TMI Blog1975 (10) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... sion on 5th May 1970. The Petitioners are seeking to challenge all the three Orders indicated above. 2.The challenge to the impugned orders arises in these circumstances : on 9-2-1963 M/s. Gyanchand Santlal Jain (Petitioners in Spl. C.A. No. 140 of 1971) purported to purchase 14,805 yards of cotton cloth from the firm of M/s. Sushil Trading Company at Bombay under invoice of the same date issued by the said firm to the Petitioners. Similarly between 8-3-1963 and 27-4-1963 M/s. B. Pravinchandra and brothers (Petitioners in Spl. C.A. No. 141 of 1971) purported to purchase 33,060 yards of cotton cloth in aggregate from the firm of M/s. Sushil Trading Company at Bombay under 11 invoices dated 8-3-1963, 18-3-1963, 22-3-1963, 31-3-1963, 3-4-1963, 6-4-1963, 13-4-1963, 18-4-1963, 20-4-1963, 23-4-1963 and 27-4-1963 issued by that firm to M/s. B. Pravinchandra and brothers. It appears that on or about 20-7-1963 on receipt of certain information the officers of the Central Excise Bombay raided the business premises of a firm called M/s. Radhakishen Omprakash and during the search several account books and documents which related not merely to M/s. Radhakishen Omprakash but also to M/s Sushi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . S. Pravinchandra Bros. was also recorded and it may be stated that while recording the statement of Santlal Gyanchand, who was said to have acted both on behalf of the Petitioners in Spl. C.A. No. 140 of 1971 as well as on behalf of the Petitioners in Spl. C.A. No. 141 of 1971, portions of statement of Omprakash Kedia as well as relevant entries in the books of account of M/s. Radhakishen Omprakash and M/s. Sushil Trading Co. were put to him and his explanation was sought. Santlal Gyanchand was unable to give proper explanation of the relevant entries which appeared in the books of account, but maintained that Omprakash Kedia's statement was false that his books of account were also false and that the transactions under which his firm of M/s. Gyanchand Santlal Jain and the other firm had received cotton fabric and cotton cloth from M/s. Sushil Trading Co. were in reality the transaction of purchase of cloth and that the story of Omprakash Kedia that the two petitioners had got manufactured cotton cloth from out of the yarn supplied by them to M/s. Sushil Trading Co. on mere payment of weaving charges or manufacturing charges and commission was false. On 19-11-1964 a further sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on any working day immediately after the receipt of the show cause memo. By this show cause notice both the petitioners were further directed to produce at the time of showing cause all the evidence upon which they intended to rely in support of their defence and they were further informed that they should also indicate in their written replies whether they wished to be heard in person before the case was adjudicated and that if no cause was shown against the action proposed to be taken within 10 days from the receipt of the notice or if they did not appear when the case was posted for hearing, the case would be decided ex parte. It will, therefore appear clear that alongwith the show cause memo that was served on the two petitioners the material evidence on the basis of which the prima facie conclusion (that the petitioners had manufactured the cloth in contravention of the Central Excise Rules) had been arrived at was made available to them. On 31-1-1965 M/s. Gyanchand Santlal Jain submitted their written reply to the show cause notice while M/s. S. Pravinchandra and brothers submitted their written reply on 11-5-1965. Personal hearing was given to M/s. Gyanchand Santlal on 28- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter filed these petitions in Dec. 1970 challenging the order passed by the Officer on Special Duty as well as the orders passed in appeal and in revision. 4.Since common contentions were urged by Mr. Dhanuka before us in both these matters, we have thought it fit to dispose of both these petitions by this common judgment. Mr. Dhanuka challenged the impugned orders, particularly the order passed by Respondent No. 3 on 5-8-1965 principally on two grounds. In the first place, he contended that no opportunity was given to either of the petitioners to cross examine Omprakash Kedia on whose statements and on whose books of account reliance has been placed by Respondent No. 3. He pointed out that at the personal hearing that took place on 28th and 29th June, 1965 Omprakash Kedia was not present nor was he examined-in-chief nor were his previous statements put to him nor got affirmed and consequently the petitioners were not afforded any opportunity to cross-examine him if they so desired. Secondly he contended that Respondent. No. 3 has found the entries in the books of account of M/s. Radhakishen Omprakash and M/s. Sushil Trading Co. reliable and those entries have been accepted by him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1935 and Art. 311 of the Constitution arose for consideration but the observations on which reliance has been placed by Mr. Dhanuka in para 10 of the judgment are of general nature regarding