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

J & K Cigarettes Ltd. & Ors. And M/s. GTC Industries Ltd Versus Collector of Central Excise & Ors.

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 of the Central Excise and Salt Act, 1944 - Relevancy of statements under certain circumstances - denial of cross-examination​​​​​​​ - violation of principles of natural justice - invocation of provisions of Section 9-D - Whether the provision in question is arbitrary - Held that:- The safe and well known rule of construction is to assume that the legislature, when using well-known words upon which there have been well known decisions, use those words in the sense which the decisions have attached to them. The provisions under Section 32 of the Evidence Act have not been found to be ultra vires of the Constitution. Therefore, the provisions under Section 9-D of the Act, which are pari materia with the provisions under Section 32 of the Evidence Act, cannot be held as ultra vires of the Constitution. The very fact that the statement of such a person can be treated as relevant only when the specified ground is established, it is obvious that there has to be objective formation of opinion based on sufficient material on record to come to the conclusion that such a ground exists. Before forming such an opinion, the quasi-judicial authority would confront the assessee as well, during the proceedings, which shall give the assessee a chance to make his submissions in this behalf. It goes without saying that the authority would record reasons, based upon the said material, for forming the opinion. Only then, it would be possible for the affected party to challenge such a decision effectively. Therefore, the elements of giving opportunity and recording of reasons are inherent in the exercise of powers. The aggrieved party is not remediless. This order/opinion formed by the quasi judicial authority is subject to judicial review by the appellate authority. The aggrieved party can always challenge that in a particular case invocation of such a provision was not warranted. we summarize our conclusions as under :- (i) We are of the opinion that the provisions of Section 9-D (2) of the Act are not unconstitutional or ultra vires; (ii) while invoking Section 9-D of the Act, the concerned authority is to form an opinion on the basis of material on record that a particular ground, as stipulated in the said Section, exists and is established; (iii) such an opinion has to be supported with reasons; (iv) before arriving at this opinion, the authority would give opportunity to the affected party to make submissions on the available material on the basis of which the authority intends to arrive at the said opinion; and (v) it is always open to the affected party to challenge the invocation of provisions of Section 9-D of the Act in a particular case by filing statutory appeal, which provides for judicial review. Thus, insofar as the vires of the provision are concerned, we find no merit in these writ petitions and dismiss the same. 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.