2009 (8) TMI 64 - HC - Central Excise

Section 9-D(2) upheld as pari materia with Section 32 Evidence Act; needs objective opinion, recorded reasons, opportunity to respond

HC upheld constitutionality of Section 9-D(2) of the Central Excise and Salt Act, holding it pari materia with Section 32 of the Evidence Act and not ... Constitutional validity of Section 9-D(2) of the Central Excise and Salt Act, 1944 - right to cross-examination and principles of natural justice in quasi-judicial proceedings - relevancy of statements recorded under departmental inquiry - doctrine of necessity as justification for admissibility of prior statements - requirement to form an opinion based on material, record reasons and afford opportunity before excluding cross-examination - judicial review and appellate remedy against invocation of Section 9-DConstitutional validity of Section 9-D(2) of the Central Excise and Salt Act, 1944 - right to cross-examination and principles of natural justice in quasi-judicial proceedings - relevancy of statements recorded under departmental inquiry - doctrine of necessity as justification for admissibility of prior statements - requirement to form an opinion based on material, record reasons and afford opportunity before excluding cross-examination - judicial review and appellate remedy against invocation of Section 9-D - Section 9-D(2) is not unconstitutional and may be applied in departmental adjudication subject to specified safeguards - HELD THAT: - The Court upheld the competence of Parliament to enact a provision pari materia with the established exception for relevancy of prior statements, observing that Section 9-D(2) extends to proceedings before Central Excise officers the exception comparable to that in the Evidence Act. The Court rejected the contention that Section 9-D(2) confers uncanalised, arbitrary power, noting safeguards inherent in the provision: admissibility is confined to statements made before a gazetted officer; relevance arises only upon proof of one of the specified exceptional circumstances (dead, cannot be found, incapable, kept out of the way, or presence obtainable only with unreasonable delay or expense); and the authority must form an opinion based on material on record to establish the ground relied upon. The Court held that the exercise of this power necessarily entails recording reasons and confronting the affected party during proceedings so as to permit submissions; these procedural incidents are implicit in the quasi judicial exercise and can be subjected to appellate and judicial review. The Court emphasised that apprehensions of misuse do not invalidate the provision itself, which must be tested by its application; improper exercise in a particular case remains open to challenge by statutory appeal or judicial review. Accordingly, while acknowledging the importance of the right to cross examine in quasi judicial proceedings, the Court concluded that exceptional circumstances may justify reliance on prior statements provided the officer's opinion is reasoned and based on material and the party is afforded an opportunity to be heard. [Paras 29, 30, 32, 33]Section 9-D(2) is constitutionally valid; when invoked the adjudicating authority must form an opinion supported by material, record reasons, afford the affected party an opportunity to make submissions, and the invocation is subject to appellate and judicial scrutinyFinal Conclusion: Writ petitions dismissed. Section 9-D(2) of the Act is not ultra vires; its invocation in departmental adjudication must be grounded on material, accompanied by reasons and opportunity to the affected party, and is amenable to challenge by statutory appeal or judicial review. Issues Involved:1. Constitutional validity of Section 9-D of the Central Excise and Salt Act, 1944.2. Interpretation and application of Section 9-D in quasi-judicial proceedings.3. Violation of principles of natural justice due to denial of cross-examination.4. The necessity and adequacy of safeguards in Section 9-D.Issue-Wise Detailed Analysis:1. Constitutional Validity of Section 9-D:The primary issue in these writ petitions was the constitutional validity of Section 9-D of the Central Excise and Salt Act, 1944. The petitioners argued that Section 9-D(2) conferred uncontrolled, unguided, and unfettered powers upon Central Excise Officers, violating Article 14 of the Constitution. They contended that the provision lacked necessary safeguards, conditions, guidelines, and restrictions, making it arbitrary. However, the court held that Section 9-D is not unconstitutional or ultra vires. It noted that similar provisions exist in other statutes, such as Section 32 of the Indian Evidence Act, and have not been found unconstitutional. The court emphasized that the power to rely on statements without cross-examination under certain exceptional circumstances is justified and necessary to ensure that proceedings do not continue indefinitely.2. Interpretation and Application of Section 9-D:Section 9-D provides for the relevancy of statements made before a Central Excise Officer of gazetted rank during an inquiry or proceeding under the Act. Such statements can be used to prove the truth of the facts contained therein under specific circumstances, such as when the person who made the statement is dead, cannot be found, is incapable of giving evidence, is kept out of the way by the adverse party, or when their presence cannot be obtained without unreasonable delay or expense. The court held that these circumstances are exceptional and beyond the control of the parties, justifying the reliance on such statements without cross-examination.3. Violation of Principles of Natural Justice:The petitioners argued that the denial of cross-examination violated the principles of natural justice. They contended that the right to cross-examine witnesses is a crucial facet of natural justice, especially in quasi-judicial proceedings that can have severe consequences. The court acknowledged the importance of cross-examination but noted that under certain exceptional circumstances, this right could be taken away. The court emphasized that the provision itself includes safeguards, such as the requirement for the quasi-judicial authority to form an opinion based on material on record and to provide reasons for its decision. Additionally, the affected party has the opportunity to challenge the invocation of Section 9-D through statutory appeals.4. Necessity and Adequacy of Safeguards in Section 9-D:The petitioners argued that Section 9-D lacked adequate safeguards to prevent arbitrary exercise of power by Central Excise Officers. They suggested that prior intimation and an opportunity to make submissions on the applicability of Section 9-D should be provided to the assessee. The court, however, held that the safeguards are inherent in the provision itself. The quasi-judicial authority must form an opinion based on sufficient material on record and provide reasons for its decision. The court also noted that the affected party has the right to challenge the decision through statutory appeals, ensuring judicial review.Conclusion:The court concluded that Section 9-D of the Central Excise and Salt Act, 1944, is not unconstitutional or ultra vires. It held that while the provision allows for statements to be relied upon without cross-examination under certain exceptional circumstances, it includes inherent safeguards to prevent arbitrary exercise of power. The court emphasized that the quasi-judicial authority must provide reasons for its decision and that the affected party has the right to challenge the invocation of Section 9-D through statutory appeals. The writ petitions were dismissed, and the court found no merit in the challenge to the vires of the provision.