Part II Mandatory Compliance of Examination in Chief by adjudicating authorities and Relevancy/admissibility of statements before Custom and indirect tax administration Officers

Mandatory Compliance of Examination in Chief by adjudicating authorities and Relevancy/admissibility of statements before Custom and indirect tax administration Officers

Part II… Continue…

In the case of M/s. Geetham Steels Versus Commissioner of GST & Central Excise, Salem - 2025 (3) TMI 1098 - CESTAT CHENNAI, following questions of law were framed and answered, amongst others, namely, firstly, whether compliance of Section 9D by the Adjudicating Authority mandatory ? and secondly, What is the import of Section 14 statement and whether it is relevant and admissible if not subjected to the rigours of Section 9D(2) ?. This article attempts to capture relevant reasoning and findings given by Hon’ble CESTAT Chennai, which is perhaps one of the most detailed judgment on the subject matter.

Nearly three decades ago, a three judge bench of the Honourable Supreme Court, in KI. PAVUNNY Versus ASSTT. COLLR. (HQ.), C. EX. COLLECTORATE, COCHIN - 1997 (2) TMI 97 - Supreme Court, had an occasion to consider whether the confessional statement of the appellant therein, given to the Customs officers under Section 108 of the Customs Act, 1962 (for short, the `Act’), though retracted at a later stage, is admissible in evidence and could form basis for conviction and whether retracted confessional statement requires corroboration on material particulars from independent evidence. The Honorable Supreme Court held that:

“17. It would thus be clear that the object of the Act empowering Customs Officers to record the evidence under Section 108 is to collect information of the contravention of the provisions of the Act or concealment of the contraband or avoidance of the duty of excise so as to enable them to collect the evidence of the proof of contravention of the provisions of the Act so as to take proceedings for further action of confiscation of the contraband or imposition of the penalty under the Act etc. By virtue of authority of law, the officer exercising the powers under the Act is an authority within the meaning of Section 24 of the Evidence Act.

(1) Though the authority/officer on suspecting a person of having committed the crime under the Act can record his statement, such a person per force is not a person accused under the Act. (2) He becomes accused of the offence under the Act only when a [complaint] is laid by the competent Customs Officer in the Court of competent jurisdiction or Magistrate to take cognizance of the offence and summons are issued. Thereafter, he becomes a person accused of the offence. (3) A statement recorded or given by the person suspected of having committed an offence during the inquiry under Section 108 of the Act or during confiscation proceedings is not a person accused of the offence within the meaning of Section 24 of the Evidence Act. (4) Though the Customs Officer is an authority within the meaning of Section 24 of the Evidence Act, by reason of statutory compulsion of recording the statement or the accused giving voluntary statement pursuant to his appearing either after issuance of summons or after the appellant’s surrender, such statement cannot be characterised to have been obtained by threat, inducement or promise. (5) The collection of evidence under Section 108 and other relevant provisions relating to search and seizure are only for the purpose of taking further steps for confiscation of contraband and imposition of penalty. (6) The selfsame evidence is admissible in evidence on the complaint laid by the Customs Officer for prosecution under Section 135 or other relevant statutes.”

(emphasis supplied)

****. Thereafter, the import of a retracted confession was elaborated as under:

“25. It would thus be seen that there is no prohibition under the Evidence Act to rely upon the retracted confession to prove the prosecution case or to make the same basis for conviction of the accused. The practice and prudence require that the Court could examine the evidence adduced by the prosecution to find out whether there are any other facts and circumstances to corroborate the retracted confession. It is not necessary that there should be corroboration from independent evidence adduced by the prosecution to corroborate each detail contained in the confessional statement. The Court is required to examine whether the confessional statement is voluntary; in other words, whether it was not obtained by threat, duress or promise. If the Court is satisfied from the evidence that it was voluntary, then it is required to examine whether the statement is true. If the Court on examination of the evidence finds that the retracted confession is true, that part of the inculpatory portion could be relied upon to base conviction. However, the prudence and practice require that Court would seek assurance getting corroboration from other evidence adduced by the prosecution.”

What can be gleaned from the above decisions of the Apex Court is that a statement made under S.108/S.14, while admissible, does not automatically translate into their being relevant to the proceedings unless they satisfy the statutory stipulations laid down to consider them relevant. This is because there is a difference between relevancy and admissibility according to the general principles of evidence law. Otherwise, this would tantamount to an incongruous circular reasoning that the details contained in the statement are being presumed to be relevant, and are relevant, since the statement is admissible. In other words, a statement being used as evidence to prove itself and thus becoming admissible! In fact, the Honourable Supreme Court has in K I Pavunny’s case explicitly stated how an inculpatory statement is to be dealt with prior to placing reliance thereon, when it was held that The Court is required to examine whether the confessional statement is voluntary; in other words, whether it was not obtained by threat, duress or promise. If the Court is satisfied from the evidence that it was voluntary, then it is required to examine whether the statement is true. If the Court on examination of the evidence finds that the retracted confession is true, that part of the inculpatory portion could be relied upon to base conviction.

