1962 shall be relevant, for the purpose

proving, in any prosecution of an offence under the Act of 1962, the

truth of the facts which it contains when, the person who made the

statement is dead, or cannot be found, or is incapable of giving

evidence, or is kept out of the way by the adverse party, or whose

presence cannot be obtained without an amount of delay or expense 16

which, under the circumstances of the case, the Court considers

unreasonable, or when the person who made the statement is

examined as a witness in the case before the Court and the Court is

of opinion that, having regard to the circumstances of the case, the

statement should be admitted in evidence in the interest of justice.

Cross-examination is the norm for making the statement made

by a witness relevant for evaluation in the proceedings. Section 138B

of the Act of 1962 carves out few exceptions and limits it to a

proceeding under the Act of 1962 and a proceeding for prosecution

launched before any Court of law in respect of offences under the Act

of 1962. Section 138B (2) stipulates that, the provisions of sub-

Section (1) shall so far as may be apply in relation to any proceeding

under the Act of 1962, other than a proceeding before a court, as

they apply in relation to a proceeding before a court. In other words,

the exceptions carved out under Section 138B (1) of the Act of 1962

from the general law of evidence, apply to a proceeding of

adjudication under the Act of 1962, as it would apply in a proceeding

before a court for the prosecution of any offence under the Act of

1962.

17

When an adjudicating authority is faced with a proceedings in

which, the prosecution introduces evidence of witnesses, then the

prosecution is obliged to offer such witness for cross-examination to

the noticee. Likewise, if the noticee introduces any witness in its

defence, the noticee is obliged to offer its witness for cross-

examination to the prosecution. Only upon such offers are made,

then the evidence of such witness becomes relevant and admissible

as evidence. However, the evidence of such witnesses would also

become relevant and admissible, if any of the grounds stipulated in

Section 138B (1) of the Act of 1962 is attracted, in a fact scenario. In

a given case, a person making a statement under Section 108 of the

Act of 1962 dies prior to the conclusion of the adjudication

proceeding and before he can be cross-examined by a noticee, then,

the statement of such witness, will not become irrelevant. The

relevancy of such statement, would be saved by virtue of the

provisions of Section 138B (1)(a) read with 138B (2) of the Act of

1962. For example, but for the provisions of Section 138B (1)(a) and

138B (2) of the Act of 1962, the statement made by a person under

Section 108 of the Act of 1962 would have become irrelevant, had he

died before his cross-examination by the noticee. 18

In the impugned order, the adjudicating authority has relied

upon M/s. Kanungo & Company (supra) in denying the right of

cross-examination to the petitioner. M/s. Kanungo & Company

(supra) was rendered by the Supreme Court while considering

provisions of Sea Customs Act, 1878 read with the Imports and

Exports (Control) Act, 1947. M/s. Kanungo & Company (supra) was

rendered on February 7, 1972. Section 138B of the Act of 1962 was

introduced with effect from September 1, 1973. Section 122A was

introduced to the Act of 1962 with effect from September 10, 2004.

Section 122A requires the adjudicating authority to give an

opportunity of hearing to a party in a proceeding, if the party so

desires. In the facts of the present case, the petitioner desired a

hearing as well as exercised its right of cross-examination. M/s.

Kanungo & Company has held on consideration of the facts of that

case, that there was no breach of natural justice. It has held that,

the principles of natural justice do not require that in matters

governed by the provisions of the Sea Customs Act, 1878 read with

the provisions of the Imports and Exports (Control) Act, 1947, the

persons who have given information should be examined in presence

of the noticee or should be allowed to be cross-examined by them on 19

the statements made before the customs authorities. As noted above,

Section 122A of the Act of 1962 was introduced subsequent to M/s.

Kanungo & Company (supra). Surjeet Singh Chhabra (supra)

has held that, where the petitioner seeks cross-examination of the

witness who have said that the recovery was made from the

petitioner, necessarily an opportunity is required to be given for the

cross-examination of such witness as regards the place at which

recovery was made. However, in the facts of that case, in view of the

confessions made, it was held that, there was no breach of principles

of natural justice by the refusal to grant the right of cross-

examination. Tapan Kumar Biswas (supra) was rendered on July

17, 1995 prior to the introduction of Section 122A and 138B to the

Act of 1962. It has held that, a proceedee is not entitled to cross-

examination any witness. The same cannot be said to be good law in

view of the subsequent pronouncement of the Supreme Court and

the introduction of Sections 122A and 138B to the Act of 1962.

Section 122A of the Act of 1962 requires the adjudicating

authority to adhere to the principles of natural justice. The question

as to whether, principles of natural justice will include a right of

cross-examination or not, has been answered by the Supreme Court 20

in New India Assurance Company Ltd. (supra). It has held as

follows:-

"45. If some facts are to be proved by the landlord, indisputably the occupant should get an opportunity to cross-examine the witness who intends to prove the said fact has the right to cross-examine the witness. This may not be provided by under the statute, but it being a part of the principle of natural justice should be held to be indefeasible right.

