TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1339
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.... in the facts and circumstances of the case in the interest of justice and equity." 2. The brief facts giving rise to the present petition are as under:- The petitioner - JSW Steel Ltd., entered into an Memorandum of Understanding (MoU) with M/s. Larsen & Turbo Ltd., (L & T) for supply of various products viz., reinforcement bars, plates, steels, round bars etc., under two financing schemes i.e., MRPA and non-MRPA. As per the MoU, based on the annual lifting done by LoP for certain prescribed products, L & T would be entitled to Turn Over Discounts (TOD) and under the MRPS scheme, L & T was eligible for credit period of 120 days from the date of Invoices with interest free credit period of 60 days, interest of 30 days inbuilt in the price and interest of balance 30 days to be adjusted against equivalent TOD. On 15.12.2022, the respondents initiated investigation against the petitioner and summons were issued to both representatives of the petitioner as well as representatives of L & T interalia alleging that the petitioner was engaged in evasion of GST by adopting different methods / modus operandi in its day-to-day business and that there was a mismatch in the income reported in....
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....ent petition. 3. Heard learned Senior counsel for the petitioner and learned counsel for the respondents - revenue and perused the material on record. 4. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned Senior counsel for the petitioner submitted that the 1st respondent committed an error in refusing to permit the petitioner to cross-examine the representatives of the L & T whose statement had been recorded by the respondents. It was submitted that it was very crucial and important to permit the petitioner to examine / cross-examine the L & T representatives especially when their statements were relied upon by the 1st respondent for the purpose of rejecting the claim of the petitioner by passing the impugned order and as such, it is necessary that the impugned order be set aside and the matter be remitted back to the 1st respondent for reconsideration afresh in accordance with law by permitting the petitioner to examine / cross-examine the said L & T representatives and to proceed further in accordance with law. In support of his submissions, learned Senior counsel for the petitioner placed reliance upon the....
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....n't find any necessity of Cross-Examination of L&T representative in this case, In this regard, I reply on the following judgments: The Hon'ble High Court of Telangana, in its judgment dated: 06.11.2020 in the case of Mr. Mohammed Muzzamil and Another vs. The CBIC in W.P. No. 18081 OF 2020, on the basis of several judgment of the Hon'ble Supreme court, has held as follows: " Thus, there is no doubt that where a plea of violation of principles of natural justice by denying a party an opportunity to cross examine witnesses is raised in proceedings under he Customs Act, 1962 or similar legislation, the question of prejudice suffered to such party by such denial has to be gone into. If there is no prejudice caused by such denial, no relief can be granted to him. From the contents of the Hon'ble Supreme Court's judgments referred to an relief upon in the said judgment of High Court, it may be seen that denial of opportunity for Cross Examinations has been upheld. Some of these judgment are given herein below; The Hon'ble Supreme Court, in the case of Surjeet Singh Chhabra vs Union of India (Judgment dated: 25.10.1996) has held that "The Customs officials are not police officers....
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....ondent for the purpose of passing the impugned order; in other words, having undisputedly recorded the statement of not only the officials of the petitioner but also the L & T representatives in the backdrop of the subject matter of the impugned proceedings which relate to transactions between the petitioner and L & T, it was absolutely essential to provide an opportunity to the petitioner to examine / cross-examine the L&T officials whose statements were recorded by the respondents. Under these circumstances, denial of an opportunity in favour of the petitioner to cross-examine the L & T representatives tantamounts to not only violation of principles of natural justice but also deprival of the valuable right of cross-examination to the petitioner and also contrary to principles of justice, equity and fair play particularly when the said statement of the said L & T representatives were relied upon by the 1st respondent in the impugned order, thereby establishing that denial of an opportunity to cross-examine has caused irretrievable prejudice and hardship to the petitioner and consequently, the impugned order deserves to be set aside and the matter remitted back to the 1st responde....
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....prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the adjudicating authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject-matter of cross-examination. Therefore, it was not for the adjudicating authority to presuppose as to what could be the subject-matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came up before this Court in CCE v. Andaman Timber Industries Ltd. [CCE v. Andaman Timber Industries Ltd., (2005) 12 SCC 151], order dated 17-3-2005 was passed remitting the case back to the Tribunal wi....