James Fitzjames Stephen, when drafting the Indian Evidence Act, 1872, defined and distinguished “Fact” from “Evidence”. The distinction remains unextinguished in the Bharatiya Sakshya Adhiniyam, 2023 ( BSA), and the definitions are reproduced below:

“S.2(f) 'fact' means and includes—

(i) any thing, state of things, or relation of things, capable of being perceived by the senses;

(ii) any mental condition of which any person is conscious.”

S. 2(e) 'evidence' means and includes—

(i) all statements including statements given electronically which the Court permits or requires to be made before it by witnesses in relation to matters of fact under inquiry and such statements are called oral evidence;

(ii) all documents including electronic or digital records produced for the inspection of the Court and such documents are called documentary evidence”

Thus, “Fact” encompasses anything (in the material sense), state or relation, of things perceptible to the senses, including states of mind, whereas “evidence” can ONLY be oral or documentary. Fact refers to the thing to be proved (quid probandum) and evidence means the means of proof or manner of proof (modus probandi). Thus, conceptually Fact and Evidence are distinct and separate. Fact can either be a fact-in-issue, which means and includes any fact from which, either by itself or in connection with other facts, the existence, non-existence, nature or extent of any right, liability or disability, asserted or denied in any suit or proceeding, necessarily follows. [2(g) of the BSA] or a relevant fact [2(k) of the BSA]- A fact is said to be relevant to another when it is connected with the other in any of the ways referred to in the provisions of the Adhiniyam relating to the relevancy of facts.

Evidence, on the other hand, can only be admissible or inadmissible and this evidence can be used only to prove or disprove relevant facts. The Supreme Court in Ram Bihari Yadav Versus State of Bihar and Ors. - 1998 (4) TMI 578 - Supreme Court itself has observed that more often than not, the expressions 'relevancy and admissibility' are used as synonyms but their legal implications are distinct and different from for more often than not facts which are relevant are not admissible; so also facts which are admissible may not be relevant, for example questions permitted to put in cross examination to test the veracity or impeach the credit of witnesses, though not relevant are admissible. The probative value of the evidence is the weight to be given to it which has to be judged having regards to the fact and circumstances of each case. The relevant para is as under:

“The law relating to dying declaration - the relevancy, admissibility and its probative value- is fairly settled. More often the expressions 'relevancy and admissibility' are used as synonyms but their legal implications are distinct and different for more often than not facts which are relevant may not be admissible, for example, communication made by spouses during marriage or between an advocate and his client though relevant are not admissible; so also facts which are admissible may not be relevant, for example, questions permitted to be put in cross-examination to test the veracity or impeach the credit of witnesses, though not relevant are admissible. The probative value of the evidence is the weight to be given to it which has to be judged having regard to the facts and circumstances of each case. In this case, the thrust of the submission relates not to relevancy or admissibility but to the value to be given to Exh. 2. A dying declaration made by a person who is dead as to cause of his death or as to any of the circumstances of the transaction which resulted in his death, in cases in which cause of his death comes in question, is relevant under Section 32 of the Evidence Act and is also admissible in evidence. Though dying declaration is indirect evidence being a specie of hearsay, yet it is an exception to the rule against admissibility of hearsay evidence. Indeed, it is substantive evidence and like any other substantive evidence requires no corroboration for forming basis of conviction of an accused. But then the question as to how much weight can be attached to a dying declaration is a question of fact and has to be determined on the facts of each case.”

It is pertinent to note that Section 5 to 16 of the Indian Evidence Act, 1872 (3 to 14 of BSA, 2023) pertains to relevance of facts and sections 16 to 31 of Indian Evidence Act, 1872 (14 to 25 of BSA, 2023) deals with admissions and confessions and when they are relevant or when they are irrelevant. At this juncture, it will also be appropriate to notice S.141BSA (former S.136 of Indian Evidence Act). S.141 says:

“141. (1) When either party proposes to give evidence of any fact, the Judge may ask the party proposing to give the evidence in what manner the alleged fact, if proved, would be relevant; and the Judge shall admit the evidence if he thinks that the fact, if proved, would be relevant, and not otherwise.

