Gujarat High Court
Vijay Chandrakant Mulchandani vs Union Of India & 2 on 28 November, 2017
Author: Akil Kureshi
Bench: Akil Kureshi, A.Y. Kogje
C/SCA/1885/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 1885 of 2017
With
SPECIAL CIVIL APPLICATION NO. 2813 of 2017
TO
SPECIAL CIVIL APPLICATION NO. 2815 of 2017
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VIJAY CHANDRAKANT MULCHANDANI....Petitioner(s)
Versus
UNION OF INDIA & 2....Respondent(s)
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Appearance:
MR HASIT DILIP DAVE, ADVOCATE for MR HIRAK P GANGULY,
ADVOCATE for the Petitioner(s) No. 1
DELETED for the Respondent(s) No. 2
NOTICE SERVED for the Respondent(s) No. 1
MR PRIYANK P LODHA, ADVOCATE for the Respondent(s) No. 3
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.Y. KOGJE
Date : 27-28/11/2017
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. These petitions arise in common background. They have been heard together and would be disposed of by this common order.
2. We may record facts from Special Civil Application No.2815 of 2017. The petitioner is a trader involved in the business of trading in industrial salts and various chemicals including Technical Grade Urea (for short, "TGU"). The case of the petitioner is that the petitioner is involved in dealing in Page 1 of 10 HC-NIC Page 1 of 10 Created On Fri Dec 01 23:27:44 IST 2017 C/SCA/1885/2017 ORDER Agricultural Grade Urea ("AGU" for short) and in any case had never diverted AGU for industrial use.
3. Investigation was carried out at various premises including that of the petitioner by the department on the basis that there had been diversion of AGU for industrial use. This culminated into issuance of show cause notices including against the petitioner. Against the petitioner, the show cause notice is dated 25.5.2015. In a rather detailed notice the authority confronted the petitioner with voluminous material to establish such clandestine diversion of AGU. Under the notice, the petitioner was called upon to show cause why various penalties prescribed under the Customs Act, 1962 should not be imposed on them. In the show cause notice, reference was made to several statements of the co-noticees and other individuals recorded by the authority on which reliance was sought to be placed for proving the charge against the petitioner. The petitioner replied to such show cause notice under a communication. The reply carried a caption of the subject "Preliminary reply, including Preliminary Objections, to the maintainability of the above SCN, & Request for Cross Examination of Various Persons, by Mr.Mulchandani". In the reply, the petitioner had taken various defences. The petitioner pointed out that in the show cause notice the department had placed heavy reliance on statements of various persons recorded during the course of investigation. The inculpatory statements have been withdrawn by the deponents. Even independent persons, whose statements were recorded and sought to be relied upon, have retracted their statements at the first available opportunity. The petitioner, therefore, in paragraph 57 of the reply stated as under:-
Page 2 of 10HC-NIC Page 2 of 10 Created On Fri Dec 01 23:27:44 IST 2017 C/SCA/1885/2017 ORDER "We request for Speaking Order after allowing Examination/ Cross-Examination of concerned Persons as listed out in the separate list attached h/w and Prayed for and and after giving us appropriate opportunity of Personal Hearing."
4. In paragraph 58, it was a prayer clause. The petitioner had prayed for (i) grant of personal hearing, (ii) to allow examination/cross-examination of such persons including those mentioned in the list, (iii) to permit the petitioner to adduce further evidence and (iv) to quash the show cause notice. Thus, reply contained an annexure giving names of various persons whose statements were referred to and relied upon in the show cause notice, whose cross-examination the petitioner desired.
5. It is undisputed that the adjudicating authority passed no separate order on this prayers of the petitioner. In other words, the petitioner's prayers for permitting cross-examination of the relevant witnesses, whose statements were relied upon by the authority in the show cause notice, was not disposed of by separate order. With this request pending, the adjudicating authority proceeded further with the hearing of the show cause notice and eventually passed the impugned order dated 30.9.2016, in which in addition to confirming the customs duty, he imposed various penalties under the Customs Act. It was in this order that the adjudicating authority dealt with the petitioner's request for cross-examination. He was of the opinion that the request for cross-examination of the investigating officers was not valid since the investigating officers had only collected evidence and they were not, in the Page 3 of 10 HC-NIC Page 3 of 10 Created On Fri Dec 01 23:27:44 IST 2017 C/SCA/1885/2017 ORDER opinion of the adjudicating authority, vital witnesses. With respect to the request for cross-examination of co-noticees, the said authority observed that the statements of co-noticees were in the nature of confessional statements, which were made on the basis of the record, which they were allowed to peruse. This record was anyway available to the petitioners. The authority was also of the opinion that the petitioner having made confessions, there was no need to permit cross- examination of the other witnesses. Having thus dealt with the petitioner's request for cross-examination of various witnesses, the adjudicating authority proceeded to decide the issues on merits. He relied upon the confessional statements of the petitioner and statements of other co-noticees and also other material collected during the course of investigation, which included statements of various persons such as dealers of agricultural products, transporters etc.
