2022 (1) TMI 1407 - HC - Central Excise

Violation of principles of natural justice - Rejection application for cross examination ex-parte without giving an opportunity of hearing - Clandestine manufacture and clearance of finished goods - HELD THAT - The Court was addressing the issue of permitting the cross examination of those witnesses whose statements had been recorded and who had not been examined as the prosecution witnesses - The Court relied on the decision of MS NAINA VERSUS COLLECTOR OF CUSTOMS WEST BENGAL CALCUTTA-I 1971 (6) TMI 11 - HIGH COURT AT CALCUTTA where the Court has recognised the right of cross examination and any denial of opportunity on that count to be treated as the violation of principle of natural justice. Thus what has been made clear is that the subject to the statutory provision of Section 128 of the Act it is the right of the parties in the adjudicatory process as to whom they need to bring on record as defence witnesses. It is held that it is the right of the parties against whom the show cause notices issued to call those persons to make a request for the defence witnesses of even those witnesses who have been dropped out by the department to be examined as defence witnesses - it was held that the same was impermissible as no one can be cross examined without being examined by one of the parties as the witness. Section 128 of the Customs Act which is pari materia with Section 14 read with Section 9 D of the Act. Now Section 14 of the Act provides power to summon person to give evidence and produce evidence in inquiries. This authorizes the Central Excise Officer empowered by the Central Government to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making for any of the purposes of this Act. As per the order which is impugned here the statement of five persons were found to be relevant in the adjudication proceedings they were admitted as evidence and therefore the request for cross examination of those witnesses had been granted - Per se there cannot be any dispute with regard to the right to examine the defence witnesses however that was never the request on the part of the petitioner. The application which has been moved after this Court had quashed and set aside the order and remanded the matter back on having found the order-in-original to have been passed without availing an opportunity to the party hence no interference is desirable. Petition disposed off.

Summary

Issues Involved:
1. Issuance of show cause notice by the Central Excise Department.
2. Rejection of the application for cross-examination.
3. Alleged violation of principles of natural justice.
4. Denial of opportunity to examine defence witnesses.
5. Non-compliance with court orders and procedural fairness.

Issue-wise Detailed Analysis:

1. Issuance of Show Cause Notice:
The petitioner, engaged in manufacturing stainless steel products, received a show cause notice from the Central Excise Department on 08.05.2017. The notice alleged clandestine manufacture and clearance of finished goods from 2012-13 to 2015-16. The petitioner responded with an interim reply and requested cross-examination of individuals whose statements were recorded under Section 14 of the Central Excise Act, 1944.

2. Rejection of the Application for Cross-Examination:
Initially, the adjudicating authority rejected the application for cross-examination ex-parte on 10.10.2018 without granting a hearing. The petitioner sought reconsideration, and the authority eventually allowed the cross-examination of certain individuals. However, the petitioner later requested cross-examination of additional individuals whose statements were not relied upon in the show cause notice. This request was denied on 28.08.2019, prompting the petitioner to submit written submissions and seek a personal hearing.

3. Alleged Violation of Principles of Natural Justice:
The petitioner contended that the denial of cross-examination without proper reasoning violated the principles of natural justice. The Court noted that the right to cross-examine is integral to natural justice, referencing the decisions in M.S. Naina vs. Collector of Customs and Savino Micron (India) Pvt. Ltd. vs. Union of India, which emphasized the importance of cross-examination in ensuring fair adjudication.

4. Denial of Opportunity to Examine Defence Witnesses:
The petitioner argued that the adjudicating authority's refusal to allow the examination of defence witnesses, whose statements were recorded but not relied upon, was unjust. The Court recognized the right of litigating parties to request the examination of defence witnesses, including those whose statements were not relied upon by the prosecution. However, it clarified that cross-examination of witnesses without first examining them as defence witnesses was impermissible.

5. Non-Compliance with Court Orders and Procedural Fairness:
Despite the Court's directives to file an affidavit and provide a hearing, the respondent passed an ex-parte order-in-original on 29.10.2020, confirming the duty demand proposed in the show cause notice. The Court found this action to be in gross violation of natural justice principles and set aside the ex-parte order, remanding the matter back to the adjudicating authority with specific directions to ensure procedural fairness. The Court emphasized the need for the authority to consider the petitioner's request for examining defence witnesses and to conclude the proceedings within a stipulated timeframe.

Conclusion:
The Court upheld the petitioner's right to a fair hearing and cross-examination, setting aside the ex-parte order due to procedural lapses and non-compliance with natural justice principles. The matter was remanded back to the adjudicating authority with directions to allow the examination of defence witnesses and ensure a fair adjudication process. The proceedings were ordered to be concluded within eight weeks from the date of receipt of the judgment.