TaxTMI 
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TaxTMI 
Part III… Continue …..
Now what would this entail for the adjudicating proceeding before the adjudicating authority? It is pertinent to note that under Section 14 of the CEA/Section 108 of the Customs Act, all persons so summoned before the Gazetted Officer of the Department shall be bound to state the truth upon any subject respecting which they are examined or make statements and produce such documents and other things as may be required. Every such inquiry as aforesaid shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the erstwhile Indian Penal Code, 1860 (45 of 1860). Thus, the person summoned is giving the aforesaid statement at the risk of being proceeded against for perjury. That in itself, neither automatically translates into a validation of the truthfulness of the statement, nor does it attract any such presumption that what is deposed in the statement is the truth. A statement may be relevant, but it yet needs to be proved in accordance to the means known to law. The fact that a statement is made and recorded, and is statutorily said to be relevant in the IEA (BSA), does not mean it is proved. In this regard, reference to the decision of the Honourable High Court of Madras in Commissioner of Customs (Imports) Versus Shri Sainul Abideen Neelam - 2013 (3) TMI 263 - MADRAS HIGH COURT is apposite where it was held as under:
“14. The learned counsel for the Revenue relied on the decision of the Hon’ble Supreme Court in SURJEET SINGH CHHABRA Versus UNION OF INDIA - 1996 (10) TMI 106 - Supreme Court and the decision of this Court in ROSHAN BEEVI AND OTHERS Versus JOINT SECRETARY TO THE GOVERNMENT OF TAMIL NADU, PUBLIC DEPARTMENT (LAW AND ORDER) AND OTHERS - 1983 (11) TMI 290 - MADRAS HIGH COURT in support of his contention that statement made before the Customs Officer under Section 108 of the Customs Act, though retracted later is an admissible evidence and binding. Certainly, there is no quarrel about the said proposition. The admissibility of such statement as evidence is always there. However, the question is whether the authorities can act on such statement alone in the absence of any corroborating materials to substantiate the contents of such statement. Therefore, the admissibility of an evidence cannot and should not be taken to mean its acceptability as well.”
If one notices the provisions of Section 9D, what flows from it is that 9D(1) stipulates when a statement given under section 14 would be relevant for the purpose of proving, “in any prosecution for an offence”, the truth of the facts which it contains and provides for various scenarios in the sub-sections thereto at (a) and (b). It is only when the Department first adduces evidence in the proceedings before the adjudicating authority, of the existence of the aforementioned scenarios in section 9D(1)(a) that the deponent’s statement is taken as a substantive piece of evidence, without the deponent deposing thereto before the adjudicating authority. That would still not obviate the requirement of the Gazetted officer before whom the statement was given, deposing the factum of such statement having been recorded from the deponent- which is the method or manner of proving the recording of the statement, which statement under section 14 is already considered relevant for the purpose of proving the truth of the fact it contains- that is to say, the said deposition of the Gazetted Officer stating that the deponent had indeed given the statement before him, would be the manner of admitting or mode of proof of the admissible substantive evidence.
Again, 9D(1)(b) provides for the deponent’s statement given before the Gazetted Officer to be admitted as substantive evidence, when the person who made the statement is examined as a witness in the case before the adjudicating authority and the adjudicating authority is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. This sub section (b) of Section 9D(1) takes care of a situation where the witness who is deposing before the adjudicating authority turns hostile and on an evaluation of the circumstances of the case the adjudicating authority decides to discard the version given by the witness before it and instead place reliance on the earlier statement given before the Gazetted Officer. However, implicit in this procedure stipulated in 9D(1)(b) is the necessary requirement for the adjudicating authority to depose all the deponents who have given statement under Section 14, save as those that are unavailable in the scenarios given in 9D(1)(a), for the purposes of evaluating whether the statements are voluntary, to attest that he had deposed the contents of the statement and then take a considered decision whether the truth of the facts contained in the statement stand proved or disproved in the facts and circumstances of the case. In other words, it is only after such examination in chief, that the adjudicating authority can arrive at a considered decision, whether to declare the witness appearing before it as a hostile witness and then to decide in the facts and circumstances whether to rely on the earlier statement; or if upon finding major inconsistencies between his earlier deposition and in the contradictions brought about in cross-examination, to not rely on the earlier statement; or if it is only minor discrepancies as that which does not majorly disturb the essential truth of his deposition, to rely upon it, if in the circumstances of the case, the adjudicating deems it fit in the interest of justice.
