2023 (5) TMI 1433 - AT - Customs

Violation of principles of natural justice - denial of request of the petitioner for cross-examination of witnesses - HELD THAT - It is the settled position of law that when a piece of evidence is sought to be made use against an assessee such an assessee shall be afforded an opportunity of rebuttal as per the principles of natural justice. When therefore a statement of any person is pressed into service against an assessee the person whose statement is to be relied upon is required to be subjected to cross-examination by the person against whom such statement is being used. Otherwise such statement cannot be used since the same clearly amounts to violation of the principles of natural justice. The Hon ble Apex Court has in the case of M/s. Andaman Timber Industries v. Commissioner of C.Ex. Kolkata-II 2015 (10) TMI 442 - SUPREME COURT held that The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. The scope of this appeal is very limited and the only prayer of the petitioner is for setting aside of the impugned communication and a direction to the Commissioner for affording an opportunity to cross-examine the witnesses whose statements are being used and hence with the consent of both the parties the matter is taken up for hearing. Conclusion - The denial of cross-examination rights when witness statements are used against an assessee constitutes a violation of natural justice rendering any resultant order null and void. The communication denying right to cross-examination is not sustainable and the same is therefore set aside - the impugned communication set aside - the Adjudicating Authority is directed to allow cross-examination of any person/s whose statements are sought to be relied upon or used against the petitioner before passing the adjudication order.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this judgment is whether the denial of the petitioner's request for cross-examination of witnesses by the Adjudicating Authority constitutes a violation of the principles of natural justice. The Tribunal also considered whether it has jurisdiction to entertain the appeal regarding the denial of cross-examination rights.

ISSUE-WISE DETAILED ANALYSIS

Denial of Cross-Examination and Principles of Natural Justice

Relevant Legal Framework and Precedents: The principles of natural justice require that an assessee be given an opportunity to rebut evidence used against them. The judgment heavily references the precedent set by the Hon'ble Apex Court in M/s. Andaman Timber Industries v. Commissioner of C.Ex., Kolkata-II, where it was held that not allowing cross-examination of witnesses whose statements form the basis of an order constitutes a serious flaw, rendering the order a nullity due to the violation of natural justice principles.

Court's Interpretation and Reasoning: The Tribunal emphasized that the denial of cross-examination rights when witness statements are used against an assessee is a violation of natural justice. The Tribunal noted that the Adjudicating Authority's discretion does not extend to denying such fundamental rights when the statements are pivotal to the case against the assessee.

Key Evidence and Findings: The Tribunal found that the lower authority's communication did not adequately address the petitioner's request for cross-examination, and the denial was based on the discretionary power of the Adjudicating Authority without proper justification. The Tribunal highlighted that the precedent from the Apex Court mandates the allowance of cross-examination in such circumstances.

Application of Law to Facts: The Tribunal applied the principles from the Andaman Timber Industries case, concluding that the denial of cross-examination rights was unsustainable. The Tribunal found that the statements intended to be used against the petitioner could not be relied upon without offering an opportunity for cross-examination.

Treatment of Competing Arguments: The Tribunal dismissed the lower authority's reliance on the case of M/s. Kanungo & Co. v. Collector of Customs, Calcutta, noting that the facts of that case were distinguishable as no witness statements were relied upon there. The Tribunal found that the lower authority's reasoning was not applicable to the present case.

Jurisdiction of the Tribunal

Relevant Legal Framework and Precedents: The Tribunal considered whether it had the jurisdiction to entertain the appeal regarding the denial of cross-examination rights. It referred to previous decisions by coordinate Benches of the CESTAT, which had entertained similar appeals and directed the allowance of cross-examination.

Court's Interpretation and Reasoning: The Tribunal concluded that it has jurisdiction to hear the appeal, as demonstrated by past cases where similar issues were adjudicated by the CESTAT.

Key Evidence and Findings: The Tribunal found that past decisions from various CESTAT Benches consistently held that the Tribunal has the authority to direct the allowance of cross-examination, thereby affirming its jurisdiction to entertain such appeals.

Application of Law to Facts: By referencing previous decisions, the Tribunal affirmed its jurisdiction and proceeded to address the merits of the appeal regarding cross-examination rights.

Conclusions: The Tribunal concluded that it has jurisdiction to entertain the appeal and that the denial of cross-examination rights was a violation of natural justice, necessitating the setting aside of the impugned communication.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal reiterated the Apex Court's ruling in Andaman Timber Industries: "Not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected."

Core Principles Established: The Tribunal reaffirmed the principle that the denial of cross-examination rights when witness statements are used against an assessee constitutes a violation of natural justice, rendering any resultant order null and void. The Tribunal also established that it has jurisdiction to entertain appeals concerning the denial of such rights.

Final Determinations on Each Issue: The Tribunal set aside the impugned communication denying the right to cross-examine and directed the Adjudicating Authority to allow cross-examination of any persons whose statements are used against the petitioner before passing the adjudication order.