GST UPDATE No. 108 ON RIGHT TO CROSS EXAMINE BEFORE SCN REPLY

It is a settled principle of law that assessee has the right to test the veracity of evidences used against him including the statements relied upon in the show cause notice. However, what is important is the time of exercising the said right by the assessee. The assessee has right to cross-examine the witness or persons whose statements are being used in the proceedings initiated against him. However, the question arises is whether the assessee can seek cross examination of the persons even prior to filing reply to the show cause notice issued to them. This issue was recently examined in detail by the hon’ble Bombay High Court in the case of PRAKASH RAGHUNATH AUTADE VERSUS THE UNION OF INDIA &B ANOTHER [WRIT PETITION NO. 5753 OF 2021]. The analysis of this decision is the subject matter of discussion of our present update. The petitioner contended that the right to cross examine should be provided beforehand and relied upon the decision given by the Hon’ble Punjab and Haryana High Court in the case of G-TECH INDUSTRIES VERSUS UNION OF INDIA reported as [2016 (339) E.L.T. 209 (P & H)] wherein the provisions of section 9D were analyzed and the request of cross examination was accepted. The counsel for the department submitted that the request for crossexamination of the witness was premature as the petitioner had not even filed reply to the show cause notice. It was held that the request for crossexamination of the witness would be examined after the petitioner files his reply, in the light of facts and circumstances of the case. Reliance was placed on the decision given by the hon’ble Allahabad High Court in the case of KANPUR CIGARETTES LTD. VERSUS UNION OF INDIA [2016 (344) E.L.T. 82 (ALL.)] and COMMISSIONER OF CENTRAL EXCISE, MEERUT-I VERSUS PARMARTH IRON PVT. LTD. [2010 (260) E.L.T. 514 (ALL.)]. The hon’ble Bombay High Court conceded with the view taken by Allahabad High Court as cited by revenue department wherein it was held that opportunity for cross examination can be given only after reply has been filed and the adjudicating authority seeks to place reliance on the statements as evidence. It was held that show cause notice is only a step in the process of adjudication and there is no adjudication at the stage of show cause notice. The show cause notice itself is not an order of assessment and so the assessee being entitled to cross examination, even before adjudication has commenced would not arise. It was held that the exercise of cross examination commences only after the proceedings for adjudication have commenced and not available before the reply to show cause notice has been filed. Therefore, petition was disposed of by directing the petitioner to file reply to the show cause notice and for adjudication of the case as per procedure prescribed in law after providing reasonable opportunity to cross examine witness if his statement is found as relevant and is relied upon during the course of adjudication. There are numerous favourable decisions rendered by the courts regarding allowing the assessee to cross examine the witnesses but it has been largely opined by various High Courts that this exercise of cross examination is available only after submission of reply and after adjudication of the show cause notice when the statements are considered as significantly relevant by the adjudicating authority. Similar view was taken by Hon’ble Gujarat High Court in the case of MULCHAND M. ZAVERI V/S UNION OF INDIA wherein it was held that stand of petitioner to allow cross examination before filing reply of Show Cause Notice, cannot be accepted. Thus, it is crystal clear that the assessee cannot demand his right of cross examination before replying to show cause notice. He can demand his right while replying to the said notice or after adjudication of the case because every statement recorded during the preliminary stage of investigation may not be found to be relevant for the purpose of adjudication of the case.

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GST UPDATE No. 108 ON RIGHT TO CROSS EXAMINE BEFORE SCN REPLY

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