the scope and content of principles of natural justice and would cover all proceedings where principles of natural justice would be applicable. In para 10 this is what Venkatarama Aiyar J. has observed. "Stating it broadly and without intending it to be exhaustive, it may be observed that rules of natural justice require that a party should have the opportunity of adducing all relevant evidence on which he relies, that the evidence of the opponent should be taken in his presence, and that he should be given the opportunity of cross-examining the witnesses examined by that party, and that no materials should be relied on against him without his being given an opportunity of explaining them." The decision of Mysore High Court reported in A.I.R. 1961 Mysore 203 (Nagar Mohan Rao v. The Collector of Central Excise) was a case of an enquiry by the Customs Authority under the Sea Customs Act, 1878 and the aforesaid pronouncement of Venkatarama Aiyar J. in Varma's case was quoted with approva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the inquiry under Sub-rule (2) would be levy of (i) heavy excise duty and (ii) penalty and confiscation. It would be difficult to hold that in such an inquiry conclusions can be made and findings can be arrived at without giving an appropriate opportunity to show cause to the offending manufacturer. The nature of the opportunity to be afforded to such a manufacturer cannot be stated in detail in this judgment. It is, however, sufficient to state that the materials on the basis whereof conclusions and/or findings are intended to be arrived at against him should be in clearest terms and in all detailed particulars disclosed to the offending manufacturer. This would be necessary, so that in connection with these materials, he can give explanations and if he so chooses, tender evidence and make a case that the material was insufficient for the necessary conclusions and findings and/or that the material was not reliable." Relying on these authorities Mr. Dhanuka contended before us that in the instant case though undoubtedly the evidence collected during the investigation, particularly the statement of Omprakash Kedia and his books of account, had been furnished to the petitioners at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine him in examination-in-chief or get his previous statements confirmed by him especially when in the show cause notice the petitioners had been categorically informed that such previous statements of Kedia which had been recorded and the books of account which had been seized during the search were going to form the evidence on the basis of which the matter was going to be decided. He urged that in these circumstances once the previous statement of Omprakash Kedia as well as the books of account of M/s. Radhakishen Omprakash and M/s. Sushil Trading Co., were made available to the petitioners before the personal hearing commenced, it was up to the petitioners, if they were so advised, to make a specific request to call Kedia for the purpose of cross-examining him and he urged that during the enquiry there was no such request made by the petitioners to call Kedia for the purpose of subjecting him to cross-examination. On the other hand, he pointed out that the petitioners had proceeded on the basis that Kedia was a self-confessed liar, that his previous statements were false and his books of account were false and fabricated and as such there was no point in examining Kedia in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... narily the principle of natural justice is that no man shall be a judge in his own cause and that no man should be condemned unheard. This latter doctrine is known as audi alteram partem. It is on this principle that natural justice ensures that both sides should be heard fairly and reasonably. A part of this principle is that if any reliance is placed on evidence or record against a person then that evidence or record must be placed before him for his information, comment and criticism. That is all that is meant by the doctrine of audi alteram partem, that no party should be condemned unheard. No natural justice requires that there should be a kind of a formal cross-examination. Formal cross-examination is procedural justice. It is governed by rules of evidence. It is the creation of Courts and not a part of natural justice but of legal and statutory justice. Natural justice certainly includes that any statement of a person before it is accepted against somebody else, that somebody else should have an opportunity of meeting it whether it (sic), by way of interrogation or by way of comment does not matter. So long as the party charged has a fair and reasonably opportunity to see, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine was afforded and the contention was disposed of in a short para thus :- "We may first deal with the question of breach of natural justice. On the material on record, in our opinion, there has been no such breach. In the show cause notice issued on August 21, 1961 all the material on which the Customs Authorities have relied was set out and it was then for the appellant to give a suitable explanation. The complaint of the appellant now is that all the persons