46. We may also take note of the fact that this Court in Bareilly Electricity Supply Co. Ltd. v. Workmen this Court held as under:

"14..... the application of principle of natural justice does not imply that what is not evidence can be acted upon. On the other hand what it means is that no materials can be relied upon to establish a contested fact which are not spoken to by persons who are competent to speak about them and are subjected to cross-examination by the party against whom they are sought to be used."

New India Assurance Company Ltd. (supra) has recognised

that, an opponent in a proceeding is entitled to cross-examine the

witness produced against him by the prosecution. The right to cross-

examine such witness may not be provided under the statute but it

is a part of the principles of natural justice and has been held to be

an indefeasible right. New India Assurance Company Ltd. (supra)

has recognised that right of cross-examination is a part of the 21

principles of natural justice and is an indefeasible right. In view of

such pronouncement by the Supreme Court, the ratio laid down in Tapan Kumar Biswas (supra) that, the principles of natural justice

do not extend to the cross-examination of the witness cannot be said

to be good law any longer.

The Supreme Court in Lakshman Exports Ltd. (supra) while

considering proceedings under the Central Excise Act, 1944 has held

that, a noticee has a right to cross-examine the persons making

statements against the noticee.

In M/s. V.K. Udyog Limited (supra) the Court has held that, in

a quasi judicial proceeding, a party to such proceeding is entitled to

cross-examine the witness of the other side when evidence is led

through such witness in such proceeding. Skyrise Overseas Pvt.

Ltd. (supra) has held that, denying the right to cross-examine the

witness is in breach of principles of natural justice. Sadguru

Forwarders Pvt. Ltd. (I) (supra) has quashed the order in original

on the ground that it stands vitiated by breach of principles of

natural justice on the refusal of the adjudicating authority to allow

cross-examination of the prosecution witness. Similar view has been

expressed in Sadguru Forwarders Pvt. Ltd. & Anr. (II) (supra). 22

Ankit Kapoor (supra) and Shiva Sahu (supra) have held the same

view that, denial of right of cross-examination vitiates the order in

original on the ground of breach of principles of natural justice.

Lakshman Lal Das (supra) has held as follows:-

"In an adjudication proceeding which is adversarial in nature, a party adducing evidence through a natural person is required to allow cross-examination of such natural person, to the other side. In the present case apparently the prosecution was relying upon evidence adduced by natural persons in the proceeding. The prosecution, therefore, ought to have allowed such persons to be cross-examined. The petitioner made a request to the adjudicating authority for an opportunity to cross-examine. Such request was made by the written notes of defence. The adjudicating authority took such written request on record. However, it did not allow the petitioner to cross- examine the prosecution witness. It did not deal with the request for cross-examination, in the impugned order. It is not necessary that, a party to a proceeding, specify the reason why it requires the cross-examination of the witness. When, a contesting party in adversarial litigation adduced evidence through a natural person, it results in a corresponding right to 3 the opposite party in such adversarial proceeding to cross-examine such natural person. In absence of such cross-examination being allowed or facilitated the evidence given by such natural person has no evidentiary value and cannot relied upon. The adjudicating authority not having considered the request for grant of cross-examination of the prosecution witness, the impugned order stands vitiated by breach of the principles of natural justice. The impugned order is quashed. This order will not prevent the adjudicating authority to proceed a fresh from the stage reached on April 25, 2018 or from such stage it deems appropriate. It is expected that, the adjudicating authority will keep the 23

request of the petitioner to cross-examine the witnesses noted in its written notes of defence, in accordance with law."

Sadguru Forwarders Pvt. Ltd. (I) (supra) and Sadguru

Forwarders Pvt. Ltd. & Anr. (II) (supra) have received the

consideration of the appeal court and were upheld. Andaman

Timber Industries (supra) has held that, denial of right of cross-

examination of a witness before the adjudicating authority renders

the order in original a nullity. In that case, an investigation was

carried out against the assessee under the provisions of the Central

Excise Act, 1944. Statement of two buyers were recorded and on that

basis a show-cause notice was served upon the assessee. The

assessee questioned the correctness of the statement of such

witnesses and demanded the right to cross-examine them. The

adjudicating authority did not allow the assessee the right of cross-

examination. The appellate authority rejected the appeal. The

Supreme Court in Andaman Timber Industries (supra) has held as

follows:-

"6. According to us, not allowing the assessee to cross- examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of 24

the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the adjudicating authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the adjudicating authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.

7. As mentioned above, the appellant have contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the adjudicating authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject-matter of cross-examination. Therefore, it was not for the adjudicating authority to presuppose as to what could be the subject-matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came up this Court in CCE vs. Andaman Timber Industries Ltd., order dated 17-3- 2005 was passed remitting the case back to the Tribunal 25

with a direction to decide the appeal on merits giving its reasons for accepting or rejecting the submissions."

