2025 (9) TMI 673 - AT - Central Excise

Adjudicating authority required to remand for fresh adjudication and allow cross-examination of revenue witnesses under Section 9D

M/s Rajdhani Iron Products Pvt. Ltd. and Shri Naresh Kumar Gupta Versus Commissioner of Central Goods & Service Tax, Ludhiana

CESTAT CHANDIGARH - AT set aside the impugned order and remanded the matters to the adjudicating authority for fresh adjudication. The tribunal held that ... CENVAT credit availed on the basis of fraudulent invoices - invocation of extended period of limitation - HELD THAT:- The identical issue has been decided by the Hon’ble Punjab & Haryana High Court in the case of Jindal Drugs Pvt. Ltd. [2016 (6) TMI 956 - PUNJAB & HARYANA HIGH COURT] as well as by this Tribunal in the case of M/s Lauls Ltd. [2023 (7) TMI 1113 - CESTAT CHANDIGARH] wherein it was held that the cross-examination of witnesses whose statements were relied upon by the Revenue to make out a case against the assessee has to be allowed and by following the ratio of the said decisions, the impugned order is not sustainable and therefore, the same is set aside and the cases remanded back to the Adjudicating Authority for a fresh decision after affording opportunity of cross-examination of the material witnesses and by following the procedure as prescribed in Section 9D of the Central Excise Act. Both the appeals are allowed by way of remand to the Original Authority who will comply with the requirement of Section 9D of the Central Excise Act by affording an opportunity of cross-examination and thereafter will pass a reasoned order in accordance with law. ISSUES PRESENTED AND CONSIDERED 1. Whether an adjudicating authority can rely upon statements recorded earlier by a gazetted Central Excise Officer without first following the procedure mandated by Section 9D(1) of the Central Excise Act when none of the contingencies in clause (a) are shown to exist. 2. Whether the assessee is entitled to cross-examine material witnesses whose prior statements are relied upon by the Revenue in quasi-judicial adjudication and, if so, the stage and manner in which such cross-examination must be offered. 3. Whether documentary evidence described as 'self-speaking' can obviate the requirement to permit cross-examination of witnesses whose statements form the basis of the impugned order. 4. Whether failure to permit cross-examination of relied-upon witnesses and/or to follow the procedure of Section 9D renders the adjudication vitiated and calls for remand for fresh adjudication. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Admissibility of statements recorded by Gazetted Central Excise Officer (Section 9D): Legal framework Section 9D(1) prescribes when a statement made and signed before a gazetted Central Excise Officer is relevant for proving the truth of its contents: (a) in cases where the maker is dead, cannot be found, incapable, kept out of way, or presence cannot be obtained without unreasonable delay/expense; or (b) where the person is examined as a witness before the adjudicating authority and the authority, having regard to circumstances, admits the statement in evidence in the interests of justice. Sub-section (2) applies the same to proceedings other than a court. The provision uses mandatory language and prescribes a two-step procedure under clause (b): (i) examination of the maker as witness before the adjudicating authority and (ii) formation of a reasoned opinion admitting the statement in the interests of justice. Issue 1 - Precedent treatment The Tribunal follows the ratio of the Punjab & Haryana High Court decision holding Section 9D procedure mandatory and requiring reasoned, speaking orders if Section 9D(1)(a) is invoked; the Supreme Court authority emphasises that denial of cross-examination when statements are relied upon vitiates proceedings. Issue 1 - Interpretation and reasoning The Court reasons that Section 9D's mandatory steps reflect the risk of coerced or compellable statements during investigation; hence an adjudicating authority cannot straightaway rely on such statements unless clause (a) conditions apply or the clause (b) safeguards are complied with. The statutory sequence of evidence (Evidence Act principles) underscores that examination and cross-examination must follow proper order. Issue 1 - Ratio vs. Obiter Ratio: Section 9D imposes mandatory procedural requirements for admissibility of statements; failure to follow them renders reliance on such statements impermissible unless clause (a) conditions legitimately apply. Observations on underlying policy (risk of compulsion) are explanatory but integral to the ratio. Issue 1 - Conclusion The Court concludes that the impugned order cannot validly rely on statements recorded earlier without first complying with Section 9D; the matter must be remitted for fresh adjudication adhering to Section 9D. Issue 2 - Right to cross-examine material