2017 (3) TMI 462 - HC - Central Excise

Search - Evasion of duty - The petitioners submitted that the request contained in their letter specifically to cross examine all these three employees, since their statements were relied upon, has been rejected - Held that - We do not think that such an approach, apart from being unhealthy and non conducive to fair and impartial adjudication sub-serves the cause of justice. The cross examination of these persons is not a proper method to belie their expertise and it is sought apparently for inconveniencing and making them uncomfortable for giving a version to help the investigation in the matter and for delaying the adjudication proceedings is one of the reasons assigned in the impugned communication - The petitioners shall cross-examine these three persons and who shall remain present before the adjudicating authority on 14.3.2017, at 11 00 a.m - petition disposed off - decided in favor of petitioner.

Issues Involved:
1. Whether the petitioners should be allowed to cross-examine the employees of the distributors whose statements were relied upon in the show cause notice.
2. Whether the refusal to allow cross-examination violates the principles of natural justice.
3. Whether the refusal to allow cross-examination causes prejudice to the petitioners.

Issue-wise Detailed Analysis:

1. Whether the petitioners should be allowed to cross-examine the employees of the distributors whose statements were relied upon in the show cause notice:

The petitioners, a company engaged in manufacturing eco-friendly products, were issued a show cause notice alleging duty evasion based on statements from employees of their distributors. The petitioners requested cross-examination of these employees, arguing their statements were critical to the allegations. The request was denied by the adjudicating authority, prompting the petitioners to seek judicial intervention. The High Court noted that the statements of Dinesh J. Gunjal, Dilip Sampat Dhikale, and Aditya Keshavsingh Pardeshi were pivotal as they claimed the products were plant growth stimulants/regulators, not ordinary fertilizers. The petitioners argued that these individuals lacked the technical expertise to make such assertions, making cross-examination essential to test their credibility.

2. Whether the refusal to allow cross-examination violates the principles of natural justice:

The Court emphasized the principles of natural justice, specifically the right to a fair hearing, which includes the opportunity to cross-examine witnesses. Citing the Supreme Court's judgment in Telestar Travels Pvt. Ltd. Vs. Special Director of Enforcement, the Court highlighted that cross-examination is a crucial tool to test the veracity of statements used against a party. The refusal to allow cross-examination, especially when the statements form the basis of the allegations, was deemed a violation of these principles. The Court criticized the adjudicating authority's view that cross-examination was a delaying tactic, stating that such an approach undermines the rule of law and fair adjudication.

3. Whether the refusal to allow cross-examination causes prejudice to the petitioners:

The Court found that denying cross-examination of the three employees caused prejudice to the petitioners. The statements of these employees were integral to the Revenue's case, and without cross-examination, the petitioners were deprived of the opportunity to challenge the credibility and technical competence of these witnesses. The Court noted that the adjudicating authority's failure to inform the petitioners about the rejection of their request for cross-examination during the personal hearing added to the prejudice. The Court concluded that the refusal to allow cross-examination not only violated the principles of natural justice but also caused significant prejudice to the petitioners, warranting judicial intervention.

Conclusion:

The High Court quashed the impugned communication denying cross-examination and directed that the petitioners be allowed to cross-examine the three employees on 14.3.2017. The Court emphasized that if the petitioners fail to avail this opportunity, they would forfeit the liberty granted. Conversely, if the employees do not present themselves for cross-examination, the Revenue would be barred from relying on their statements. The petition was disposed of with no order as to costs.

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