Mandatory witness examination under customs evidence rules: bypassing examination-in-chief vitiates adjudication and requires remand.

Where the Revenue relies on witness statements in customs adjudication, Section 138B requires the witnesses to be examined in chief before their statements can be used, and the adjudicating authority must form the requisite opinion on admissibility in the interests of justice. Cross-examination without prior examination-in-chief is not a substitute for the statutory procedure and is inconsistent with natural justice. Non-compliance with this mandatory evidentiary framework vitiates the adjudication, so orders passed on such statements are unsustainable and the matter must be remanded for fresh adjudication in accordance with law.

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Issues: (i) Whether the adjudicating authority was required to first examine the witnesses in chief and then afford cross-examination before relying on their statements under Section 138B of the Customs Act, 1962. (ii) Whether the impugned adjudication orders, having been passed without following that procedure, were liable to be set aside and the matter remanded.

Issue (i): Whether the adjudicating authority was required to first examine the witnesses in chief and then afford cross-examination before relying on their statements under Section 138B of the Customs Act, 1962.

Analysis: Section 138B operates on the same evidentiary principle as Section 9D of the Central Excise Act, 1944. The statements of witnesses become relevant only in the circumstances contemplated by the provision, and where the Revenue chooses to rely on such statements in adjudication, the witness must first be examined in chief and the adjudicating authority must then form the requisite opinion on admissibility in the interests of justice. Cross-examination without prior examination-in-chief is not a valid substitute for the statutory procedure and is inconsistent with the scheme of evidence and natural justice reflected in Section 138 of the Indian Evidence Act, 1872.

Conclusion: The statutory procedure was mandatory and had not been followed.

Issue (ii): Whether the impugned adjudication orders, having been passed without following that procedure, were liable to be set aside and the matter remanded.

Analysis: Since the adjudicating authority relied upon statements without first complying with the mandatory evidentiary steps under Section 138B, the adjudication was vitiated. The defect went to the root of the decision-making process and required fresh consideration by the authority after following the correct procedure.

Conclusion: The impugned orders were set aside and the matter was remanded for re-adjudication.

Final Conclusion: Non-compliance with the witness examination procedure under the customs evidentiary framework rendered the adjudication unsustainable, requiring fresh adjudication in accordance with law.

Ratio Decidendi: Where the Revenue relies on witness statements in adjudication, the adjudicating authority must first comply with the statutory conditions for their relevancy and admissibility and cannot deny effective cross-examination by bypassing examination-in-chief.

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