2025 (9) TMI 1225 - HC - Customs

Section 138B applies only to criminal prosecutions; direction for cross-examination in adjudication proceedings set aside and matter remanded

The Commissioner Of Customs Bangalore. Versus Jyothi C. Jain, Proprietor Of M/s Samaavesh, Rakesh, Proprietor of Vainatheya International Agency, J.V. Impex, Samskruthi Interiors By Its Proprietor, Mr. N. Abhishek Jain, Samaavesh HUF.

HC held that Section 138B applies only to criminal prosecutions, not to adjudication proceedings, and the Tribunal erred in directing cross-examination of ... Seeking to provide cross-examination of the witnesses - Mis-declaration of value of imports - undervaluation of goods - SCN issued for determination of duty, confiscation, and penalty - HELD THAT:- A plain reading of Section 138B indicates that the provision contemplates cross-examination in the context of proving the truth of facts in a prosecution for an offence under the Act. The provision, by its very language, is applicable only to proceedings relating to offences and prosecutions under the Act. The Tribunal has, therefore, erred in invoking Section 138B while directing cross-examination of the witnesses in adjudication proceedings. The Hon’ble Supreme Court, in M/s. Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II [2015 (10) TMI 442 - SUPREME COURT], while dealing with the consequences of denial of cross-examination of witnesses, has held that 'It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the adjudicating authority he has specifically mentioned that such an opportunity was sought by the assessee.' In light of the above judgment, it is only where the statement of a witness has been recorded and such statement is proposed to be relied upon against the assessee that, upon a request made by the assessee, the adjudicating authority is bound to afford an opportunity of cross-examination. In the present case, the Tribunal has erred in issuing a direction for cross-examination without recording any finding as to whether statements of the witnesses were recorded and relied upon against the assessees. The direction to permit cross-examination is, therefore, without any foundation and is unsustainable. Furthermore, since the Tribunal remanded the matter to the adjudicating authority for de novo consideration limited to cross-examination of the panch witnesses, it has failed to examine the other issues raised by the respondent-assessees. The matter is remanded to the Tribunal for fresh consideration - appeal allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether Section 138B of the Customs Act, 1962, which contemplates cross-examination, applies to adjudication proceedings or is confined to prosecution proceedings under Chapter XVI (Offences and Prosecutions). 2. Whether an adjudicatory direction to permit cross-examination of panch witnesses is sustainable where no recorded statements of those witnesses have been taken or relied upon against the assessee. 3. Whether a remand by the Tribunal limited solely to cross-examination of panch witnesses, without addressing other issues raised by the assessee, is appropriate. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of Section 138B to Adjudication Proceedings Legal framework: Section 138B is located in Chapter XVI of the Customs Act dealing with Offences and Prosecutions; its language contemplates cross-examination for proving truth of facts in prosecution contexts. Precedent treatment: The Tribunal relied on Section 138B to direct cross-examination in adjudication proceedings; the High Court examined whether that reliance was legally tenable. Interpretation and reasoning: A plain reading confines Section 138B to offence/prosecution proceedings. The provision, by its terms, contemplates cross-examination in the context of proving facts in prosecutions under the Act and does not, on its face, extend to civil/adjudicatory valuation and duty determination proceedings. Ratio vs. Obiter: Ratio - Section 138B is inapplicable to adjudication proceedings; reliance on it by an appellate Tribunal in an adjudicatory matter is erroneous. Conclusion: The Tribunal erred in invoking Section 138B to direct cross-examination in the adjudication context; the provision does not furnish a statutory basis for such a direction in adjudication proceedings. Issue 2 - Necessity of Recorded Statement to Entitle Cross-Examination Legal framework: Principles of natural justice and preceding higher-court authority establish that denial of an opportunity to cross-examine witnesses whose statements are made the basis of an adverse order can vitiate the order; conversely, cross-examination is warranted when a recorded statement is relied upon against a party. Precedent treatment: The Court relied on controlling authority of the Supreme Court (as discussed in the judgment) which holds that when an adjudicating authority bases its order on statements of witnesses, refusal to allow cross-examination of those witnesses is a serious flaw amounting to violation of natural justice; however, the entitlement arises when statements have in fact been recorded and are relied upon. Interpretation and reasoning: Cross-examination is not an absolute or vested right in every proceeding; its invocation depends on whether a witness's statement has been recorded and is proposed to be used against the assessee. In the present matter the Tribunal directed cross-examination without recording a finding that any statements of the panch witnesses had been recorded or were relied upon. Where no recorded statement exists, there is no legal basis for ordering cross-examination under the principles applied by the higher authority. Ratio vs. Obiter: Ratio - Where no recorded statement of a witness has been taken or relied upon in adjudication proceedings, direction for cross-examination lacks foundation and is unsustainable; entitlement to cross-examination arises only when recorded statements are used against the party. Conclusion: The Tribunal's direction to permit cross-examination of panch witnesses was unsustainable because it did not and could not identify recorded statements relied upon against the assessees; the safeguard of cross-examination to protect natural justice rights was therefore inapplicable on the facts as found by the Court. Issue 3 - Scope of Remand and Obligation to Consider Other Issues Legal framework: Appellate and remand orders must address matters remitted comprehensively and should not limit reconsideration to one narrow facet where other contested issues remain; remand should enable full and fresh consideration consistent with legal observations of the Court. Precedent treatment: The Tribunal remanded the matter to the adjudicating authority for de novo consideration limited to cross-examination of the panch witnesses, without dealing with other issues raised by the assessees. Interpretation and reasoning: Given the Court's finding that the Tribunal erred both in statutory basis and in failing to establish that recorded statements existed, a mere remand limited to cross-examination is insufficient. The Tribunal failed to examine other issues which may impact adjudication; a proper remand requires fresh consideration in light of the Court's observations and ensuring all relevant contentions are addressed. Ratio vs. Obiter: Ratio - The remand limited solely to cross-examination was inadequate; the matter must be reconsidered by the Tribunal afresh, taking into account the Court's findings and all issues raised. Conclusion: The Tribunal's restricted remand is set aside; the matter is remitted to the Tribunal for fresh consideration consistent with the High Court's observations, and the Court declines to answer questions of law in view of the remand.