Admissibility of Statements under Section 9D of the Central Excise Act, 1944 – Lessons for GST Adjudication By G. Jayaprakash, Advocate

In indirect tax administration, statements recorded by departmental officers have historically been treated with near-sacrosanct status. For decades, officers of Customs and Central Excise have proceeded on the assumption that whatever is recorded during investigation is sufficient “evidence” to sustain adjudication or prosecution. This mindset created systemic abuse: dealers, transporters, job-workers, and even employees often signed statements under duress or without proper understanding, only to find such statements used against them in adjudication.

Recognising this misuse, Parliament inserted Section 9D in the Central Excise Act, 1944, creating mandatory safeguards for the admissibility of statements. The Punjab & Haryana High Court in M/s G-Tech Industries Versus Union of India And Another - 2016 (6) TMI 957 - PUNJAB & HARYANA HIGH COURT gave authoritative interpretation, holding that statements recorded by excise officers cannot be mechanically relied upon unless the statutory conditions of Section 9D are strictly fulfilled.

With the advent of the Goods and Services Tax (GST), excise has largely receded, but the investigative mindset continues. Sections 70 and 136 of the CGST Act, 2017 replicate the investigative and evidentiary framework, raising the same concerns. Thus, G-Tech Industries is not merely of historical value – it is a guiding precedent for GST adjudication.

Section 9D of Central Excise Act, 1944 – A Statutory Safeguard

Section 9D created a two-stage filter before a recorded statement could be used in evidence:

1. Examination of the witness before the adjudicating authority – the person whose statement is relied upon must be produced.
2. Right of cross-examination to the assessee – the credibility of the witness must be open to challenge.
3. Limited exceptions under Section 9D(1)(b) – such as death, incapacity, or untraceability of the witness, where examination is impossible.

The language of Section 9D is unequivocal – the term “shall” was deliberately used, making compliance mandatory. The provision thus gave statutory recognition to principles of natural justice and fair trial, ensuring that adjudication does not collapse into mere reliance on investigative paperwork.

G-Tech Industries v. Union of India – Ratio and Significance

The Punjab & Haryana High Court in M/s G-Tech Industries Versus Union of India And Another - 2016 (6) TMI 957 - PUNJAB & HARYANA HIGH COURT laid down the following propositions:

• Mandatory compliance – Section 9D is not a procedural formality; it is a substantive requirement.
• Cross-examination is a right, not a discretion – without it, the adjudication is vitiated.
• Duty of adjudicating authority – the authority cannot short-circuit the safeguard by citing convenience. If reliance is placed on statements, reasons must be recorded and the assessee must be confronted.
• Narrow scope for exceptions – only where the witness cannot be examined for reasons mentioned in Section 9D(1)(b), can the statement be used without examination.

The Court harmonised tax adjudication with constitutional protections under Articles 14 and 21, embedding due process into excise jurisprudence.

Transition to GST – Sections 70 and 136 of the CGST Act

Although majority of the goods under excise has been subsumed into GST, the GST framework also carries forward similar provisions:

• Section 70, CGST Act – confers power on officers to summon persons and record statements, equivalent to Section 14 of the Excise Act.
• Section 136, CGST Act – provides for the admissibility of statements before gazetted GST officers in prosecutions, but does not directly govern adjudication.

Despite this statutory difference, departmental practice continues to treat recorded statements as sufficient evidence in adjudication – a continuation of the excise era’s flawed approach.

Critical Implications for GST Adjudication

1. Separation of Investigation and Adjudication – G-Tech underscores that what may suffice for investigation does not automatically qualify as ad judicable evidence. Adjudication must rest on tested, credible material.
2. Third-Party Statements – Reliance on suppliers, brokers, or transporters is common in GST. Unless such witnesses are produced for cross-examination, their statements are unreliable.
3. Protection against Coercion – Like in excise, GST officers cannot rely on confessions obtained during raids or summons proceedings. Courts consistently view such confessions with suspicion.
4. Doctrine of Fair Trial in Tax Law – Though adjudication under GST is civil in form, it carries penal consequences (tax, interest, penalty). Hence, fair trial standards from criminal law principles – cross-examination, due process, and natural justice – must apply.

Conclusion

The G-Tech Industries ruling remains a cornerstone in indirect tax adjudication, ensuring that departmental convenience does not override taxpayer rights. While Section 9D has disappeared with excise, its spirit survives in GST through Section 136 and constitutional guarantees. Unless authorities rigorously enforce examination and cross-examination, adjudications built solely on untested statements will remain vulnerable to judicial invalidation.