Therefore, it is evident that Section 9D(2) not only legislatively mandates the adjudicating authority to apply the provisions of S.9D(1), depending on the facts and circumstances of the case, to the extent possible, but also when read along with Section 9D(1)(b), leads to the inexorable conclusion that the adjudicating authority necessarily has to conduct an examination in chief of the deponent of the statement so as to determine not only the voluntary nature as well as truthfulness of the facts the statement given under Section 14 before the Gazetted Officer contains, but also to determine whether or not the witness is hostile, and to decide whether or not to place reliance on the statement as per the mandate of Section 9(1)(b) in the circumstances of the case, as has been elaborated supra. This interpretation is also in consonance with the decision of the Honourable Apex Court in K I Pavunny’s case as stated supra, wherein the Apex Court emphasised that in the case of a retracted confession the court should examine whether the confessional statement is voluntary; in other words, whether it was not obtained by threat, duress or promise and if the Court is satisfied from the evidence that it was voluntary, then it is required to examine whether the statement is true. Such an interpretation is also in line with the decision of the Madras High Court cited supra
The decision of the Honourable High Court of Punjab & Haryana in M/s Jindal Drugs Pvt. Ltd. And Another Versus Union of India And Another - 2016 (6) TMI 956 - PUNJAB & HARYANA HIGH COURT, merits reproduction at this juncture and the relevant paras are as below:
“11. As already noticed hereinabove, sub-section (1) of Section 9D sets out the circumstances in which a statement, made and signed before a gazetted Central Excise Officer, shall be relevant for the purpose of proving the truth of the facts contained therein. If these circumstances are absent, the statement, which has been made during inquiry/investigation, before a Gazetted Central Excise Officer, cannot be treated as relevant for the purpose of proving the facts contained therein. In other words, in the absence of the circumstances specified in Section 9D(1), the truth of the facts contained in any statement, recorded before a Gazetted Central Excise Officer, has to be proved by evidence other than the statement itself. The evidentiary value of the statement, insofar as proving the truth of the contents thereof is concerned, is, therefore, completely lost, unless and until the case falls within the parameters of Section 9D(1).
12. The consequence would be that, in the absence of the circumstances specified in Section 9D(1), if the adjudicating authority relies on the statement, recorded during investigation in Central Excise, as evidence of the truth of the facts contained in the said statement, it has to be held that the adjudicating authority has relied on irrelevant material. Such reliance would, therefore, be vitiated in law and on facts.
13. ***
15. Once discretion, to be judicially exercised is, thus conferred, by Section 9D, on the adjudicating authority, it is self evident inference that the decision flowing from the exercise of such discretion, i.e., the order which would be passed, by the adjudicating authority under Section 9D, if he chooses to invoke clause (a) of sub-section (1) thereof, would be pregnable to challenge. While the judgment of the Delhi High Court in J&K Cigarettes Ltd. (supra) holds that the said challenge could be ventilated in appeal, the petitioners have also invited attention to an unreported short order of the Supreme Court in UOI and Another v. GTC India and Others in SLP (C) No. 2183/1994, dated 3-1-1995 wherein it was held that the order passed by the adjudicating authority under Section 9D of the Act could be challenged in writ proceedings as well. Therefore, it is clear that the adjudicating authority cannot invoke Section 9D(1)(a) of the Act without passing a reasoned and speaking order in that regard, which is amenable to challenge by the assessee, if aggrieved thereby.
16. If none of the circumstances contemplated by clause (a) of Section 9D(1) exists, clause (b) of Section 9D(1) comes into operation. The said clause prescribes a specific procedure to be followed before the statement can be admitted in evidence. Under this procedure, two steps are required to be followed by the adjudicating authority, under clause (b) of Section 9D(1), viz.
(i) the person who made the statement has to first be examined as a witness in the case before the adjudicating authority, and
(ii) the adjudicating authority has, thereafter, to form the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
17. There is no justification for jettisoning this procedure, statutorily prescribed by plenary Parliamentary legislation for admitting, into evidence, a statement recorded before the Gazetted Central Excise Officer, which does not suffer from the handicaps contemplated by clause (a) of Section 9D(1) of the Act. The use of the word “shall” in Section 9D(1), makes it clear that, the provisions contemplated in the sub-section are mandatory. Indeed, as they pertain to conferment of admissibility to oral evidence they would, even otherwise, have to be recorded as mandatory.
18. The rationale behind the above precaution contained in clause (b) of Section 9D(1) is obvious. The statement, recorded during inquiry/investigation, by the Gazetted Central Excise Officer, has every chance of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D(1) mandates that the evidence of the witness has to be recorded before the adjudicating authority, as, in such an atmosphere, there would be no occasion for any trepidation on the part of the witness concerned.
