Third-party statements and denied cross-examination can vitiate tax adjudication, requiring remand and fresh decision.
Where a tax adjudication rests on third-party statements, failure to supply those materials and refusal of a timely cross-examination request deprive the noticee of an effective opportunity to rebut the allegations. The adjudication order was therefore set aside and remanded for fresh decision after disclosure of the statements and, if sought, cross-examination. On the credit ledger issue, the existing block was allowed to continue because the ledger was already in negative balance, but any future credits were directed to remain restricted to the quantified disputed amount.
Issues: (i) Whether the adjudication order was liable to be set aside and the matter remanded for failure to furnish the third-party statements and permit cross-examination. (ii) Whether the blocking of the credit ledger required restriction.
Issue (i): Whether the adjudication order was liable to be set aside and the matter remanded for failure to furnish the third-party statements and permit cross-examination.
Analysis: The adjudication was founded on statements and declarations recorded from the supplier and transporter, but copies of those materials were not furnished to the appellant. A specific request for cross-examination had also been made, yet it was not allowed. In these circumstances, the appellant was held to have been denied an effective opportunity to rebut the allegations, warranting fresh consideration by the adjudicating authority.
Conclusion: The adjudication order was set aside and the matter was remanded for fresh adjudication after supplying the statements and, if sought, allowing cross-examination.
Issue (ii): Whether the blocking of the credit ledger required restriction.
Analysis: The appellant admitted that the credit ledger carried a negative balance, so the existing blockage did not prejudice the appellant at that stage. At the same time, it was directed that if funds entered the ledger, the blockage would be confined to the quantified disputed amount.
Conclusion: The blocking of the credit ledger was permitted to continue for the present, with restriction to the disputed amount if funds are credited.
Final Conclusion: The appellate and writ proceedings succeeded to the extent that the adjudication was annulled and returned for a fresh decision, while the interim restraint on the credit ledger was maintained with a monetary cap linked to the disputed demand.
Ratio Decidendi: Where a tax adjudication relies on third-party statements that are not furnished to the noticee and a timely request for cross-examination is denied, the order cannot stand and the matter must be remanded for a fresh decision after affording an effective opportunity of rebuttal.
TaxTMI 
AI Drafter ✕
TaxTMI 