6. Learned advocate Shri Dave appearing for the petitioners submitted that the adjudicating authority has committed a serious error in not permitting cross-examination of vital witnesses. Though such a request was made at the outset, the same was not considered althroughout the hearing of the show cause notice. It was only while taking a final decision, in the order of adjudication, the said authority dealt with such a request. In any case, the authority having relied on the statements of several witnesses, not only in the show cause notice but also in the final order of adjudication, not granting cross-examination to the petitioner has resulted into miscarriage justice. Counsel pointed out that the petitioners had never asked for cross-examination of the investigating officers and reference to this request in the impugned order is, Page 4 of 10 HC-NIC Page 4 of 10 Created On Fri Dec 01 23:27:44 IST 2017 C/SCA/1885/2017 ORDER therefore, erroneous. Counsel lastly clarified that the petitioners would be satisfied if cross-examination of sample witnesses and not of all of them is permitted.
7. In support of his contentions, counsel relied on following decisions.
(i) Commissioner of Central Excise, Ahmedabad-II v. Gujarat Cypromet Ltd., 2017 (345) ELT 520 (Guj.)
(ii) Manek Chemicals Pvt. Ltd. v. Union of India, 2016 (334) ELT 302 (Guj.)
(iii) Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II, 2015 (324) ELT 641 (SC)
(iv) Judgment in the case of Swagat Synthetics and Others v.
Union of India dated 2011.2017 passed by this Court in Special Civil Application No.9510 of 2017.
8. On the other hand, learned advocate Shri Lodha for the department opposed the petitions. He contended that the petitioners do not show relevance why cross-examination of the witnesses was necessary. In any case, no prejudice has been caused by not granting such cross-examination. The adjudicating authority has relied on the statements of the witnesses only for corroboration. There was independent evidence to prove the allegations against the petitioner. In support of his contention, he has relied upon the decision in the case of Patel Engineering Ltd. v. Union of India, 2014 (307) ELT 862 (Bom.).
9. Material on record suggests that the adjudicating authority referred to and relied upon the statements of various witnesses to prove the allegations against the noticees. While Page 5 of 10 HC-NIC Page 5 of 10 Created On Fri Dec 01 23:27:44 IST 2017 C/SCA/1885/2017 ORDER filing reply to the show cause notices, the petitioners applied for cross-examination of such witnesses citing reasons. The adjudicating authority did not dispose of such a request but proceeded further with the hearing of the show cause notices. In the final order of adjudication, he dealt with such a request rejecting it primarily on the grounds that the cross-examination of investigating officers of the department is not necessary. The petitioners having made confessional statements cross- examination of other witnesses would not be necessary.
10. In this context, we may recall the petitioners had never asked for cross-examination of the investigating officers. Reference to this request by the adjudicating authority was, therefore, erroneous and of no consequence. The petitioners had, in fact, asked for cross-examination of the witnesses whose statements were relied on in the show cause notices and proposed to be relied upon during the course of hearing. If the adjudicating authority did not place any reliance on the statements of these witnesses, it was within his powers to proceed further without permitting cross-examination of such witnesses to the petitioners. However, in the order of adjudication, we do not find that the adjudicating authority places no reliance on the statements of these witnesses. The petitioners had pointed out that they themselves had retracted the confessional statements at the first available opportunity. Similarly, the statements of those witnesses which were referred to by the adjudicating authority had also retracted their statements. We are not commenting on the nature of retraction and only despite such retractions of the confessional statements, the allegations could be held to have been proved against the petitioners or not. We are only examining whether Page 6 of 10 HC-NIC Page 6 of 10 Created On Fri Dec 01 23:27:44 IST 2017 C/SCA/1885/2017 ORDER in the process of passing the final order, the adjudicating authority had committed breach of principles of natural justice so as to render the order of adjudication invalid. In this context, as noted, even counsel for the department could not build a case that the adjudicating authority had placed no reliance on the statements of the witnesses whose cross- examination the petitioners wanted but the adjudicating denied. That being the position, it was necessary that the petitioners be allowed cross-examination of such witnesses at least on sample basis. It is not possible for us to segregate the nature of evidence on record and come to the conclusion that even in absence of the statements of these witnesses, the findings of the adjudicating authority can be salvaged. The adjudicating authority not having undertaken any such exercise it would neither be possible nor appropriate on our part to do so.