from whom enquiries were alleged to have been made by the authorities should have been produced before it to cross-examine them. In our opinion, the principles of natural justice do not require that in matters like this the persons who have given information should be examined in the presence of the appellant or should be allowed to be cross-examined by them on the statements made before the Customs Authorities. Accordingly, we hold that there is no force in the third contention of the appellant." Replying on the aforesaid authorities Mr. Manjrekar in the first place contended that when the entire material, which consisted of previous statements of Kedia and his books of account, had been made available to the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce taken behind the back of the opponent with that taken in his presence and that the particular observation if read in the context of the facts of the case did not carry the import suggested by Mr. Dhanuka. It may be pointed out that in this latter case during the course of departmental enquiry held under the Bombay Police Manual statements of witnesses recorded in the absence of a defaulter were used against the defaulter but before so using them the procedure indicated in Cl. 8 of Sec. 545 of the Bombay Police Manual was followed by the Officer conducting the enquiry, Cl. 8 of Sec. 545 of the Bombay Police Manual ran thus : "The officer conducting the inquiry should then recall all necessary witnesses in support of the charge and, in the defaulters' presence, read out any statements they may have made in the preliminary inquiry and record, if necessary, any further statements they may have to make. He should then give the defaulter an opportunity of cross-examining each witness after his statement in support of the charge is completed, any such cross-examination being recorded below the statement of the witness concerned." In accordance with this provision the Deputy Superi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tness who had given prior statement was recalled, that statement was put to him and made known to the opposite party and the witness was tendered for cross-examination by that party. In this view of the matter the validity of Sec. 545(8) of the Bombay Police Manual was upheld. As regards the content of the rules of natural justice the position was explained by the Supreme Court thus : "For a correct appreciation of the position, it is necessary to repeat what has often been said that tribunals exercising quasi-judicial functions are not Courts and that therefore they are not bound to follow the procedure prescribed for trial of actions in Courts nor are they bound by strict rules of evidence. They can, unlike Courts, obtain all information material for the points under enquiry from all sources, and through all channels, without being fettered by rules and procedure which govern proceedings in Court. The only obligation which the law casts on them is that they should not act on any information which they may receive unless they put it to the party against whom it is to be used and give him a fair opportunity to explain it. What is a fair opportunity must depend on the facts and ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he instant case such previously recorded statements of Omprakash Kedia together with all the books of account were made available to the petitioners and since by the show cause notice the petitioners were expressly informed that such previous statements and the books were going to be used as evidence against them, we do not think it was necessary for the respondent to examine Kedia in chief or to get his previous statements confirmed from him and no breach of natural justice on that account was involved and it was upto the petitioners to explain those statements or 'comment thereon in such manner as they liked. 9.On the other aspect as to whether the right of cross-examination forms part of natural justice or not it is not possible to accept Mr. Manjrekar's bald submission that such right does not form part of natural justice. Formal cross-examination may be a part of procedural justice but that does not mean that the content of natural justice excludes the right of cross-examination. As stated earlier, the rules of natural justice do cast an obligation on the Tribunals that they should not act on any information which they may receive unless they put it to the party against whom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nducting disciplinary enquiry could interview witnesses separately and were not obliged to offer to the accused an opportunity of confronting or cross-examining the hostile witnesses provided he was given proper indication of the case which he had to meet, but it might have been a breach of natural justice to reject a positive request by the accused to be permitted to confront and cross-examine them. The facts were that plaintiff Fernando on being found guilty of an examination offence and on being suspended indefinitely from all University Examinations brought an action against the University declaring that the decision was null and void on the ground that the enquiry was not conducted in accordance with the principles of natural