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2021 (12) TMI 241 - HC - Central ExciseClandestine removal - denial of opportunity of cross-examination of witnesses - at what stage would he be entitled to cross-examine the witnesses - relevancy of statements relied upon - HELD THAT - A stage prior to issuance of show-cause notice cannot be regarded as an inquiry or proceeding as contemplated in the Act. As per sub-section (1) of section 14 of the Act, power to summon witnesses in any inquiry for purposes specified therein has been conferred on an officer duly empowered by the Central Government and in terms of subsection (3) thereof, any such inquiry shall be deemed to be a judicial proceeding within the meaning of section 193 and 228 of the Indian Penal Code. Prior to the issuance of a show-cause notice, neither any inquiry nor a proceeding can be said to have commenced. Therefore, any statement recorded prior to the issuance of such show-cause notice is not a statement recorded in the course of an inquiry or proceeding and no right accrues in favour of a noticee to insist that he be offered for cross1- examination the witnesses, whose statements have been recorded and are referred to in the show-cause notice, even prior to a reply thereto being submitted. Once the show-cause notice is issued, it is for the petitioner to deny and dispute the allegations levelled therein and if he so chooses to raise such defence as he may be advised. Omission and/or failure to reply to a show-cause notice may not, in all cases, amount to an admission of the allegations. In the present case, such question of admission does not arise because the petitioner in his reply dated 23rd October, 2020 has clearly denied and disputed the allegations levelled against him. The only question is at what stage would he be entitled to cross-examine the witnesses. The petitioner is granted liberty to file a final reply to the show-cause-cum-demand notice dated 24th September, 2020 within a fortnight from date - Petition disposed off.
Issues Involved:
1. Validity of the show-cause-cum-demand notice. 2. Right to cross-examine witnesses before submitting a reply to the show-cause notice. 3. Application of Section 9D of the Central Excise Act, 1944. Detailed Analysis: 1. Validity of the Show-Cause-Cum-Demand Notice: The Principal Additional Director General, Directorate General of GST Intelligence, issued a show-cause-cum-demand notice dated 24th September 2020, alleging violations of the Central Excise Act, 1944. The petitioner responded on 23rd October 2020, denying all allegations but requested that this letter not be treated as a formal reply. The petitioner also requested the cross-examination of witnesses whose statements were used to issue the show-cause notice, citing Section 9D of the Act. 2. Right to Cross-Examine Witnesses Before Submitting a Reply: The Commissioner responded on 13th July 2021, stating that the request for cross-examination was premature as the petitioner had not formally replied to the show-cause notice. The petitioner, aggrieved by this denial, sought a writ from the High Court to prohibit further proceedings until compliance with Section 9D of the Act. The Court referred to the judgments of the Punjab and Haryana High Court and the Allahabad High Court. In the case of Commissioner of Central Excise, Meerut-I vs. Parmarth Iron Pvt. Ltd., it was held that the right to cross-examine witnesses does not arise before the adjudication proceedings commence. The Allahabad High Court in Kanpur Cigarettes Ltd. vs. Union of India supported this view, stating that cross-examination is only permissible during the adjudication process, not at the stage of replying to a show-cause notice. 3. Application of Section 9D of the Central Excise Act, 1944: Section 9D stipulates that statements made before a Central Excise Officer are relevant only if the person is examined as a witness during adjudication or if certain conditions prevent their examination. The Punjab and Haryana High Court in G-Tech Industries vs. Union of India clarified that statements recorded during an investigation cannot be relied upon unless the witness is examined during adjudication and the statement is admitted as evidence. The High Court of Bombay concurred with these views, emphasizing that the right to cross-examine witnesses arises only after the adjudication proceedings have commenced and the statements are admitted as evidence. Conclusion and Orders: The Court disposed of the writ petition with the following directives: - The petitioner is granted liberty to file a final reply to the show-cause notice within a fortnight. - The relevant authority shall decide whether to proceed with the case after receiving the reply. - If no reply is received or if the decision is against the petitioner, the proceedings shall continue to their logical conclusion. - During adjudication, if any witness's statement is recorded and deemed relevant, it shall not be used against the petitioner unless an opportunity for cross-examination is provided. - The evidence of the witness shall be recorded in the petitioner's presence. - The final order shall be based on the evidence and other materials on record. The entire process should be completed preferably within six months of the petitioner's final reply. All contentions on the merits of the show-cause notice remain open, and there shall be no order as to costs.
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