(emphasis supplied)
19. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a Gazetted Central Excise Officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the Gazetted Central Excise Officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for proving the truth of the contents thereof, he has to first admit the statement in evidence in accordance with clause (b) of Section 9D(1). For this, he has to summon the person who had made the statement, examine him as witness before him in the adjudication proceeding, and arrive at an opinion that, having regard to the circumstances of the case, the statement should be admitted in the interests of justice.
(emphasis supplied)
20. In fact, Section 138 of the Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidence-in-chief has to precede cross-examination, and cross-examination has to precede re-examination
21. It is only, therefore, -
(i) after the person whose statement has already been recorded before a Gazetted Central Excise Officer is examined as a witness before the adjudicating authority, and
(ii) the adjudicating authority arrives at a conclusion, for reasons to be recorded in writing, that the statement deserves to be admitted in evidence, that the question of offering the witness to the assessee, for cross-examination, can arise.”
The relevant paragraphs of the decision in SAMPAD NARAYAN MUKHERJEE Versus UNION OF INDIA - 2019 (6) TMI 977 - CALCUTTA HIGH COURT is reproduced below:
“12. 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 when such witness is offered for cross-examination in the proceeding.
13. 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. ****.
In sum, the Hon’ble Court has succinctly captured the law emanating from statutory provisions and discussion and judgments of Constitutional Courts as follows :
A. The statement given under Section 14 of the Central Excise Act, 1944 (or under Section 108 of the Customs Act, 1962) in response to a summons by a gazetted customs/excise officer, is not hit by Section 25 of the Indian Evidence Act, 1872, because a customs/excise officer is not a “police officer”.
B. At this stage, it is merely a recorded statement—not yet admissible or relevant. It becomes relevant under the circumstances stated in S. 9D of the CE Act 1944/S.138B of the Customs Act.
C. The fact that a statement is made and recorded, and is said to be relevant as per IEA/BSA, does not mean it is proved.
D. For the S.14/ S.108 statement to be admissible under general circumstances there must be an examination in chief and a subsequent cross examination that would bring it into the evidentiary pool for consideration. It needs to be examined whether the statement is voluntary; in other words, whether it was not obtained by threat, duress or promise. If the adjudicating authority is satisfied from the evidence that it was voluntary, then it is required to examine whether the statement is true. If the adjudicating authority on examination of the evidence finds that it is true, it can be relied upon in determination of the issue in dispute in the circumstances of the case.
E. However, if the condition of sub-section (a) of S.9D(1)/S.138B(1) do not exist, then it is incumbent upon the adjudicating authority to invariably examine in chief the deponent of the statement given under Section 14/ Section 108 in order to determine whether or not sub-section (b) of S.9D(1)/S.138B(1) would be attracted. That is to say, implicit in this procedure is the necessary requirement for the Court to depose all the deponents who have given statement under Section 14/ Section 108, save as those that are unavailable in the scenarios given in 9D(1)(a), for the purposes of evaluating whether the statements are voluntary, whether they depose to having made the recitals in the statement recorded under Section 14/ Section 108 and then take a considered decision whether the truth of the facts contained in the statement stand proved or disproved in the facts and circumstances of the case. In other words, it is only after such examination in chief, that the adjudicating authority can arrive at a decision whether or not to declare the witness appearing before it as a hostile witness and then to decide in the facts and circumstances whether to rely on the earlier statement or not, as more elaborately elucidated supra. Needless to say, such examination in chief has to be conducted by the adjudicating authority in the presence of the assesse/representative of the assessee. This is in accordance with the decision of the Honourable High Court of Punjab and Haryana in M/s Jindal Drugs Pvt. Ltd. And Another Versus Union of India And Another - 2016 (6) TMI 956 - PUNJAB & HARYANA HIGH COURT,
F. When the adjudicating authority is examining the witness, it should be noted that minor contradictions, inconsistencies or embellishments of venial or trivial nature which do not affect the kernel of the Department’s case should not be taken to be a ground to reject the statement deposed before the Gazetted officer in its entirety. It is only when such contradictions/inconsistencies cast a serious doubt about the truthfulness or creditworthiness of the witness so as to render the evidence unacceptable, that the adjudicating authority may not be in a position to place reliance on such evidence. Serious contradictions and inconsistencies which materially affect the case of the Department have to be understood in clear contradistinction to mere minor discrepancies in the statement of the witness.
Part IV to continue ....