justice and the graveman of the charge of breach of natural justice rested entirely on the admitted fact that one Miss Balasingham and other witnesses were not questioned in his presence and within his hearing and consequently he was not able to question them on the statements they made. The Court was however satisfied that the plaintiff had been adequately informed of what Miss Balasingham and others had stated and that the Plaintiff was adequately infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic request being made it would not be possible for such party to make a grievance that the principles of natural justice have been committed breach of. 10.In his book 'Judicial Review of Administrative Action (2nd Edition) at pp. 200-201 s. A. De Smith has stated the position as follows : "Refusal to permit cross-examination of witnesses at an administrative hearing will usually be a denial of natural justice. Seldom can such a refusal be justified if a witness has testified orally and a party requests leave to confront and cross-examine him; the fact that the proceedings may be inquisitorial and informal is inconclusive but there may exceptionally be valid grounds for disallowing questions to a witness on a particular matter." It is thus clear that the right of cross-examination is normally regarded as forming part of natural justice. 11.The two decisions on which Mr. Manjrekar relied may now be considered. The first is Kishanlal Agarwala's case and certain observations of Mr. Justice P.B. Mukherjee were strongly relied upon. The observations contain a note of warning that natural justice was fast becoming the post unnatural and artificial justice but the observations wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may be stated that all the books of accounts that were seized on 27-7-1963 from the business premises of M/s. Radhakishen Omprakash and M/s. Sushil Trading Co. were offered for inspection before the petitioners were called upon to file their written reply and in particular English translations of relevant account of M/s. Gyanchand Santlal appearing in the account from the business premises of Sushil Trading Co., particularly Books No. 34 and 55 were forwarded to the petitioners. Similarly, copies of both the previous statements of Omprakash Kedia recorded on 12-11-1963 and 19-11-1964 respectively were also furnished. It was expressly stated in the show cause notice that these books of accounts as well as the two previous statements of Omprakash Kedia were regarded by the Excise authorities as evidence on the basis of which the enquiry was to be conducted and the adjudication was to be made. In other words, it was made amply clear to both the petitioners that the statements of Kedia and his books of account were to be used against them as pieces of evidence on which the Excise Department was going to rely. Therefore, the entire material regarding the case which the petitioners h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k for cross-examination of Kedia at all. In the absence of such request being made there was no duty cast upon Respondent No. 3 to voluntarily offer Kedia for cross-examination and if Respondent No. 3 did not do so, it cannot be said that in conducting the enquiry he committed any breach of rules of natural justice nor can the enquiry be said to have been conducted in violation of the principles of natural justice for want of opportunity being given to the petitioners to cross-examine Kedia. In these circumstances, it would be difficult to accept Mr. Dhanuka's contention that the impugned order of Respondent No. 3 dated 5-8-1965 is liable to be quashed on the ground that the enquiry conducted by him was in violation of the principles of natural justice. We may also mention in this context that even in the Memos of Appeal that were filed by the petitioners before the 2nd Respondent challenging the 3rd Respondent's order no ground was made out that the petitioners were not allowed to cross-examine Omprakash Kedia and it was only during the course of bearing of the appeals that Counsel for the petitioners made a complaint in that behalf which complaint was disposed of by Respondent No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een disclosed to the petitioners, the impugned order could not be struck down as having been passed in breach of the principles of natural justice. In the first place, he contended that the third parties' admissions about the correctness of the entries pertaining to their transactions in Kedia's books of account was no material against the petitioners as such and therefore there was no obligation on the part of the Excise authorities to disclose the same to the petitioners; secondly he contended that these so-called admissions of third parties about the genuineness of the entries in Kedia's books pertaining to their transactions was really irrelevant material and from such admissions no inference was possible to be drawn that the entries pertaining to the petitioners' transactions as appearing in Kedia's books were also genuine, for, entries pertaining to third parties' transactions can have no bearing on the genuineness of the entries pertaining to the petitioners' transactions and therefore at the highest it could be said that Respondent No. 3 had taken into consideration certain irrelevant material which he thought lent an assurance to the genuineness of the books of Kedia. