2025 (12) TMI 1684 - HC - Customs

Cross-examination rights in alleged bonded-warehouse goods diversion case: officials spared, private brokers and warehouse staff allowed.

The dominant issue was whether a noticee is entitled, as of right, to cross-examine persons whose statements were relied upon in proceedings alleging ... Entitlement to seek cross-examination of persons who have given certain statements, and also of officials of the Customs Department - diversion of goods stored in the Customs Bonded Warehouse into the domestic market - HELD THAT:- The aforesaid persons being Customs Officials, this Court is of the considered view that they were discharging their duties in an official capacity. Consequently, they cannot, as a matter of right, be subjected to cross-examination, particularly in view of the settled position of law laid down by this Court in M/s Vallabh Textiles vs. Additional Commissioner Central Tax GST, Delhi East and Ors. [2025 (4) TMI 1154 - DELHI HIGH COURT], wherein the Court has held that the right to cross examination is not an unfettered and absolute right. Prejudice has to be shown which would lead to a conclusion that without cross examination substantial justice cannot be done. Insofar as Mr. Divakant Jha and Mr. Rajat Prabhakar are concerned, they are the Customs Brokers and proprietors of M/s D.S. Cargo Agency and M/s R.P. Cargo Handling Services. Considering that they could be independent Customs Brokers, who also serve other clients, their cross-examination is permitted - Insofar as Mr. Rohit Chaudhary and Mr. Rajesh Mehta are concerned, they are staff members of Customs Bonded Warehouses, being private individuals, their cross-examination is permitted. The impugned order is modified - Let the cross-examination of aforementioned four individuals Mr. Divakant Jha and Mr. Rajat Prabhakaras also Mr. Rohit Chaudhary and Mr. Rajesh Mehta be conducted by the Petitioner on 21st January, 2026 and 22nd January, 2026. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether, and to what extent, the person facing adjudication pursuant to a show-cause notice is entitled, as a matter of right, to cross-examine persons whose statements are referred to in the show-cause notice, including Customs Department officials. (ii) Whether cross-examination ought to be permitted for (a) Customs Brokers and (b) private individuals connected with the bonded warehouse operations, and whether denial of cross-examination required modification. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Cross-examination as of right in show-cause notice adjudication, including of Customs officials Legal framework (as discussed by the Court): The Court applied the settled position that the right to cross-examination in such proceedings is not unfettered or absolute; the party seeking cross-examination must demonstrate prejudice and show that without cross-examination substantial justice cannot be done. The Court also applied the principle that show-cause proceedings cannot be converted into 'mini-trials' through blanket cross-examination requests, and that reasons must be given for cross-examining specific witnesses; the authority may allow cross-examination for some persons and refuse for others with reasons. Interpretation and reasoning: The Court examined the request to cross-examine several persons including Customs officials. It held that Customs officials named were discharging duties in an official capacity, and therefore they cannot, as a matter of right, be subjected to cross-examination. The Court treated the cross-examination request as requiring justification by showing prejudice, and did not accept a blanket entitlement to cross-examine officials merely because their names appeared in the record. Conclusions: Cross-examination of the Customs Department officials sought by the petitioner was not granted, as there is no absolute right to cross-examine them in the circumstances and they were acting officially; cross-examination depends on demonstrated prejudice and case-specific necessity. Issue (ii): Whether cross-examination should be permitted for Customs Brokers and private bonded-warehouse staff, and whether the adjudication order required modification Legal framework (as applied by the Court): Proceeding on the same principle that cross-examination is discretionary and fact-dependent, the Court assessed whether particular categories of witnesses warranted cross-examination. Interpretation and reasoning: The Court differentiated among requested witnesses. For two persons described as Customs Brokers/proprietors of customs brokerage entities, the Court considered that they could be independent actors serving other clients and, on that basis, permitted cross-examination. Separately, for two persons identified as staff members of Customs Bonded Warehouses and private individuals, the Court permitted cross-examination. In contrast, for acquaintances whose statements were referred to in the show-cause notice, the Court noted the petitioner's awareness of them and observed that if statements were retracted, they would be read 'in accordance with law,' without granting cross-examination on that basis in the operative directions. Conclusions: The Court modified the impugned order rejecting cross-examination by allowing cross-examination of four specified individuals (two Customs Brokers and two private bonded-warehouse staff). It directed that the cross-examination be conducted on specified dates; after completion, the petitioner may file an additional reply to the show-cause notice; cross-examination recorded in connected proceedings could be relied upon; and a personal hearing must be granted before adjudication of the show-cause notice in accordance with law.