Whether deciding about request for cross examination in the final order proper?

PJ/CASE LAW/2014-15/2482

Case:- M/s. UNION QUALITY PLASTIC LTD Vs. COMMISIONER OF CENTRAL EXCISE & SERVICE TAX, VAPI

Citation:- 2014-TIOL-2299-CESTAT-AHM

Brief facts:-The brief facts that arise for consideration in these cases is whether the main appellant M/s Union Quality Plastic Ltd has engaged himself in clandestine removal of finished goods which has
been worked out upon the shortage of raw material / finished goods during the visit of the preventive officers.

Appellant’s contention:- Ld Counsel at the outset submits that instead of going into merits, the issue needs to be reconsidered by the Adjudicating Authority only on the ground of the denial of the principles of natural justice, in as much as the appellants were not granted cross examination and were not informed about the decision of non-granting of the cross examination before hand and rejection of cross examination is conveyed only through OIO. He would submit that the Hon'ble High Court of Gujarat in the case of Mahek Glazes Pvt Ltd vs Union of India – 2014 (300) E.LT. 25 (Guj) has laid down the law and produces copy of the order.

Respondent’s contention:- Ld DR reiterates the findings of the Adjudicating Authority on the question of cross examination.

Reasoning of judgment:- They have considered the submissions made by both sides and perused the records. They intend to remand back to the Adjudicating Authority only on the question of violation of principles of natural justice hence they are not recording any findings on merits of the case.
On perusal of the impugned order, they find that at Paragraph No.27 where Adjudicating Authority on the question of cross examination has recorded as under:

"As regards their claim for cross examination of the investigating officer as well as panch witness, the counsel of the assessee has no given any justification as to why they wanted to cross examine them but they merely contented that the physical stock taking of the goods was not conducted by the officers. And for this contention it was already discussed elsewhere in this order that the stock of the goods was in fact taken by the officers in presence of panchas and Shri Rangawala and Shri Kapadia authorised persons of the assessee. Hence no further discussion on this point. Even, since they have not justified their claim for cross examination, denial thereof does not amount to violation of principles of natural justice. Although during the personal hearing the Ld Counsel Shri Vyas has not claimed for examination of the officers of panchas. The honorable commissioner had also given due consideration to the facts and position of present case. Further as regards their contention that the inquiry was not conducted with the buyers, it may be mentioned that when the authorised persons and Director of the assessee themselves admitted the shortages and confirmed the illicit removal of such short found goods, there is no need to make further probe with the buyers, since the facts narrated in panchnama an admission given by Director, manager and excise clerk of the assessee are sufficient evidence on records. Hence their contention is not tenable.

They find strong force in the contentions raised by the Ld Counsel that Hon'ble High Court has settled the law as to the question of denial of cross examination in the case of Mahek Glazes Pvt Ltd (Supra). They respectfully reproduce the relevant paragraphs from the said order.

"6. Having heard learned counsel for the parties, we are inclined to interfere on the short ground of serious breach of principles of natural justice in the process of passing final order of adjudication. We say so because the adjudicating authority, though categorically informed by the representative of the petitioners that the petitioners are serious about exercise of their right to cross-examination and further that any meaningful participation in the adjudicating proceedings can take place only after such cross-examination is granted, the authority proceeded to decide such request only along with the final order of adjudication. Whether the petitioners had a right to seek cross-examination in the facts of the present case, is not our brief at the moment. We, therefore, refuse to comment on the petitioners' insistence for cross-examination or authority's reluctance to grant it. What we, however, find is that the petitioners had atleast a right to be told whether such application is being granted or refused before final order was passed. When the petitioners prayed for cross-examination and reasonably expected that the same would be granted, they cannot be expected to participate in the adjudicating proceedings up to the final stage. In other words, without dealing with and disposing of the petitioners' application for cross-examination, the adjudicating authority could not have finally adjudicated the issues. If he was of the opinion that the request for cross examination was not tenable, by giving reasons, he could have rejected it. We wonder what would have happened, if he was inclined to accept such a request. In such a situation, he himself could not have finally disposed of the show cause notice proceedings. In either case, the petitioners had a right to know the outcome of their application.”

They also added that merely because the Commissioner was of the opinion that the petitioners had made such a request somewhat belatedly, would not permit him to, in the facts of the present case, deal with such an application only in the final order itself. And hence at last they were inclined to set-aside the impugned order and requested the adjudicating authority to pass a separate order on the petitioners' application/request letter for granting cross-examination of the named witnesses.

The impugned order was set aside and all the appeals were allowed by way of remand to the Adjudicating Authority to reconsider the issue afresh after following the law on cross examination, as settled by the jurisdictional High Court and re-adjudicate the matter in denovo proceedings.

Decision:- Matter remanded.

Comment:- The crux of the case is that the revenue department cannot deal with the request of cross examination while passing the final order without even communicating the reasons for rejection of the request of cross examination. According to the decision of the Gujarat High Court in the case of Mahek Glazes Pvt Ltd vs Union of India – 2014 (300) E.LT. 25 (Guj), the practice of deciding the issue of cross examination in the final order was not proper and is breach of principle of natural justice. It was held that the adjudicating authority is required to pass separate order for deciding the request of cross examination. In view of the above decision, matter was remanded for de-novo adjudication after considering the request for cross examination of the named witness.

Prepared by:- Kushal Shah

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PJ/CASE LAW/2014-15/2482

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