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...., examine him as witness before him in the adjudicating proceeding, and arrive at an opinion that, having regard to the circumstances of the case, the statement should be admitted in the interests of justice. 17. In fact, section 138 of the Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidence-in-chief has to precede Cross-Examination, and cross-examination has to precede re-examination. 18. It is only, therefore, (i) after the person whose statement has already been recorded before a Gazetted Central Excise Officer is examined as a witness before the adjudicating authority, and (ii) the adjudicating authority arrives at a conclusion, for reasons to be recorded in writing, that the statement deserves to be admitted in evidence, that the question of offering the witness to the assessee, for Cross-Examination, can arise. 19. Clearly, if this procedure, which is statutorily prescribed by plenary Parliamentary legislation, is not followed, it has to be regarded, that the Revenue has given up the said witnesses, so that the reliance by the Commissioner of Central Excise, on the said statements, has to be regarded as misguided, and the said s....
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....sked for on the ground that his statement, although in his own handwriting, appeared to be dictated. Further, it was not corroborated by any documentary evidence. Cross-examination was also sought of the panch witnesses Mr. Shiv Kumar and Mr. Md. Anwar as well as of Mr. Rakesh Garg, IO, DGCEI, New Delhi. The above request was declined by the CCE by referring the decision in, Jetmal Pithaji v. Assistant Collector of Customs, Bombay - AIR 1974 SC 699 = (S.C.) followed in Jagdish Shankar Trivedi v. Commissioner of Customs -. Reference was also made to the decision in Surjeet Singh Chhabra v. Union of India - 1997 (89) E.L.T. 646 (S.C.) where it was held that, not allowing of cross-examination was not violative of principles of natural justice even if such confession was retracted within six days. Reference was also made to the decision in Kanungo & Co. v. Collector of Customs, Calcutta - (S.C.). On the other hand, on behalf of the respondent, reliance was placed on the decisions in Superintendent of Customs v. Banabhai Kailphabhai - 1995 (76) E.L.T. 508 (S.C.) and Jagmohan Singh Sawhney v. Collector of Customs - 1995 (75) E.L.T. 350 (Tri.-Delhi). 14. Accepting the case of the Depart....
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....ppeal under Section 35G of the CE Act. 19. It was submitted by Mr. Harpreet Singh, learned Senior Standing Counsel for the appellant that the retracted statements of the aforesaid persons might require corroboration but not in material particulars. According to him, as long as the material available on record provided a general corroboration of the retracted statements, that would be sufficient to sustain the SCNs issued to the respondent. Secondly, it was submitted that the retraction took place only when the cross-examination of the persons who gave statements in the course of investigation was denied and not earlier thereto. Therefore, the CCE was justified in ignoring such retraction. 20. On the other hand, Mr. A.K. Prasad, learned counsel appearing for the respondent pointed out that although the impugned order of the CESTAT in the respondent's case has been appealed against, no appeal has been filed against the three other noticees on whom penalty was levied and whose appeals had been allowed by the CESTAT by the same common impugned order. In other words, the Department was being selective. Secondly, he pointed out that there was no justification in denying cross-examina....
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....tment to produce other evidence which is of an independent nature which corroborates the retracted statements." In that case, the Commissioner had proceeded on the basis of the retracted statements of persons not offered for cross-examination. There again, it was contended by the department that the retraction made beyond 20 months after the initial statement, would have no effect in the eyes of law. The Court negated the above statements and held as under: "41. What the above submission overlooks is the 'reliability' of such statements. Once it is shown that the maker of such statement has in fact resiled from it, even if it is after a period of time, then it is no longer safe to rely upon it as a substantive piece of evidence. The question is not so much as to admissibility of such statement as much as it is about its 'reliability'. It is the latter requirement that warrants a judicial authority to seek, as a rule of prudence, some corroboration of such retracted statement by some other reliable independent material. This is the approach adopted by the CESTAT and the Court finds it to be in consonance with the settled legal position in this regard." 24. Likewi....
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....unt of Rs.9.40 Crores under section 122(1) of the State Goods & Services Tax Act, 2017 (for short 'SGST Act') and consequential interest and other penalties. Though an appeal is available to the petitioner under section 107 of the CGST/SGST Act, the jurisdiction under Article 226 of the Constitution of India has been invoked, alleging that the principles of natural justice have been violated while issuing the impugned order. 2. Petitioner is the proprietor of a plywood business by name 'M/s.Wood Tunes Enterprises'. As per Ext.P1 show cause notice, petitioner was called upon to explain why the penalty proposed therein ought not to be imposed for alleged will ful misstatements and suppression of facts with intent to evade payment of GST. It was stated therein that the statements of 20 different persons were taken, indicating that the petitioner had indulged in fake registrations and suppression of sales for the purpose of deriving undue benefit from the input tax credit. 3. In the reply submitted on 16.01.2024, apart from denying all the allegations, petitioner specifically requested for an opportunity for Cross-Examination of those persons from whom the statement....
