Dismissal of Petition Allows Final Reply to Notice, Witness Statements Require Cross-Examination

The High Court dismissed the writ petition, allowing the petitioner to submit a final reply to the show-cause notice within two weeks. The authority will decide on further proceedings based on the reply. If no response is received or if the decision is adverse, proceedings will continue. Witness statements cannot be used against the petitioner without an opportunity for cross-examination during adjudication. The final order will consider evidence and other records, aiming for completion within six months. Costs were not awarded, and the merits of the show-cause notice remain open.

---

---

Issues Involved:
1. Validity of the show-cause-cum-demand notice.
2. Right to cross-examine witnesses before submitting a reply to the show-cause notice.
3. Application of Section 9D of the Central Excise Act, 1944.

Detailed Analysis:

1. Validity of the Show-Cause-Cum-Demand Notice:
The Principal Additional Director General, Directorate General of GST Intelligence, issued a show-cause-cum-demand notice dated 24th September 2020, alleging violations of the Central Excise Act, 1944. The petitioner responded on 23rd October 2020, denying all allegations but requested that this letter not be treated as a formal reply. The petitioner also requested the cross-examination of witnesses whose statements were used to issue the show-cause notice, citing Section 9D of the Act.

2. Right to Cross-Examine Witnesses Before Submitting a Reply:
The Commissioner responded on 13th July 2021, stating that the request for cross-examination was premature as the petitioner had not formally replied to the show-cause notice. The petitioner, aggrieved by this denial, sought a writ from the High Court to prohibit further proceedings until compliance with Section 9D of the Act.

The Court referred to the judgments of the Punjab and Haryana High Court and the Allahabad High Court. In the case of Commissioner of Central Excise, Meerut-I vs. Parmarth Iron Pvt. Ltd., it was held that the right to cross-examine witnesses does not arise before the adjudication proceedings commence. The Allahabad High Court in Kanpur Cigarettes Ltd. vs. Union of India supported this view, stating that cross-examination is only permissible during the adjudication process, not at the stage of replying to a show-cause notice.

3. Application of Section 9D of the Central Excise Act, 1944:
Section 9D stipulates that statements made before a Central Excise Officer are relevant only if the person is examined as a witness during adjudication or if certain conditions prevent their examination. The Punjab and Haryana High Court in G-Tech Industries vs. Union of India clarified that statements recorded during an investigation cannot be relied upon unless the witness is examined during adjudication and the statement is admitted as evidence.

The High Court of Bombay concurred with these views, emphasizing that the right to cross-examine witnesses arises only after the adjudication proceedings have commenced and the statements are admitted as evidence.

Conclusion and Orders:
The Court disposed of the writ petition with the following directives:
- The petitioner is granted liberty to file a final reply to the show-cause notice within a fortnight.
- The relevant authority shall decide whether to proceed with the case after receiving the reply.
- If no reply is received or if the decision is against the petitioner, the proceedings shall continue to their logical conclusion.
- During adjudication, if any witness's statement is recorded and deemed relevant, it shall not be used against the petitioner unless an opportunity for cross-examination is provided.
- The evidence of the witness shall be recorded in the petitioner's presence.
- The final order shall be based on the evidence and other materials on record.

The entire process should be completed preferably within six months of the petitioner's final reply. All contentions on the merits of the show-cause notice remain open, and there shall be no order as to costs.

---