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2018 (3) TMI 291

ly indulged in diversion of the imported goods, imported by them on payment of duty and Imported duty free against Advance Authorization / Licences. It was alleged that in order to fulfill export obligation, they are showing fake clearance / deemed exports under CT­3 to M/s. Tara Holdings Ltd. (100% EOU), West Bengal - For effective adjudication of the controversy in hand and to determine as to whether the petitioners ought to be permitted to avail the opportunity of cross­examination, as prayed by them, it would be necessary to dwell upon the statutory scheme under which such a right is claimed. - The Adjudication procedure contemplated in Chapter 14, thus mandates the adjudicating authority to follow the principles of natural justice before issuing an order of confiscation of any goods or imposition of any penalty on any person and it mandates issuance of notice in writing, informing the owner of the goods or such person of the grounds on which it has proposed to confiscate the goods or to impose the penalty and on affording an opportunity to make a representation in writing within such reasonable time, as may be specified and also offer the reasonable opportunity of being he .....

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eging that the goods imported by the Company have not reached the factory of the petitioner. The petitioner is served with the show cause notice by the Commissioner of Customs (Exports), Jawaharlal Nehru Custom House, Nhava Sheva, asking it to show cause as to why penalty should not be imposed on the Managing Director, Assistant Manager, Commercial Head & Company Secretary­cum­Authorized Signatory of the Petitioners Company and also the partners of the said Company since they have indulged in evasion of central excise duty and customs duty by diverting the indigenously procured inputs as well as imported inputs in local market and by clandestine removal of the finished goods. The show cause notice sets out that the raids were conducted at the factory premises at Dadra and Daman, godown of the petitioner and also at residential premises of the Managing Director and Assistant Manager cum Authorized Signatory at Vapi and Mumbai Head Office of the Petitioners on 3rd / 4th February, 2010 and various documents were seized under the distinct panchanamas and the stock position of raw material and finished goods was recorded. During the course of the investigation, the officers .....

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uated at Jawaharlal Nehru Customs House, Nhava Sheva, Po­Uran, District Raigad (MH), as to why : i 702 MT of PVC Resign valued at ₹ 3,29,80,357/­ (as detailed in Annexure A­8 to the Show Cause Notice) should not be confiscated under Section 111 (O) of Customs Act,962. ii Customs Duty amounting to ₹ 61,42,270/­ ( as detailed in Annexure A­8 to the show cause notice), should not be demanded and recovered under proviso to Section 28 (4) of Customs Act, 1962, and the bonds executed by them against the said Advance Authorisations at the time of imports of the said goods be enforced for recovery of the said duty as per the conditions of the Notification No. 93/2004­Cus dtd 10/9/2004 and No.96/2009­Cus dtd 11/9/2009. iii 944 MT of LLDPE and Silicon Fluids (VTMOS) valued at ₹ 6,69,18, 426/­ ( as detailed in Annexure A­13 to the Show Cause Notice) should not be confiscated under Section 111 (O) of Customs Act, 1962. iv Customs Duty amounting to ₹ 1,49,08,584/­ ( as detailed in Annexure A­13 to the Show Cause Notice), should not be demanded and recovered under proviso to Section 28 (4) of Customs Act, 1962 and the bonds exec .....

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is application for crossexamination is granted or refused before final order is passed. The attention of the Commissioner was invited to that portion of the judgment, where the Hon'ble High had held that without dealing with and disposing of the party's application for cross examination, the adjudicating authority could not have adjudicated the issues. The request was, therefore, made to decide the application for cross­examination of the transporters. 6. The Assistant Commissioner of Customs on 14.09.2016 informed the decision of the Adjudicating Authority i.e. Commissioner of Customs (NS­IV), JNCH, Nhava Sheva, on the application, seeking cross­examination in relation to the show cause notice issued to the petitioner. The communication addressed to the petitioner, mentions that the request of the noticee for permission of cross­examination of persons indicated in their letter dated 15.1.2016 and reiterated in the letter dated 19.01.2016, is not supported by valid reasons. The communication sets out the following reasons : . I find that the request of noticee for permission of cross examination of persons as indicated in their letter dated 15.01.2016 and ag .....

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ged to be erroneous and on the other hand the petitioner placed strong reliance on the judgment of the Hon'ble Apex Court in the case of Ayaab Khan Noor Khan Pathan vs. State of Maharashtra (2013) 4 SCC 465. 8. In support of the petitioners, we have heard learned Advocate Mr. Prakash Shah, assisted by Mr. Vir Sanghvi, who would harp on the principles of natural justice and would argue that the basic principles of natural justice though enunciate two rights namely ­ (a) Audi Alteram Partem Rule i.e. that no person shall be condemned unheard and, (b) Nemo judex in causa sua i.e. that no person can be a judge in his own case. The principles have been further refined and various facets have been evolved and acknowledged in series of decisions. He would argue that the material on the basis of which action is proposed against a person, if entails civil consequences, then such material is to be supplied to the person concerned and if the matter includes documentary evidence, the same must be supplied and if it includes statements of persons or the documents authored by certain persons, then such persons must be made available for cross examination before the Authority. He would th .....

