Delhi High Court
J & K Cigarettes Ltd. & Ors. vs Collector Of Central Excise & Ors. on 28 August, 2009
Author: A.K.Sikri
REPORTABLE
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ WP (C) No. 1854 of 1992
WP (C) No. 1895/1992
WP (C) No. 1896/1992
WP (C) No. 1897/1992
and
WP (C) No. 1898/1992
% Reserved on : July 20, 2009
Pronounced on : August 28, 2009
1. WP (C) No. 1854/1992
J & K Cigarettes Ltd. & Ors. . . . Petitioners
through : Mr. S.K. Bagaria, Sr. Adv. with
Ms. Rohina Nath, Ms. Nisha
Baghchi, Ms. Priyadeep
Mr. S.K. Mongia and
Ms. Suchi Kakkar, Advocates
VERSUS
Collector of Central Excise & Ors. . . . Respondents
through : Mr. Mohan Parasaran, ASG with
Mr. Rajesh Katyal, Advocates and
Mr. Satyavir Singh (SIO).
2. WP (C) No. 1895/1992
M/s. GTC Industries Ltd. . . . Petitioner
through : Mr. S.K. Bagaria, Sr. Adv. with
Ms. Rohina Nath, Ms. Nisha
Baghchi, Ms. Priyadeep
Mr. S.K. Mongia and
Ms. Suchi Kakkar, Advocates
VERSUS
Collector of Central Excise & Ors. . . . Respondents
through : Mr. Mohan Parasaran, ASG with
Mr. Rajesh Katyal, Advocates and
Mr. Satyavir Singh (SIO).
3. WP (C) No. 1896/1992
M/s. GTC Industries Limited . . . Petitioner
through : Mr. S.K. Bagaria, Sr. Adv. with
Ms. Rohina Nath, Ms. Nisha
Baghchi, Ms. Priyadeep
WP (C) No. 1854/1992 & batch nsk Page 1 of 29
Mr. S.K. Mongia and
Ms. Suchi Kakkar, Advocates
VERSUS
Collector of Central Excise & Ors. . . . Respondents
through : Mr. Mohan Parasaran, ASG with
Mr. Rajesh Katyal, Advocates and
Mr. Satyavir Singh (SIO).
4. WP (C) No. 1897/1992
M/s. GTC Industries Limited . . . Petitioner
through : Mr. S.K. Bagaria, Sr. Adv. with
Ms. Rohina Nath, Ms. Nisha
Baghchi, Ms. Priyadeep
Mr. S.K. Mongia and
Ms. Suchi Kakkar, Advocates
VERSUS
Collector of Central Excise & Ors. . . . Respondents
through : Mr. Mohan Parasaran, ASG with
Mr. Rajesh Katyal, Advocates and
Mr. Satyavir Singh (SIO).
5. WP (C) No. 1898/1992
M/s. GTC Industries Limited . . . Petitioner
through : Mr. S.K. Bagaria, Sr. Adv. with
Ms. Rohina Nath, Ms. Nisha
Baghchi, Ms. Priyadeep
Mr. S.K. Mongia and
Ms. Suchi Kakkar, Advocates
VERSUS
Collector of Central Excise & Ors. . . . Respondents
through : Mr. Mohan Parasaran, ASG with
Mr. Rajesh Katyal, Advocates and
Mr. Satyavir Singh (SIO).
CORAM :-
THE HON‟BLE MR. JUSTICE A.K. SIKRI
THE HON‟BLE MR. JUSTICE VALMIKI J. MEHTA
1. Whether Reporters of Local newspapers may be allowed
to see the Judgment?
2. To be referred to the Reporter or not?
3. Whether the Judgment should be reported in the Digest?
WP (C) No. 1854/1992 & batch nsk Page 2 of 29
WP (C) No. 1854/1992 & batch nsk Page 3 of 29
A.K. SIKRI, J.
1. All these writ petitions filed by the same petitioner raise identical
issue which relates to the constitutional validity and/or interpretation
of the provisions of Section 9-D of the Central Excise and Salt Act,
1944 (hereinafter referred to as the „Act‟). For this purpose, we are
taking note of the facts as they appear in WP (C) No. 1854/1992.