witnesses whose statements are relied upon Legal framework Where a prior statement is to be admitted under Section 9D(1)(b), the maker must be examined as a witness before the adjudicating authority; only thereafter can the question of offering the witness for cross-examination to the opposite party arise. Principles of natural justice and Evidence Act sequencing (examination-in-chief, cross-examination, re-examination) govern the process. Precedent treatment High Court and Supreme Court authorities cited (including the Punjab & Haryana High Court and the Supreme Court in Andaman Timber) have held that refusal to permit cross-examination of witnesses relied upon by the Revenue is a serious breach of natural justice and vitiates the order. Interpretation and reasoning The Tribunal reasons that cross-examination cannot be precluded by speculative or belated procedural objections; the statutory procedure requires that the witness be examined before the authority and, if the statement is admitted, the accused/assessee must be given the opportunity to cross-examine so that the truthfulness and circumstances of the recorded statement are tested. The adjudicator cannot assume cross-examination would be futile or unnecessary. Ratio vs. Obiter Ratio: When prior statements are to be used against a party, the party is entitled to have the witness examined before the adjudicating authority and, upon admission of the statement, to have opportunity for cross-examination; denial of that opportunity is a jurisdictional infirmity. Remarks suggesting timing constraints or discretionary denial in exceptional late-stage situations are context-specific and may be obiter in relation to the present facts. Conclusion The Tribunal holds entitlement to cross-examination is mandatory where prior statements are relied upon and such opportunity must be afforded in accordance with Section 9D; failure to do so warrants remand for fresh proceedings permitting cross-examination. Issue 3 - Whether documentary 'self-speaking' evidence can dispense with cross-examination Legal framework Documentary evidence may, in some cases, be sufficient to establish facts; however, when impugned orders rely materially on prior recorded statements of witnesses, Section 9D procedure and associated cross-examination protections are triggered regardless of documentary material. Precedent treatment Authorities emphasise that tribunals or adjudicating authorities must not speculate about the utility of cross-examination; where statements have been made the basis of adverse findings, their testing by cross-examination is required, even if documents exist. Interpretation and reasoning The Tribunal rejects the Department's submission that cross-examination would be purposeless because documents are self-speaking. It reasons that the presence of documentary evidence does not negate the statutory safeguards embodied in Section 9D when oral statements form part of the evidentiary foundation of the order. Ratio vs. Obiter Ratio: Documentary evidence cannot be relied upon as a ground to deny the statutory procedure and cross-examination rights where prior statements of witnesses have been used to support the order. Conclusion The contention that documentary evidence obviates cross-examination is not accepted; the adjudicating authority must allow cross-examination when prior statements are relied upon. Issue 4 - Consequences of non-compliance with Section 9D and denial of cross-examination Legal framework Procedural compliance with Section 9D and observance of natural justice are conditions precedent to valid quasi-judicial adjudication where prior statements are relied upon; failure may render the order a nullity or vitiated for want of jurisdictional fairness. Precedent treatment Both High Court and Supreme Court authorities hold that non-allowance of cross-examination and non-compliance with Section 9D constitute serious procedural infirmities necessitating quashing/remand for fresh adjudication. Interpretation and reasoning Given the mandatory statutory scheme and binding precedents, the Tribunal finds the impugned order unsustainable. Rather than decide merits on the existing record, the appropriate remedy is remand so the Original Authority may comply with Section 9D, permit cross-examination of material witnesses, and thereafter pass a reasoned order. Ratio vs. Obiter Ratio: Non-compliance with Section 9D and denial of cross-examination where statements are relied upon vitiates the adjudicatory order and requires remand for fresh proceedings consistent with law. Ancillary directions about cooperation and speedy disposal are remedial instructions rather than substantive ratio. Conclusion The appeals are allowed by remand: the Original Authority must afford opportunity for cross-examination, comply with the procedure in Section 9D, and thereafter pass a reasoned order; the assessee is to cooperate for expeditious disposal.