Cross-Examination Under GST Law: A Critical Right in Tax Proceedings

Introduction

The Goods and Services Tax (GST) regime, introduced in India in 2017, brought sweeping changes to the country’s indirect taxation system. With its promise of simplification and transparency, GST also entails a complex procedural framework for assessments, audits, investigations, and adjudication. One crucial facet of these proceedings is the right to cross-examination, a principle rooted in natural justice and a key element of fair trial in quasi-judicial proceedings.

Cross-examination refers to the right of a party to challenge the credibility and reliability of evidence provided by the opposing party. Under GST law, cross-examination plays a pivotal role when evidence from third parties is relied upon by authorities to demand tax or impose penalties. This article explores the scope, legal provisions, judicial interpretations, and significance of cross-examination under GST in ensuring fair adjudication.

Nature and Origin of the Right

The right to cross-examination stems from the principle of natural justice—particularly, the maxim audi alteram partem (the right to be heard). It is triggered when the tax authorities rely on statements or testimonies of third-party witnesses to frame allegations or issue a show cause notice (SCN).

While Relied Upon Documents (RUDs) can be rebutted through written submissions, witness statements can only be effectively challenged via cross-examination. Therefore, denial of this right can constitute a serious violation of natural justice.

The CBEC Circular No. 1053/02/2017-CX clarified that adjudication commences with the issuance of an SCN and that RUDs must be provided along with it.

When Does the Right to Cross-Examination Accrue?

Two schools of thought have emerged:

1. Pre-SCN Stage

This view posits that the right to cross-examination can arise even before the issuance of the SCN.

• In Mohammed Fariz & Co. Versus Commissioner of Customs - 2018 (10) TMI 1650 - KERALA HIGH COURT the Kerala High Court held that early cross-examination aids both the assessee and the department in determining the reliability of the evidence. The decision drew support from Andaman Timber Industries Versus Commissioner of Central Excise, Kolkata-II - 2015 (10) TMI 442 - Supreme Court, where denial of cross-examination was found to be a fatal flaw.
• Statutory references include Section 136 of the CGST Act, 2017 and Section 138B of the Customs Act, 1962, both supporting early access to cross-examination without prejudicing either party.

2. Post-SCN Stage

The opposing school maintains that the right to cross-examination accrues only after issuance of the SCN—particularly at the stage of replying to it.

The Commissioner of Central Excise, Meerut-I, Meerut & Another Versus M/s Parmarth Iron Pvt. Ltd., - 2010 (11) TMI 109 - ALLAHABAD HIGH COURT held that the SCN marks the initiation of adjudication, and thus cross-examination is relevant at that point.

Is Denial of Cross-Examination a Violation of Natural Justice?

Judicial pronouncements consistently emphasize that denial of cross-examination, especially when relied-upon statements are uncorroborated, violates principles of natural justice.

Supporting Judgments

• Nishad K.U., Prop. M/s. Woodtunes Enterprises Versus The Joint Commissioner, Central Tax And Central Excise, Cgst Kochi Commissionerate Kochi, The Additional Director, Dggi, Kochi Zonal Unit, Central Board Of Indirect Taxes & Customs, Union Of India. - 2025 (1) TMI 980 - KERALA HIGH COURT:The Kerala High Court quashed the order where cross-examination was denied despite reliance on witness statements.
• SAMPAD NARAYAN MUKHERJEE Versus UNION OF INDIA - 2019 (6) TMI 977 - CALCUTTA HIGH COURT:The Calcutta High Court ruled that denial of cross-examination on procedural grounds was unjustified.
• THANGAPANDI SELVARAJ Versus ENFORCEMENT OFFICER ENFORCEMENT SQUAD NO. 1, KERALA STATE GOODS AND TAXES DEPARTMENT - 2025 (1) TMI 1422 - KERALA HIGH COURT: Reaffirmed that Section 75(4) of CGST Act mandates a hearing when proceedings are initiated based on third-party statements.

Contrary Views

• M/s. Vallabh Textiles Versus Additional Commissioner Central Tax Gst, Delhi East And Ors. - 2025 (4) TMI 1154 - DELHI HIGH COURT: The Delhi High Court held that cross-examination is not an unfettered right and may be denied when based on undeniable documentary evidence and where no prejudice is caused.
• Mr. Mohammed Muzzamil and Another Versus The Central Board of Indirect Taxes and Customs CBIC and Another - 2020 (11) TMI 361 - TELANGANA HIGH COURT: The Telangana High Court concurred, emphasizing that cross-examination is governed by Section 138B and is not absolute.

Statutory Provisions and Legal Framework

A. Relevant Sections of CGST Act, 2017

• Section 70: Power to summon persons for evidence.
• Section 136: Statements made under Section 70 are admissible as evidence.
• Section 75(4): Mandates opportunity of hearing.
• Sections 73 & 74: Adjudication for short-paid or unpaid tax.
• Sections 122 to 132: Penalties and prosecution.

B. Other Applicable Laws and Rules

• Rule 161 of CGST Rules: Notice and demand order procedures.
• Section 138B of the Customs Act, 1962: Often referred for procedural analogy.
• Section 9C of the Central Excise Act, 1944: Pertains to admissibility of evidence.

Importance of Cross-Examination

Cross-examination acts as a procedural safeguard for the assessee. Its significance lies in:

• Testing the credibility of third-party evidence.
• Uncovering inconsistencies in witness statements.
• Challenging ex parte decisions.
• Ensuring fair adjudication and transparency in proceedings.

Judicial Precedents: Key Decisions

• Andaman Timber Industries Versus Commissioner of Central Excise, Kolkata-II - 2015 (10) TMI 442 - Supreme Court: Denial of cross-examination renders an order a nullity.
• Nidhi Gupta v. Commissioner of CGST, Delhi South [2023 (75) GSTL 198 (Del)]: Right to cross-examine must be granted if third-party statements are relied upon.

  • Kishan Lal v. UOI [2023-TIOL-2514-HC-DEL-GST] Recording third-party statements is insufficient unless cross-examination is allowed.

Procedural Aspects of Cross-Examination

When Can It Be Requested?

• At the time of replying to SCN.
• When demand is solely based on third-party statements without corroborative evidence.

How to Request?

• Must be made through a written request in the reply to SCN or during hearing.
• Should specify the witness and the statement sought to be cross-examined.

Can Denial Be Fatal?

• Yes, if statements form the sole basis of proceedings.
• No, if adequate corroborative documentary evidence is on record and no prejudice is caused.

Cross-Examination in GST Investigations

In cases handled by DGGI or similar authorities:

• Statements under Section 70 are admissible.
• If relied upon in SCN, such statements must be tested via cross-examination if contested.
• This is particularly critical in cases of fake ITC, bogus invoices, or circular trading.

Conclusion

Cross-examination under GST is not merely procedural—it is a substantive right grounded in constitutional principles of natural justice. Even though the CGST Act doesn’t explicitly provide detailed rules for cross-examination, judicial decisions have consistently emphasized its importance.

Authorities must recognize that fair adjudication requires not just procedural compliance, but also transparency and fair opportunity to rebut evidence. The supply of RUDs and witness statements, and the opportunity for cross-examination, are essential for a valid reply to the SCN.

While courts have diverged on whether the right is absolute or conditional, the prevailing principle remains: where cross-examination is denied without reason and prejudice is caused, the proceedings are vitiated.