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t which had no application to adjudication proceedings under FERA. He relied upon the provisions of Section 51 of the Act and Adjudication Rules framed thereunder in this regard. He also placed reliance upon a decision of this Court in Surjeet Singh Chhabra vs. Union of India and Ors. (1997) 1 SCC 508 = 1997 (89) E.L.T. 646 (S.C.) to argue that cross­examination was unnecessary in certain circumstances such as the one at hand where all material facts were admitted by appellants in their statements before the concerned authority. 18. There is, in our opinion, no merit even in that submission of the learned counsel. It is evident from Rule 3 of the Adjudication Rules framed under Section 79 of the FERA that the rules of procedure do not apply to adjudicating proceedings. That does not, however, mean that in a given situation, cross examination may not be permitted to test the veracity of a deposition sought to be issued against a party against whom action is proposed to be taken. It is only when a deposition goes through the fire of cross­examination that a Court or Statutory Authority may be able to determine and assess its probative value. Using a deposition that is not so .....

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adjudicating authority and before the CESTAT. The counsel for the Revenue relies on paragraph 23 of the said judgment which reads as follows : 23. Therefore, we are of the opinion that it will not be correct to hold that irrespective of the facts and circumstances and in all inquiries, the right of cross­ examination can be asserted. Further, as held above which rule or principle of natural justice must be applied and followed depends upon several factors and as enumerated above. Even if there is denial of the request to cross examine the witnesses in a inquiry, without anything more, by such denial alone, it will not be enough to conclude that principles of natural justice have been violated. Therefore, the judgments relied upon by Shri Kantawala must be seen in the factual backdrop and peculiar circumstances of the assessee's case before this court. 10 For effective adjudication of the controversy in hand and to determine as to whether the petitioners ought to be permitted to avail the opportunity of cross­examination, as prayed by them, it would be necessary to dwell upon the statutory scheme under which such a right is claimed. The Petitioner was served with the sho .....

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for the burden of proof to be discharged in certain cases and Section 124 of said Act, mandates issuance of show cause notice before confiscation of goods. Section 124 needs the reproduction here and is being reproduced as under : 124. Issue of show cause notice before confiscation of goods, etc.-No order confiscating any goods or imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person - (a) is given a notice in 1[writing with the prior approval of the officer of customs not below the rank of a Deputy Commissioner of Customs, informing] him of the grounds on which it is proposed to confiscate the goods or to impose a penalty; (b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and (c) is given a reasonable opportunity of being heard in the matter: Provided that the notice referred to in clause (a) and the representation referred to in clause (b) may at the request of the person concerned be oral. 11. The Adjudication procedure contemplated in Chapter 14, thus mandates the .....

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udicial process including the administrative and quasi ­judicial process constitute the basic elements of a fair hearing and ensure fair­play and justice in the decision making process and they are recognized as fundamental principles of justice, ensuring that the authority conducting the proceedings acts fairly. The said principles which have been so recognized and evolved through the process of judicial interpretation and are sacrosanct to the proceedings and any infraction of the said principles, invite an action of striking down the decision making process, being violative of principles of natural justice. This corollary and weightage attached to the principles of natural justice would also include a right to cross­examination and through various judicial pronouncements the said right has been evolved as part and parcel of the principles of natural justice. The Hon'ble Apex Court in the case of M/s. Barelilly Electricity Supply Co. Ltd. vs. The Workmen and Others, reported in 1971 (2) SCC 617, while applying the principles contained in the Evidence Act to the procedure contemplated under the Industrial Disputes Act and was confined to with an issue about the app .....

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not produced and proved by one of the methods either by affidavit or by witnesses who have executed them, if they are alive and can be produced. Again if a party wants an inspection, it incumbent on the Tribunal to give inspection in so far as it is relevant to the enquiry. The applicability of these principles is well recognized and admit of no doubt. The Hon'ble Supreme Court as early in 1958 while dealing with the case of Khemchand Vs. Union of India, 1958 AIR 300 while dealing with the dismissal of an employee and the right available under Article 311 (2) of the Constitution of India, in the facts of the case had held that reasonable opportunity envisaged to the Government Servant by the provisions contained in Article 311 (2) includes (a) an opportunity to deny his guilt and establish his innocence, which he can only do if he is informed of the charges levelled against him and the allegations on which such charges are based; (b) an opportunity to defend himself by cross­examining the witnesses produced against him and by examining himself or any other witness in support of his defence and finally (c) an opportunity to make his representation as to why the proposed pena .....