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....r Article 226 of the Constitution of India when the remedy of an appeal is available under section 107 of the Act. 7. On a reading of Section 107(11) of the Act, it is evident that the Appellate Authority does not possess the power to remand the case, if in case any anomaly is detected in the impugned order, or even when there is any violation of the principles of natural justice. The Appellate Authority can only confirm, modify or annul the order appealed against. The aforesaid provision has specifically curtailed the right of the appellate authority to remand the case. Hence, in cases of violation of principles of natural justice, resorting to the remedy under Article 226 of the Constitution of India is legally justified. 8. Petitioner contends that there is a failure to abide by the principles of natural justice by not granting an opportunity to cross-examine the persons from whom statements have been recorded by the tax authorities. In this context, it is necessary to observe that as per Section75(4) of the Act, an opportunity for cross-examination of the witnesses is not specifically mentioned and instead only an opportunity of hearing alone is required to be given. 9. N....
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....to the conclusion that there was no merit in the demand for cross-examination. The following observations in the impugned order are relevant : "43.8 In the instant case, I find that in all the statements it has been specifically stated that they were being given voluntarily and the averments therein were true and correct. Any retraction in the future through cross examination or otherwise will fail due to the long delay, as has been consistently held by the various Courts in decisions on delayed retractions. Therefore, in my considered opinion any cross examination of these persons will not, in any way, affect the bonafides of evidence already on record. After all, the decision as to whose statements are to be recorded for establishing the facts of a case is the prerogative of the investigating agency and it is upto the adjudicating authority to weigh such evidence as brought forth, which may or may not include statements, and decide whether any demand would sustain or not." 12. The aforesaid observations indicate that the Adjudicating Authority went on a wrong tangent in assuming that cross-examination will not affect the credibility of the statement. Such a foregone conclusio....
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....ose dealers and what extraction the appellant wanted from them." 14. In an earlier decision of the Supreme Court in State of Kerala. vs. K.T. Shaduli Yusuf Grocery Dealer 1977 taxmann.com 48 (SC)/ (1977) 2 SCC 777, while considering a question arising under the Kerala General Sales Tax Act, 1963 it was observed that even though the tax proceedings are quasi-judicial in nature and the Sales Tax authorities are not strictly bound by the rules of evidence, still, they are bound by the principles of natural justice. It was held that when circumstances clearly justify the grant of an opportunity for cross-examination, especially when the statements become an integral part of the materials on the basis of which the order by the Taxing Authority is passed, an opportunity to rebut the same should be granted to the assessee. 15. In the decision of the High Court of Calcutta in Roshan Sharma v. Assistant Commissioner of Revenue, State Tax, West Bengal and Others (M.A.T. No.854 of 2024) which arose under the CGST Act, the court held that despite the specific request for cross-examination of all witnesses who had given statements to the Adjudicating Authority, refusal to grant such an oppo....
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....tant case, the circumstances compel this Court to observe that an opportunity for cross-examination was a necessity. This Court is also compelled to observe that failure to grant an opportunity to cross-examine the person whose statements were relied upon is in effect delaying the whole proceeding. 20. In the result, the impugned order dated 29-05-2024 is set aside and the first respondent is directed to consider the matter afresh, after granting an opportunity for Cross-Examination of the persons whose statements had been taken during the investigation. Appropriate orders thereon shall be passed in accordance with law, as expeditiously as possible, at any rate, within a period of six months from the date of receipt of a copy of this judgment. 21. The writ petition is allowed." 14. The aforesaid order of the learned Single Judge was challenged by the revenue before the Single Judge in W.A. No. 303/2025 which was dismissed vide final order dated 17.02.2025 by holding as hereunder:- To what extent does the Central Goods and Services Tax Act, 2017 permit reading in the principles of natural justice? The intra court appeal preferred by respondents 1 to 4 in the writ petition cha....
