CROSS EXAMINATION – NOT ABSOLUTE RIGHT IN CUSTOMS CASES?

[DR.MARIAPPAN GOVINDARAJAN]

Prohibited goods

Prohibited goods are those goods for which importation and exportation have been completely banned for reasons linked to health, environment, protection of endangered species of flora and fauna, security, legislation etc. These items shall be liable to forfeiture by customs and the person may be liable to a penalty.

Issue

In respect of prohibited imported goods the Department may initiate action against the erring assessees.  The Department may record statements from the persons concerned and also from any third person who will be helpful in proving the offences against the assessees.  The issue to be discussed in this article is as to whether the statements of the third party is relied on by the Department and the penalty is made on the basis of such evidence, whether the affected party can cross examine such witnesses with reference to decided case laws.

Case laws

In KANUNGO & CO. VERSUS COLLECTOR OF CUSTOMS, CALCUTTA AND OTHERS - 1972 (2) TMI 35 - SUPREME COURT  the Supreme Court held that the principles of natural justice do not bind the Informants to be examined in the presence of Appellant or be allowed to be cross-examined by them regarding the statements made before the Customs Authorities.  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.  This, however, does not imply that if an individual is involved in the proceeding, which results in an adverse order against a third party, (and who is asked to join the proceedings, or whose statement is used) the third party is precluded from seeking cross-examination of the informant, if the latter’s statements were recorded or were to be considered in the proceedings as material evidence. This Court notices in the present case that the statements of the co-accused, recorded under Section 108 of the Act, ultimately became the basis of the impugned order.  The denial of the right of cross examination of such witnesses, was plainly in violation of the principles of natural justice.

The Additional Commissioner of Customs shall proceed to hear the petitioners and also grant appropriate and sufficient opportunity to cross-examine the witnesses, whose cross-examination was sought but denied in the original proceedings, which culminated in the impugned original order.

in ‘SH. KRISHAN KISHORE AGGARWAL, SH. ASHOK KUMAR YOGI, SH. KISHORE AGGARWAL VERSUS THE ADDITIONAL COMMISSIONER OF CUSTOMS  - 2019 (5) TMI 167 - DELHI HIGH COURT  wherein a coordinate bench of Delhi High 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.

In SUSHIL AGGARWAL AND SUNIL AIDASANI @ VICKY VERSUS PRINCIPAL COMMISSIONER OF CUSTOMS, PRINCIPAL COMMISSIONER OF CUSTOMS (IMPORT) , NEW DELHI. - 2025 (2) TMI 322 - DELHI HIGH COURT, investigations were initiated against 5 firms on the basis of the orders issued by the Principal Commissioner of Customs on 30.10.2019.  The matter involved in these investigations is that the said firms imported prohibited goods and problems in declaration of the goods.   A detailed investigation was conducted and various persons were found to be involved in the said imports running into 19 containers without any Bill of Entry, except for two containers.  During the investigation statements were recorded from the concerned persons and also one Sri Bhallla.  The Adjudicating Authority imposed penalties on various firms.  On appeal the Central and Excise, Service Tax Appellate Tribunal by the parties concerned, the CESTAT upheld the order of the

Assessing Officer in respect of Sushil Aggarwal.   Against the order of CESTAT, the appellant filed appeal  before the High Court.  But the High Court allowed the appeal of Sunil Aidasani.  The CESTAT allowed the appeal on the ground that no opportunity was granted to the appellant for cross examination of Shri Bhalla which is against to the principles of Natural Justice.  Against this order the Department filed an appeal before the High Court. 

In respect of ‘Sushil Aggarwal’ he was the indentor in China and would connect buyers from India and the sellers from China.  When the deal is struck, he would receive commission for his services.   After the goods have been shipped, he would collect the Bills of

Lading from Bhalla and give them to the Customs House Agent (‘CHA’ for short) to get the goods cleared and further to get the delivery order and obtain the goods from the Shipping Line.  He would follow up the movement of the containers and after they have been cleared, he had even accompanied the goods up to the godown of the importer at Sitapur where Manish would take over and distribute the goods to the buyers. Manish would distribute them either on instructions of Bhalla or on the instructions of Sushil Aggarwal.  After Manish had sold the goods, Sushil Aggarwal would collect the sale proceeds and distribute them to the CHA, Bhalla and others.

In respect of ‘Sunil Aidasani’ the allegations against him are that he was the supplier of the seized goods, that 12 of the 19 containers actually belonged to him and that he had not responded nor given his statements despite repeated summons.  The CESTAT observed that the statement made by Bhalla under section 108 of the Customs Act will be relevant to prove the case only as per section 138B. This requires the adjudicating authority to examine the person making the statement and decide if it is to be admitted in evidence. Needless to say that if it is admitted in evidence and is proposed to be used against another person, such person should be allowed to cross examine the person making the statement.

Before the High Court the appellant Sushil Aggarwal contended that the CESTAT showed discrimination between him and Suni Aidasani.  In his case the penalty was confirmed.  In Anil Aidasani case the CESTAT allowed the appeal on the ground that no opportunity was given to him to cross examine Shri Bhalla.  The Department contended that the appeal ought not to be allowed by CESTAT.

The High Court considered the submissions of both the parties.  The short question in the present appeals according to the High Court is as to 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.  The High Court observed that the CESTAT took different views in these two cases. 

The High Court held 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 High Court directed that 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.   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.