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tunity, contemplated by the proviso to section 17(3) of the Act. Latest judgment of the Hon'ble Supreme Court, dealing with the right of cross­examination is reported in AIR 2013 SC 58 in the case of Ayaaub khan Noorkhan Pathan vs. State of Maharashtra. The said case revolves around the caste certificate issued to the appellant and its validity. The appellant being the member of Scheduled Tribe had approached the Caste Scrutiny Committee for verification of his claim. The issue involved in the case was denial of the opportunity to cross­examine witnesses and it was canvassed before the Hon'ble Apex Court that in absence of such opportunity it has resulted into grave miscarriage of justice. The Hon'ble Apex Court, after referring to a catena of its earlier judgments made the following observations in para 28 :­ 28. The meaning of providing a reasonable opportunity to show cause against an action proposed to be taken by the government, is that the government servant is afforded a reasonable opportunity to defend himself against the charges, on the basis of which an inquiry is held. The government servant should be given an opportunity to deny his guilt and est .....

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he case of State of Kerala vs. K. T. Shaduli Grocery Dealer Etc., supra, summarized the position in paras 34 and 35 thus : 34. Keeping in view the facts of the present case and the nature of allegations being raised against the appellant the judgments of the Supreme Court in the case of K.T. Shaduli (supra), Khem Chand vs. UOI (supra) and Ayyaubkhan Noorkhan Pathan vs. State of Maharashtra (supra) would in our view apply to the facts of this case. The respondent has failed to place on record any fact to show that prejudice would be caused to it if the appellant is permitted to cross-examine the said witness. In fact a query was posed to the learned Counsel for the respondent about whether any prejudice would be caused to the respondent if the cross­examination is allowed. The learned counsel could not specify any prejudice. In our view the present appeal should be allowed to the extent that the appellants should be entitled to cross­examine the three witnesses whose statements have been relied upon by the respondent in the complaint. The respondent in the complaint have heavily relied upon the statement of Shri Ahmad Sakir, Shri Pratap Ghose and Shri K. Vasudeva. It would b .....

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volved and the provisions of the statute; though we do not intend to lay down that it is an absolute right vested in a party. In the backdrop of these facts before us and since the statements of the truck owners were heavily relied upon to attribute that the petitioner company had illicitly acquired raw materials as LDPE/ LLDPE in the open market without payment of applicable CENVAT duty in guise of duty free clearance and modified the LLDFE to one M/s. Tara Holdings Pvt. Ltd., which is 100% EOU. It is alleged that the said fake deemed exports shown by the petitioner company to fulfill export obligation towards imports done by them as duty free under advance licence/authorization scheme with payment of custom duty. It is alleged that the entire exercise undertaken by the petitioner company where the subject goods were diverted elsewhere and export obligation has been tried to be fulfilled is the said fake deemed exports by reasonably raising collusion or deliberate mis­miss statement or suppressing of the facts which warrant confiscation of the said goods and also rendered the petitioner company liable for penalty under section 112 (a) of the Customs Act, the role played by the .....

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department was in a position to defend itself effectively. It is in these circumstances, the Hon'ble Court observed that where the assessee had several opportunities to make his submissions with regard to the findings of the report of the expert panel, the refusal to permit cross­ examination was perfectly justified. 18. No doubt the principles of natural justice have been held to be sacrosant and have been placed at a highest pedestal in the adjudication proceedings which are judicial, quasi­judicial or administrative. However, there is no straight­jacket formula in which the principles of natural justice can be confined and which principles of natural justice or which facets of it is applicable, would depend upon the nature of the lis and statute under which adjudication is undertaken and several other factors. Further every departure from principles of natural justice may not result in miscarriage of justice and the Hon'ble Apex Court has at times refused to strikeout an action, not being in conformity with the principles of natural justice, unless the prejudice caused is demonstrated. In the words of the Hon'ble Apex Court, it will be useless formality , .....

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ts have been relied upon in the form of opinion, leading to show cause, in relation to the liability under the provision of the Customs Act. The learned counsel would argue that the said statements have been specifically relied upon and if they have been relied upon then fairness and equity demands that the petitioners be afforded an opportunity to cross examine those witnesses, when the specific allegation is that the customs duty to the tune of ₹ 61,42,270 and ₹ 1,49,08,584/­ has been evaded and not only the duty but interest and penalty has also been sought to be imposed on the petitioners by the impugned show cause notice. According to the learned counsel, the revenue was not justified in denying the said opportunity only on the ground that it would delay the proceedings. The learned counsel for the petitioner would rely upon the judgment of the Delhi High Court in the case of Shahid Balwa, Vinod Goenka vs. Directorate of Enforcement, reported in [201 (2013) Delhi Law Times 211 DB] and also on the judgment delivered by the Division Bench of this Hon'ble Court (Coram : S.C. Dharmadhikar and B. P. Colabawalla,JJ) in the case of Nirmal Seeds Pvt. Ltd., vs. The .....

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