Customs Tribunal Must First Verify Cross-Examination Request Before Setting Aside Adjudication: Allahabad High Court

The Allahabad High Court at Lucknow has recently set aside a Customs tribunal order after finding that the tribunal failed to first examine whether the noticees (taxpayers) had actually sought cross-examination before holding that the adjudication proceedings stood vitiated for breach of natural justice.

A bench of Justices Shekhar B. Saraf and Manjive Shukla ruled that the procedure under Section 138-B of the Customs Act, 1962, can be said to have been breached only if a specific request for cross-examination was made by the noticee and was then denied.

Without such a finding, the tribunal's conclusion that the adjudication stood vitiated would be incorrect in law, the court said.

It observed, “It was incumbent upon the Tribunal to first come to a finding as to whether a request was made by the noticee. If the answer was in the affirmative, then only the Tribunal could have held that the procedure prescribed under Section 138-B of the Act, 1962 was not followed. However, if the answer to the above question were to be in the negative, we are of the view that the finding of the Tribunal that the procedure prescribed under Section 138-B of the Act, 1962 was not followed, would be incorrect”

The case arose after the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) set aside adjudication orders on the ground that the respondents were not given an opportunity to cross-examine witnesses, which it treated as mandatory under Section 138-B of the Customs Act. The Revenue challenged this finding before the High Court.

Examining the legal position, the High Court relied on a Calcutta High Court ruling to reiterate that denial of cross-examination in customs adjudication does not, by itself, amount to a violation of natural justice.

The court clarified that cross-examination is not required in every case as a matter of law and becomes mandatory only when the noticee specifically seeks it.

Since the Revenue had produced documents to show that no request for cross-examination was made, the High Court noted that this issue had not been examined or conclusively answered by the Tribunal.

Given that the Tribunal is the final fact-finding authority, the Court held that the matter must be reconsidered after calling for the adjudication records.

Accordingly, the High Court set aside the tribunal's order and directed it to hear the matter afresh and decide, after examining the records, whether any request for cross-examination had been made. The tribunal was asked to complete proceedings afresh expeditiously.