The question, as aforesaid, has arisen in the following backdrop:
2. A show-cause notice dated 30.3.1998 was issued to M/s. Kanpur
Cigarette Limited and M/s. GTC Industries on the allegation that
Kanpur Cigarette Ltd. had manufactured cigarettes during the period
February 1985 to June 1986 exclusively for and on behalf of M/s.
GTC Industries with GTC brand names. It was alleged that the
cigarettes were owned/purchased by GTC and were marketed by
GTC through their trade channel. It was further alleged that the
noticees had availed exempted rates of duty under Notification No.
211/83 based on the declaration of sale price on the cigarette packets.
It was further alleged that the noticees had manufactured deceptively
similar versions of certain regular brands showing lower sales price
with intent to evade duty whereas GTC had all along envisaged that
they would be sold at the price similar to the regular brands. It was
alleged that the cigarettes so manufactured were sold through the
marketing chain at the higher price and the difference between the
two prices was received by GTC as flow back through various
accounts. Consequently, it was alleged, the noticees had jointly
contravened the provisions of Rule 52 and 52A of the Excise Rules
by making false declaration with intent to evade payment of
appropriate duty and had jointly rendered them liable for payment
of duty as well as the penalties. The duty demanded for the said
period was Rs.1,01,20,221/-. The show cause notice with annexures
was voluminous running in almost 1000 pages among which 600
pages relate to the statements of 84 witnesses. Similar show-cause
notices were issued to M/s. GTC Industries in respect of their units at
Mumbai and Baroda and in respect of other job workers viz. J & K
Cigarettes; Suvarna Filters and Cigarettes Ltd‟ Universal Tobacco etc.
The petitioners made a request dated 6.3.1991 for cross-
examination of the various wholesale dealers and other persons on
whose statements reliance had been placed in the show-cause notice.
These 31 witnesses were common for all the show-cause notices.
3. The respondent No.1, however, did not allow the cross-examination
of the witnesses for the reasons stated in the order dated 5.4.1991.
By that order, the respondent No.1 also confirmed the demands
raised in the notices. The petitioner challenged the aforesaid order
of the respondent No.1 by filing various writ petitions in the High
Court of Bombay, at Mumbai, the lead petition being WP (C) No.
1572/1991. The High Court of Bombay set aside the demand vide its
judgment dated 3.5.1991 and remanded the case back for de novo
adjudication after considering the request for cross-examination,
allowing production of defence evidence and thereafter hearing oral
arguments. After this order of remand, the respondent No.1
proceeded with the matter afresh.
4. The respondent No.1 allowed cross-examination of the witnesses, as
requested by the petitioners, from time to time leaving out those
who were given up by the department. Those witnesses, who were
summoned and appeared, were duly cross-examined by the
petitioners. However, some of the witnesses did not appear for the
reasons that would be taken note of hereinafter at the appropriate
stage. The respondent No.1, in respect of those witnesses, took
umbrage under Section 9-D of the Act and asked the petitioners to
argue the matter as according to the respondent No.1 it was not
possible for those witnesses to appear. The petitioners, vide letter
dated 20.4.1992, reiterated their demand for cross-examination and
at the same time stated that they would be addressing oral
submissions without prejudice to their right to cross-examine those
witnesses. The petitioners also submitted that in case those witnesses
are not allowed to be cross-examined, their statements be not relied
upon. According to the petitioners, no orders were passed on this
request/ application.
5. At this juncture WP (C) No. 1895/1992 was filed on 20.5.1992
alleging violation of principles of natural justice. Prayer made in that
writ petition was for grant of cross-examination or, in the alternative,
to eschew these statements from consideration. Four other writ
petitions were filed in respect of other show-cause notices issued in
the same manner.
