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2025 (2) TMI 322 - HC - CustomsLevy of penalties u/s 112 and 114 A of the Customs Act 1962 - cross-examination of person whose statement was relied upon by the Customs authorities - principles of natural justice - whether an opportunity ought to be given to both the Appellants before CESTAT to cross examine Mr. Bhalla in terms of Section 138(B) of the Act? HELD THAT - Reliance is placed upon the decision in Shri Krishan Kishor Aggarwal vs Additional Commissioner of Customs 2019 (5) TMI 167 - DELHI HIGH COURT wherein a coordinate bench of this Court observed that if a statement of the co-accused becomes the basis of an impugned order then denial of cross examination of such witnesses will violate the principles of natural justice. The right of cross examination was thereafter granted after discussing the decision in Kanungo Co. Vs. Collector of Customs Calcutta and Others 1972 (2) TMI 35 - SUPREME COURT wherein the Coordinate bench of this Court after analysing the said judgment observed that if any information is received from a statutory authority and an adjudicating process is initiated there is nothing in law which compels the information provider to be involved in the judicial proceedings or warrant him/her for cross examination. In the above decision it was also observed as to why the matters cannot be also relegated to CESTAT for cross examination as the parties would be deprived of their right in the Appellant forum if the findings of the Additional Commissioner are affirmed. In this case, the CESTAT has followed a curious course where in respect of one of the Appellants despite the right of cross examination having not been given the penalty has been upheld and the appeal has been dismissed by CESTAT. However in case of the other party i.e. Sunil Aidasani the exact opposite approach has been adopted by CESTAT in the same case. Such discrimination between two similarly placed persons would not be possible. Conclusion - This Court is of the opinion that in order to ensure that there is compliance of Section 138(B) of the Act though the same cannot be claimed as an unfettered right in all cases in the facts of the present case both Mr. Sushil Aggarwal and Mr. Aidasani are afforded an opportunity to cross examine Mr. Bhalla. The said cross examination shall be fixed on one particular date and the cross examination shall be concluded on the same date or one more date. No further adjournments or opportunities for cross examination shall be given. Upon the right to cross examination being afforded the authority shall proceed to adjudicate the matter in accordance with law only qua these two Appellants. Appeal disposed off.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment were: 1. Whether the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) erred in denying the right to cross-examine a key witness, Mr. Bhalla, to the appellants, Mr. Sushil Aggarwal and Mr. Sunil Aidasani, under Section 138(B) of the Customs Act, 1962. 2. Whether the principles of natural justice were violated by not allowing cross-examination of the witness whose statements were used as evidence against the appellants. 3. Whether the CESTAT's decision to uphold penalties against Mr. Sushil Aggarwal while setting aside penalties against Mr. Sunil Aidasani was justified and consistent with the law. ISSUE-WISE DETAILED ANALYSIS 1. Right to Cross-Examine under Section 138(B) of the Customs Act, 1962 Relevant Legal Framework and Precedents: Section 138(B) of the Customs Act, 1962, pertains to the admissibility of statements made before customs officers. The legal framework requires that if such statements are to be used against a person, the person making the statement must be made available for cross-examination. The Court also referenced the decision in Shri Krishan Kishor Aggarwal vs Additional Commissioner of Customs, which emphasized the necessity of cross-examination to uphold principles of natural justice. Court's Interpretation and Reasoning: The Court found that the CESTAT failed to provide a consistent application of Section 138(B) by denying cross-examination to Mr. Sushil Aggarwal while allowing it for Mr. Sunil Aidasani. The Court emphasized that the right to cross-examine is crucial when statements form the basis of an adverse order. Key Evidence and Findings: The statements of Mr. Bhalla implicated both appellants. However, the CESTAT's inconsistent approach in granting cross-examination rights led to a discriminatory outcome. Application of Law to Facts: The Court applied Section 138(B) and the principles of natural justice, concluding that both appellants should have been afforded the opportunity to cross-examine Mr. Bhalla. Treatment of Competing Arguments: The appellants argued that the denial of cross-examination violated natural justice, while the Department contended that such rights are not unfettered. The Court sided with the appellants, noting the discriminatory treatment by CESTAT. Conclusions: The Court concluded that both appellants should be allowed to cross-examine Mr. Bhalla, ensuring compliance with Section 138(B) and upholding natural justice. 2. Consistency in CESTAT's Decision Relevant Legal Framework and Precedents: The Court examined the consistency of CESTAT's application of legal principles, referencing the need for uniform treatment of similarly situated parties. Court's Interpretation and Reasoning: The Court found CESTAT's decision inconsistent, as it allowed cross-examination for one appellant but not the other, despite similar circumstances. Key Evidence and Findings: The evidence against both appellants was primarily based on Mr. Bhalla's statements, yet CESTAT's decisions diverged. Application of Law to Facts: The Court applied principles of consistency and fairness, determining that both appellants should receive equal treatment. Treatment of Competing Arguments: The appellants argued for equal treatment, while the Department justified the differential treatment based on procedural grounds. The Court favored the appellants' argument for consistency. Conclusions: The Court concluded that CESTAT's inconsistent treatment was unjustified and ordered equal opportunity for cross-examination for both appellants. SIGNIFICANT HOLDINGS Core Principles Established: The judgment reinforced the principle that the right to cross-examine is integral to ensuring fair adjudication when statements are used as evidence. It also emphasized the need for consistency in legal proceedings. Final Determinations on Each Issue: The Court determined that both Mr. Sushil Aggarwal and Mr. Sunil Aidasani should be granted the opportunity to cross-examine Mr. Bhalla. The CESTAT's inconsistent decisions were rectified by mandating a uniform approach to the appellants' rights. Verbatim Quotes of Crucial Legal Reasoning: "The denial of the right of cross-examination of such witnesses, was plainly in violation of the principles of natural justice." The Court highlighted the necessity of cross-examination to uphold fairness and justice. The Court directed that the cross-examination be scheduled on a specific date, with no further adjournments, ensuring a swift resolution. The original order was not disturbed for other parties, and the pre-deposit condition was waived in case of further penalties on the appellants.
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