2017 (12) TMI 1710 - HC - Central Excise

Principles of natural justice - no opportunity to cross examine one Ghanshyam Pandey was afforded - transport of goods took place or not - Assessment Year 1995-96 - HELD THAT - The fact that the business had closed down by the time the Assessing Authority proceeded to frame the assessment order all over again on 17 October 2006, cannot result in the assessee being visited with adverse consequences since undisputedly he had been insisting from the very beginning that the statement of the said witness was being denied and that an opportunity to cross examine must be provided. When taxing authorities choose to levy tax or conclude that payment of tax has been evaded on the basis of statements of individuals, the assessee must necessarily be granted an opportunity to cross examine. Such adverse material can neither be introduced nor form the foundation for the imposition of additional tax without an opportunity being accorded to the assessee to challenge the statement in cross examination - this Court finds itself unable to sustain the orders passed by the Assessing Authority as well as the Tribunal. Revision allowed.

Summary

Issues:
- Opportunity to cross-examine a witness in a tax assessment case.
- Reliance on witness statements without providing an opportunity for cross-examination.
- Adverse consequences based on statements without cross-examination.
- Violation of principles of natural justice.

Analysis:
- The Tribunal remanded the case to the Assessing Authority due to the absence of an opportunity to cross-examine a crucial witness, Ghanshyam Pandey, whose statement formed the basis for additions in taxable turnover for the Assessment Year 1995-96.
- The Department alleged tax evasion based on Ghanshyam Pandey's statement, which was disputed by the assessee. Despite the remand order, the Assessing Authority proceeded to assess the turnover without providing a chance for cross-examination.
- The Court emphasized the necessity of granting the assessee an opportunity to rebut adverse evidence, especially when the entire case rested on the statement of a single witness.
- The Court referenced a Supreme Court case highlighting the importance of allowing cross-examination to challenge witness statements that are foundational to tax assessments.
- It was deemed a serious flaw not to allow cross-examination, leading to a violation of natural justice principles and rendering the orders of the Assessing Authority and Tribunal unsustainable.
- Consequently, the Court allowed the revision, setting aside the orders of the Tribunal and Assessing Authority, and granting the assessee all consequential benefits.