(2) If the fact proposed to be proved is one of which evidence is admissible only upon proof of some other fact, such last mentioned fact must be proved before evidence is given of the fact first mentioned, unless the party undertakes to give proof of such fact, and the Court is satisfied with such undertaking.

(3) If the relevancy of one alleged fact depends upon another alleged fact being first proved, the Judge may, in his discretion, either permit evidence of the first fact to be given before the second fact is proved, or require evidence to be given of the second fact before evidence is given of the first fact”

Therefore, the three steps in sequence involved in applying the principles of evidence law under BSA/IEA, would be to at first find out whether the fact, the evidence in respect of which it is sought to be adduced to prove it, is relevant, and the next step would be to see whether the evidence that is being sought to be adduced to prove such a relevant fact is admissible and lastly whether the fact or facts so proved are sufficient to determine the issue. Sufficiency is completely determined only by the Court/adjudicating authority and is thus the Court’s/adjudicating authority’s evaluation of the extent of the bearing the proven facts have in the matter as per the standards of evidence called for in the adjudication process.

It is seen that, the High Court of Madras has taken judicial notice of the purpose of Section 9D being added to the Central Excise Act, in a decision rendered in Crl. Appeal No. 470 of 2019 in the case of Williamson Magor & Company Ltd. Versus Assistant Collector of Central Excise Prosecution - 2019 (11) TMI 1846 - MADRAS HIGH COURT, and the relevant paras are reproduced as below:

“8 Under our justice dispensation system, only substantive evidence for proving a fact in issue or a relevant fact would be admissible in a Court of law. In other words, a witness should testify about what he saw, heard, sensed and perceived and must offer himself for cross-examination by the adversary and hearsay evidence is inadmissible, exceptions being res gestae evidence, admission against the interest of the maker which would include confessions and dying declarations. A previous statement of a person, per se, which does not fall within the above said categories, cannot be treated as a substantive piece of evidence and can be used either to corroborate his testimony in the Court under Section 157 of the Evidence Act or contradict him under Section 145, ibid. In fact, one cannot even use the statement recorded by a Magistrate under Section 164 Cr.P.C. of a witness as a substantive piece of evidence. A statement given by a witness to the police under Section 161(3) Cr.P.C. cannot even be used to corroborate his testimony in the Court, but, can be used only to contradict him. The law being thus, certain Revenue statutes like the CESA, etc. provide for a special rule of evidence for treating a statement of a person as a substantive piece of evidence. The Parliament, in its wisdom, reposed faith in the investigation of Revenue offences by Revenue officers and also was aware of the difficulties that would be faced by them while prosecuting a Revenue offender in a Court of law.

Section 9D along with its analogous provisions, was inserted into being added to the CESA was vide clause 19 of the Customs, Gold (Control) and Central Excises and Salt(Amendment) Act, 1973 (Act 36 of 1973). This amendment was a consequence of the 47th report of the Law Commission of India on “Trial and Punishment of Social and Economic Offences” submitted to the Government of India in February, 1972. For the purpose of the discussion at hand the observations of the Commission were as follows:

“14.1 Statements made in administrative adjudications: Many of the Acts dealing with economic offences empower the enforcement officers to summon and examine witnesses. The statements made by these witnesses before such officers are not, however, admissible in evidence in the subsequent criminal prosecutions. We are of the view that these statements, if recorded by officers of sufficiently high status, to be determined by the Government should be admissible in such prosecutions, since they are very often the earliest officially recorded version of the facts.”

14.2 Certain conditions and safeguards will, no doubt, be necessary. Reference in this connection may be made to the Evidence Act, which has a provision relating to the admissibility of a statement made in a previous judicial proceeding. The relevant provision in the Evidence Act, is as follows:

“33. Evidence given by a witness in a judicial proceeding, or before any person authorized by law to take it, is relevant for the purpose of proving, in a subsequent judicial proceeding, or in a later stage of the same judicial proceeding, the truth of the facts which it states, when the witness is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or if his presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable:

Provided—

that the proceeding was between the same parties or their representatives in interest; that the adverse party in the first proceeding had the right and opportunity to cross-examine;that the questions in issue were substantially the same in the first as in the second proceeding.

Explanation.—A criminal trial or inquiry shall be deemed to be a proceeding between the prosecutor and the accused within the meaning of this section.”

14.3 We think that the safeguards mentioned in the proviso to Section 33 need not appear in the new provision which we contemplate. We are further of the view that the Court should have a discretion to admit the statement in evidence, if the circumstances of the case so require, even where the maker of the statement is a witness in the proceedings before the Court. Though such a discretion is not very frequently met with in Indian statute law, in this case, it is necessary for obvious reasons. Twenty years ago, Stone stressed the importance of excluding similar conduct evidence (even though it is relevant otherwise than via disposition), where its effect was too prejudicial, in these words-- “where the peg is so small and the linen so bulky and dirty that a jury will never see the peg, but merely yield to indignation at the dirt.”