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....he learned counsel appearing for the appellants, vehemently pointed out that there is no requirement to follow the principles of natural justice in an adjudication proceedings, especially when the Act does not contemplate such an opportunity. The writ petitioner cannot insist, as a matter of right, that he should be granted an opportunity to cross-examine the witnesses, whose statements were obtained by the proper officer. He reiterated that although the learned Single Judge placed reliance on the decision of the Supreme Court in Andaman Timber Industries (supra), the Supreme Court had rendered the said judgment without referring to the binding three Judge Bench decision in Kanungo & Co (supra). 7. On the other hand, Sri. S. Jaikumar, the learned counsel appearing for the 1st respondent/writ petitioner, would contend that even if there is no provision under the CGST Act that permits the cross-examination of persons, whose statements were relied on by the proper officer, the principles of natural justice have to be read into the said provision. Infraction of the said principle would vitiate the proceedings and, therefore, the writ petitioner was perfectly justified in approaching ....
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....ination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts. Once the proper officer forms an opinion that a notice has to be issued to the assessee, he must serve a notice under sub-Section (3) of Section 74 of the CGST Act containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised. Once the said notice is given, then, the proper officer is required under sub-Section (9) of Section 74 to consider the representation, if any, made by the person chargeable with tax, determine the amount of tax, interest and penalty due from such person and issue an order. There is no express provision for permitting a cross-examination of witnesses in the statute. It is therefore that the appellants contend that so long as the Act does not envisage such an opportunity, the proper officer is not required to extend such a benefit to the assessee. In support of the aforesaid contention, the learned Counsel placed extensive reliance on the decision of the Supreme Court in Kanungo & Co. (supra). 13. On a close reading of....
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....t cannot shut its eyes and adopt a pedantic approach and hold that unless the said principle is specifically extended under plenary legislation or the rules framed under it, the insistence of the principles is not mandatory. 16. In Krishnadatt Awasthy v. State of M.P. [2025 SCC Online 179], a three Judge Bench of the Supreme Court considered the question as to whether in the absence of any rule which mandates grant of an opportunity of hearing or extending the principles of natural justice, a violation of the latter would render the entire proceedings void? On an extensive analysis, the Court held that a breach of the principles of natural justice strikes at the fundamental core of procedural fairness, rendering the decision invalid unless exceptional circumstances justify such deviation. The Court went on to hold further that the denial of natural justice at the initial stage cannot be cured at the appellate stage. On an extensive consideration of the various precedents, the Court also held that the principles of natural justice are the cornerstone of justice, ensuring that no person is condemned unheard. 17. In Ayaaubkhan Noorkhan Pathan v. State of Maharashtra [(2013) 4 SCC ....
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....ustice 35. Principles of natural justice that are reflected in Article 311, are not an empty incantation. They form the very bedrock of Article 14 and any violation of these principles tantamounts to a violation of Article 14 of the Constitution. Denial of the principles of natural justice to a public servant can invalidate a decision taken on the ground that it is hit by the vice of arbitrariness and would result in depriving a public servant of equal protection of law. 36. Article 14, often described as the "Constitutional Guardian" of the principles of natural justice, expressly forbids the State, as defined in Article 12, from denying to any person, equality before the law or equal protection of the laws. Article 14 provides an express guarantee of equality before the law to all persons and extends a protection to them against discrimination by any law. Article 13(3)(a) defines "law" to include any ordinance, order, bye-law, rule, Regulation, notification, custom or usages having in the territory of India, the force of law. Thus, principles of natural justice guaranteed under Article 14, prohibit a decision-making adjudicatory authority from taking any arbitrary action, be ....
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....tices received by them. 25. In conclusion, we find that the stand of the appellants that the principles of natural justice need not be followed during an adjudication under the provisions of the CGST Act is clearly untenable. In the light of the principles expounded by the Supreme Court in Tulsiram Patel (supra) and Krishnadatt Awasthy (supra), we hold that in appropriate cases, extending an opportunity of cross-examination in a proceedings under Section 74(9) of the CGST Act 2017 is an integral part of the principles of natural justice, a violation of which will render the proceedings void. Therefore, we decline to interfere with the judgment of the learned Single Judge setting aside the impugned order and for the reasons stated therein as supplemented by the reasons in this judgment, we dismiss this writ appeal. No costs. 15. In view of the aforesaid facts and circumstances and the principles laid down in the judgments referred to supra, I am of the view that the 1st respondent fell in error in declining to provide an opportunity to the petitioner to examine / cross-examine the L & T representatives whose statements had not only been recorded by the respondents during invest....