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ept, the contention that he has deliberately manipulated his accounts in order to escape the responsibility for payment of Central Excise duty. As already pointed out, the account books in question contain entries pertaining to many individuals and in some cases they had admitted that the same give a correct picture of the transactions. In the circumstances it is clear that M/s. Gyanchand Santlal and M/s. S. Pravinchandra Bros. have operated as manufacturers of excisable goods through the agency of M/s. Sushil Trading Co., and have had cotton fabrics removed on their behalf from the place of manufacture without payment of duty and without observing requirements of the rules, 9, 43, 47, 48, 52, 52A, 53, 54, 96B and 96C as detailed in the show-cause notice". It is no doubt true that for the purpose of accepting reliability and genuineness of the records (books of account) of M/s. Sushil Trading Co. of which Omprakash Kedia was the sole proprietor Respondent No. 3 has relied upon some material which, according to him, lent an assurance to those records and the material so relied upon is admissions given by some third parties that the entries pertaining to their transactions give t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of similar nature had come forward to say that the entries pertaining to their transactions were false and did not depict the true nature of their transactions it would have been a relevant circumstantial piece of evidence which would have thrown doubt on the genuineness of the entries pertaining to the petitioners' transactions as appearing in Kedia's books. It is, therefore, clear that Respondent No. 3 could be said to have relied upon irrelevant material for coming to the conclusion that the entries pertaining to the petitioners' transactions depicted or reflected the true nature of transactions as deposed to by Kedia. It is in these circumstances that we have to consider as to whether the impugned order passed by Respondent No. 3 is liable to be set aside or quashed. In other words, the question is not whether the impugned order has to be quashed because irrelevant material was not disclosed to the petitioners in so-called breach of the principles of natural justice but whether the same should be quashed because partly it is based on irrelevant material and that would depend upon whether on a reading of the entire order as a whole it could be said that even after excludin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Santlal Jain as well as M/s. S. Pravinchandra Bros. it was Santlal Gyanchand who was giving instructions to him from time to time, which aspect was not seriously disputed by the petitioners though a general contention was raised that the two firms were distinct from each other. This part of Kedia's statement that it was Santlal Gyanchand who was giving the instructions on behalf of both the firms in the matter of transactions in question receives support from the circumstance that in the books of account the transaction of supply of yarn to Sushil Trading Co., and obtaining delivery of manufactured cloth therefrom by M/s. S. Pravinchandra Bros. has been entered in one and the same Khata of Gyanchand Santlal firm. Ordinarily transactions of two different firms would have been entered in two different Khatas; instead all transactions have been entered in the Khata of Gyanchand Santlal firm and that must have been done as Santlal had given instructions for transactions of both the firms. Apart from this aspect, as we have already indicated above the entries pertaining to the quantity, quality, number of takas or pieces, yardage etc. of the yarn received on behalf of both the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in writ petition for certiorari the Superior Court does not sit in appeal but exercises only supervisory jurisdiction and therefore does not enter into question of sufficiency of evidence." 17.In the other case of The State of Maharashtra v. Babulal Kriparam Takkamore reported in 69 Bom. L.R. 544 the State Government had passed an order superseding the Municipal Corporation of the City of Nagpur under Sec. 408 of the City of Nagpur Corporation Act 1948. The order was passed on two grounds and the contention was raised that since one of the ground on which the order was passed was non-existent the order was liable to be quashed or set aside. That contention was negatived by the Supreme Court by observing thus : "An administrative or quasi-judicial order based on several grounds, all taken together, cannot be sustained if it be found that some of the grounds are non-existent or irrelevant and there is nothing to show that the authority would have passed the order on the basis of the other relevant and existing grounds. On the other hand, an order based on several grounds some of which are found to be non-existent or irrelevant, can be sustained if the Court is satisfied that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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