Shri Himanshu Gupta v. The Commissioner Of Central Excise

What happened

Excise officers searched premises at Libaspur, Delhi on 11 October 2009 and found two pouch packing machines in operation, seized Pan King brand gutkha pouches, ready-mix masala and packing material with machines valued in all at ₹7,99,380, and visited the registered factory of M/s M.R. Tobacco Pvt. Ltd., where 15 packing machines were found sealed. Statements were recorded on that day of several persons including workers and the father of the appellant, a director of the company, who died after the raid. A letter of 15 December 2009 offered ₹25 lakhs towards duty. A show cause notice of 7 November 2013 alleged clearances from 1 July 2008 to October 2009 without registration. The Commissioner's order confirmed duty of ₹5,87,50,000 against the company with interest and equal penalty, and imposed penalty of ₹50,00,000 under Rule 26 on the appellant and others. The CESTAT dismissed the appeals. The appellant argued that statements were not supplied, that cross-examination under section 9D was denied, that his father had resigned as director in July 2009, and relied on Kranti Associates, J & K Cigarettes and Flevel International.

Questions before the court

• Was denial of the opportunity to cross-examine witnesses a breach of section 9D or natural justice, and does the appeal raise a question of law?

Why the court ruled this way

The order-in-original dealt with these issues and relied on independent material beyond the confessional statements: seizure of packaging material and mixture worth ₹7,99,380, the appellant's documents, electricity consumption that rose to 1,466 units for 14 September to 22 October 2009 against 540 units earlier, and the appellant's role in managing the company (paragraphs 28 to 33). The witnesses were co-noticees and employees with a financial interest or blood relationship who were not expected to depose against the appellant (paragraphs 34 and 40). The right of cross-examination exists but depends on the facts, and may be denied in convincing circumstances, as in Kanungo & Co., Surjeet Singh Chhabra, Patel Engineering and the Court's decision in Vallabh Textiles, which distinguished Flevel International, where efforts to secure witnesses were lacking (paragraphs 38 to 44). It was not said that the witnesses had retracted their statements, so denial was justified following Kalvert Foods and Sushil Aggarwal (paragraph 45). The proceedings rested on unretracted statements and corroborative evidence, and there was no failure to understand the object of section 9D (paragraphs 46 and 47).

Controlling point

No question of law arose, as the denial of cross-examination was justified on the facts.

Order and next steps

The appeal and pending applications were dismissed.

Practical implications

A noticee wanting cross-examination should show why the statements are unreliable, such as retraction or lack of corroboration, since the right is not unfettered.

Limits of this ruling

• The ruling turns on the facts: unretracted statements corroborated by independent evidence and witnesses linked to the noticee; it does not say that cross-examination can be refused whenever statements are relied on.