11. In case of Manek Chemicals (supra), Division Bench of this Court, after referring to various judgments of High Courts and the Supreme Court held that there was serious breach of principles of natural justice in the adjudication proceedings since cross-examination of important witnesses was not granted.
12. In case of Gujarat Cypromet Limited (supra), Division Bench of this Court observed as under:-
"7. In the case of Telestar Travels Pvt. Ltd. v. Special Director of Enforcement, (289) E.L.T. 3 (SC), the Apex Court even while observing that in the proceedings under the Foreign Exchange Regulation Act, 1973, the Rules of procedure did not apply to such adjudication proceedings, observed that that does not Page 7 of 10 HC-NIC Page 7 of 10 Created On Fri Dec 01 23:27:44 IST 2017 C/SCA/1885/2017 ORDER mean that in a given situation, the cross-examination may not be permitted to test the veracity of deposition sought to be issued against a party against whom action is proposed to be taken. It was further observed that it was only when a deposition goes through the fire of cross-examination that a Court or a statutory authority may be able to determine and assess its probative value.
Using a deposition that is not so tested, may therefore amount to using evidence, which the party concerned has had no opportunity to question. Such refusal may in turn amount to violation of the rule of a fair hearing and opportunity implicit in any adjudicatory process, affecting the right of the citizen."
13. In case of Swagat Synthetics (supra), Division Bench of this Court observed as under:-
"10. Coming to the adjudication of the issue arising out of such show-cause notice dated 07.06.2007, learned counsel for the petitioner is perfectly justified in raising a grievance of the adjudicating authority having relied heavily on the statements of several witnesses who were not offered for cross examination though applied for by the petitioners. For example, our attention was drawn to the impugned order where a reference is made to the statement of one Irfan Gulam Rasul Saiyed, partner of M/s. Al-Amin Exports. In his statement dated 21.06.2003 he had admitted control and supervision of M/s. Sunshine Overseas. He had admitted that certain certificates were issued without procuring any material from the EOUs for payment of premium. His statement is further relied on to believe that the petitioners had not actually made the exports thereby indicating that the goods were diverted in the local market. Though the petitioners have applied for cross-examination of such witness admittedly, the same was not granted. This consideration is also therefore being tainted with breach of natural justice. The impugned order vis-a-vis the show-cause notice dated 07.06.2007 is, therefore, set aside on this limited ground and proceedings are remanded to the adjudicating authority for fresh consideration. He shall grant cross-examination of those witnesses whose statements he proposed to rely upon before passing fresh order."Page 8 of 10
HC-NIC Page 8 of 10 Created On Fri Dec 01 23:27:44 IST 2017 C/SCA/1885/2017 ORDER
14. In case of Andaman Timber Industries (supra), the Supreme Court observed as under:-
"6. According to us, not allowing the assessee to cross- examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex- factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them."
15. Such being the legal position, we have no hesitation in holding that the impugned orders are vitiated on the ground of cross-examination of witnesses not being allowed though applied for and that adjudicating authority relying upon the statements of such witnesses in the final order of adjudication. The decision of the Division Bench in case of Patel Engineering (supra) is based on its peculiar facts. It was the case in which the petitioner wanted cross-examination of the expert panel Page 9 of 10 HC-NIC Page 9 of 10 Created On Fri Dec 01 23:27:44 IST 2017 C/SCA/1885/2017 ORDER carrying out tests, the Court found that the reports of the expert panel were on record and were made available to the petitioner and there was other independent material on record also. Only on the ground of not permitting cross-examination of the members of panel, in the opinion of the Court, did not vitiate the order of confiscation against the petitioner.
16. In the result, the petitions are allowed. Orders in Original impugned in all petitions are set aside. Proceedings are remanded to the adjudicating authority for fresh consideration and disposal in accordance with law. The adjudicating authority shall grant cross-examination of witnesses on sample basis of a minimum of three witnesses from each category, as per the convenience and choice of the department. The categories are as per annexure to the replies filed by the petitioners to the show cause notices. It is clarified that the proceedings are remanded only for this limited purpose for providing cross-examination and no other stage is envisaged. Once this is over, it will be open for the adjudicating authority to pass fresh order in accordance with law.
17. All the petitions are disposed of.
Sd/-
(AKIL KURESHI, J.) Sd/-
(A.Y. KOGJE, J.) *malek Page 10 of 10 HC-NIC Page 10 of 10 Created On Fri Dec 01 23:27:44 IST 2017