Section 9D of the Central Excise Act, 1944 is pari materia with

Section 138B of the Act of 1962. Section 9D of the Central Excise

Act, 1944 is as follows:-

"Section 9D. Relevancy of statements under certain circumstances. -

(1) A statement made and signed by a person before any Central Excise Officer of a Gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, -

(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or

(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.

(2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceedings under this Act, other 26

than a proceeding under a Court, as they apply in relation to a proceeding before a Court."

Kallatra Abbas Haji (supra) has considered Section 138B of

the Act of 1962. It has held as follows:-

"25. True, Section 138B states that a statement made and signed by a person before any gazetted officer of customs is relevant to prove the truth of the fact it contains in any proceeding under the Act. But these statements are relevant only if the conditions prescribed under clauses (a) or

(b) of Section 138B are satisfied. Here, there is no case that clause (a) applies. If at all, clause (b) alone can be attracted.

Under this clause, the statement is relevant when (a) the person who made the statement is examined and (b) the statement is admitted in evidence after the authority forms an opinion that in the interest of justice and having regard to the circumstances of the case, it should be so admitted."

HIM Logistics Pvt. Ltd. (supra) has considered a case, where

the noticee was not granted the right to cross-examine in a

proceeding under the Act of 1962. It has held that, the denial of the

request for cross-examination vitiates the order in original. It has

allowed the noticee to cross-examine the witnesses. Basudev Garg

(supra) has considered Section 138B of the Act of 1962. It has held

as follows:-

27

"13. ......this right of cross-examination can be taken away. The court also observed that such circumstances have to be exceptional and that those circumstances have been stipulated in Section 9D of the Central Excise Act, 1944. The circumstances referred to in Section 9D, as also in Section 138B, included circumstances where the person who had given a statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay and expense which, under the circumstances of the case, the Court considers unreasonable. It is clear that unless such circumstances exist, the Noticee would have a right to cross- examine the persons whose statements are being relied upon even in quasi- judicial proceedings.

Ciabro Alemao & Ors. (supra) has considered Sections 108

and 138B of the Act of 1962 and has held as follows:-

"42. The CESTAT confused the issues of relevance and proof. A statement may be relevant, but it yet needs to be proved. The fact that a statement is made and recorded, and is statutorily said to be relevant, does not mean it is proved. That statement, like all testimony, must be subjected to recourse of cross-examination, to be drawn into the evidentiary pool to form a basis for reasoning or conclusion. Section 138B does not say, and could not say, what statements can be taken as proved even without cross-examination. This, however, is how the CESTAT has misunderstood the section. All that the section says is that for want of production of a witness, his Section 108 statement does not automatically cease to become relevant. Questions of relevancy and proof are yet to determine by the Indian Evidence Act, and the CESTAT wholly failed to take these into account."

28 The Act of 1962 empowers the customs authorities to make an

enquiry, initiate adjudication proceedings and file prosecution. The

Act of 1962 allows an appeal against an order in original passed in

the adjudication proceeding. There is provisions for revision also.

When making an enquiry, an officer of the Customs may require

attendance of a person to make a statement. He is empowered to

require a person to make a statement under Section 108 of the Act of

1962. Such a statement made in the course of an enquiry, and if its

limited to the enquiry, then, the question of the person making the

statement being open to cross-examination does not arise. However,

once an adjudication proceeding is initiated, and a statement made

under Section 108 of the Act of 1962 is introduced as a piece of

evidence in such adjudication proceedings, then, the person making

that statement must be made available for cross-examination to the

party against whom such statement has been used in the

adjudication proceedings, subject to the provisions of Section 138B

of the Act of 1962. If the conditions prescribed under Section 138B

(1) of the Act of 1962 is satisfied, then, the statement made by a

person under Section 108 of the Act of 1962 would become relevant

in the adjudication proceedings, notwithstanding, such a person not 29

being cross-examined by the person who is affected by such a

statement.

In the facts of the present case, the order in original records

that, the petitioner was disallowed cross-examination of any person

making any statement against the petitioner under Section 108 of

the Act of 1962. The order in original relies upon such statements as

evidence. The impugned order in original does not record a finding

that, any of the conditions specified under Sections 138B (1) of the

Act of 1962 stands satisfied thereby making such statements

relevant without cross-examination of such witness by the petitioner.

In such circumstances, the adjudication proceedings conducted

by the adjudicating authority and resultant the impugned order in

original stand vitiated by breach of principles of natural justice. The

impugned order in original is quashed.

W.P. No. 25447(W) of 2018 is disposed of by permitting the

adjudicating authority to proceed with the show-cause notice dated

February 13, 2017 and the reply thereto, in accordance with law. The

adjudicating authority will afford reasonable opportunity of cross-

examination of the witnesses which the petitioner seeks to cross-

examine, subject to the provisions of Section 138B of the Act of 1962. 30

It is expected that the adjudication proceedings are disposed of as

expeditiously as possible. No order as to costs.

Urgent certified website copies of this judgment and

order, if applied for, be made available to the parties upon

compliance of the requisite formalities.

[DEBANGSU BASAK, J.]