Somewhat similar considerations make it desirable that the Court should have this power, since the provision which we are recommending is itself new.”

It is, therefore, obvious that the use of a statement made before a Central Excise officer of a gazetted rank under the CESA cannot be pressed in aid, if the conditions stated therein are not satisfied. In this backdrop, if we analyse Section 9D of the CESA, extracted above, it can be inferred that a statement of a person recorded by any Central Excise officer of a gazetted rank can be treated as a substantive piece of evidence, without he being examined in the Court, provided the Department is able to establish the existence of the conditions set out in sub-section (a). The conditions set out in sub-section (a) are in pari materia with the ones set out in the first clause of Section 33 of the Evidence Act.”

S.9D(1) stipulates “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” and thus addresses when such statements before a Gazetted Officer would be relevant for the purpose of proving, “in any prosecution for an offence”, the truth of the facts which it contains. As stated supra, the relevancy of a fact is a precondition for admitting evidence to prove such a fact. Thus, the legal relevance of the statement, which is crucial to the proof of facts, as evidence can only be admitted concerning relevant facts or facts in issue, stands established by virtue of the stipulation in 9D(1). As held by the Hon’ble High Court of Madras supra, such a statement is a substantive piece of evidence, without the deponent of the statement being examined in the Court, provided the Department is able to establish the existence of the conditions set out in sub-section (a).

S.9D(1)(a) mentions five scenarios where a person’s prior statement to the Gazetted Central Excise officer is relevant. They are i) where the person who made the statement is dead, ii) where the person who made the statement cannot be found, iii) where the person who made the statement is incapable of giving evidence, iv) when the person who made the statement is kept away by the adverse party or v) where the presence of the person who made the statement cannot be obtained by an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable. Therefore, ex-hypothesis, the Department should first adduce evidence in the proceedings before the Court of the existence of the aforementioned scenarios, namely that the deponent is dead, or cannot be found or is incapable of giving evidence etc., as a condition precedent for treating the deponent’s statement as a substantive piece of evidence.

S.9D(1)(b) also states that 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, then the statement made to a Gazetted Central Excise Officer is taken as relevant and admitted in evidence. This would take care of a scenario, of the deponent turning hostile, in which case, the Court can rely on the previous statement given before the Gazetted Central Excise Officer in the interests of justice. Whenever the witness who gave the statement deposes and stands by his earlier statement given before the Gazetted Officer, and if such deposition is to the detriment of the opposite side, then the witness is to be offered for cross-examination as otherwise it will be prejudicial to the interests of the other side. If the witness stands by his statement and if the cross-examination doesn’t dislodge his deposition in Court, save for some minor or inconsequential inconsistencies, then the Court can disregard such variations and, in the facts and circumstances admit the statement in evidence in the interests of justice as provided in S.9D(1)(b).Thus, S.9D(1)(b) would also apply to a situation as aforementioned, where the witness is examined in chief and thereafter offered to the opposite side for cross-examination. S.9D(2) states that 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.

Given that the adjudication proceedings under Section 33A of CEA, 1944/Section 122A of Customs Act, 1962, would come within the ambit of the phrase “any proceeding under this Act”, stipulated in S.9D (2), the provisions of sub-section (1) shall, so far as may be, apply to such adjudication proceedings, as they apply in relation to a proceeding before a Court. Now, it is to be seen as to what could be the import of the phrase “so far as may be”. In PRATAP SINGH (DR.) Versus DIRECTOR OF ENFORCEMENT FOREIGN EXCHANGE REGULATION ACT - 1985 (4) TMI 323 - Supreme Court, the Hon’ble Supreme Court has held that the term “so far as may be” has to be construed to mean that those provisions may be followed to the extent possible.

Thus, S.9D (2), casts an obligation on the adjudicating authority to generally follow the provisions of S.9D (1), to the extent possible, as it would apply to a proceeding before a Court. Thus, the term “shall” preceding, the phrase “so far as may be”, in this section can only mean that the adjudicating authority has been legislatively mandated to apply the provisions of S.9D (1), depending on the facts and circumstances of the case, to the extent possible. In other words, the words “so far as may be” cannot be taken as a leeway to refrain from the application of S.9D(1), to the exclusion of the consideration of the word “shall”, which would be contrary to the stated intent of the section.

Part III to continue ...