6. Notices were issued in these writ petitions and interim orders were
passed to the effect that final orders passed by the respondent No.1
would be placed in a sealed cover. During the pendency of these
petitions, the respondent No.1/Collector confirmed the demands in
all show-cause notices vide orders dated 10.7.1992. These orders
were produced before the Court in a sealed cover. After hearing the
parties on the said application, this Court vide orders dated 5.8.1992
vacated the stay and directed the Collector to serve the orders upon
the petitioners. At the same time, liberty was given to the petitioners
to file appeal if felt aggrieved against that order. Liberty was also
granted to the petitioner to amend the petition. The petitioners,
accordingly, amended the petition and included the prayer
challenging vires of Section 9-D of the Act. These amendments were
allowed.
7. The writ petitions were heard by a Division Bench of this Court. The
Division Bench dismissed all these three writ petitions by means of its
judgment dated 6.12.2006 holding that the true cope of Section 9-D
of the Act would legitimately arise for consideration in the Supreme
Court in the pending appeals. Writ petitions were, thus, dismissed
without deciding the issue of vires of Section 9-D of the Act. The
Supreme Court decided those appeals on 25.4.2008 whereby orders
dated 6.12.2006 passed by this Court have been set aside and
matters are remanded back to this Court for consideration afresh.
8. To complete the narration of events, if is also necessary to mention
that the petitioners had challenged the orders of the respondent No.1
on merits by filing appeals before the Custom Excise & Service Tax
Appellate Tribunal (CESTAT). Some of these appeals were decided in
favour of the petitioners and some against them. The losing party
challenged the orders by filing appeals in the Supreme Court. The
outcome of the appeals before the Custom Excise & Gold Appellate
Tribunal (now CESTAT) as well as the Supreme Court is as under :-
Writ No. Position in CEGAT Position in Supreme
Court
1854/1992 The CEGAT decided the Appeal The Court has admitted
on merits in favour of both the the Appeal without
Petitioner and the job worker granting any interim
vide order dated 21.3.2001. stay. Last listed on
The Department has filed an 27.9.2002.
Appeal under Section 35L of the
Central Excise Act 1944 before
the Hon‟ble Supreme Court
being Civil Appeal No. 6398-
6403/02.
1895/1992 The CEGAT decided the Appeal The Court has admitted
on merits in favour of both the the Appeal without
Petitioner and the job worker granting any interim
vide order dated 21.3.2001. stay. Last listed on
The Department has filed an 27.9.2002.
Appeal under section 35L of the
Central Excise Act 1944 before
the Hon‟ble Supreme Court
being Civil Appeal No. 6398-
6403/02.
1896/1992 The CEGAT in Appeal Nos. The Hon‟ble Supreme
5208/92-D and 5233/92-D Court dismissed the
confirmed the demand against Appeal bearing No.
the Petitioner vide order dated 5134-35/97 vide order
4.3.1997. The Petitioner dated 12.9.97 for want
thereafter filed Civil Appeal No. of pre-deposit (copies
5134-35/97 before the Hon‟ble enclosed).
Supreme Court against the said
order.
1897/1992 The CEGAT after considering the
application under Section 35F of
the Central Excise Act, 1944
seeking waiver of the pre-
deposit of the Duty and penalty
demanded, dismissed the same
and directed the petitioner and
the job workers to deposit the
same. Since the petitioner did
not comply with the said order,
the Appeals filed by them were
dismissed for non-compliance of
the above order on 15.7.1994
and 7.2.1996 (copies enclosed)
1898/1992 The CEGAT confirmed the The Hon‟ble Supreme
demand against the Petitioner Court dismissed the
vide order dated 4.7.1997. The Appeal bearing No.
Petitioner thereafter filed Civil 5134-35/97 vide order
Appeal No. 5134-35/97 before dated 12.9.97 for want
the Hon‟ble Supreme Court of pre-deposit.
against the said order.
9. The Supreme Court, while remitting the case back to this Court, took
note of the fact that though constitutionality of Section 9-D of the
Act was allowed to be challenged, but this issue was not decided by
this Court and, at the same time, objection of the respondents that
cause of action did not survive was also not determined, and the
Apex Court was of the opinion that these aspects be considered
afresh, as is clear from the operative portions of the said order :-
"7. The High Court, as noticed hereinabove, did not decide
the question of constitutionality of the said provision, nor did
it determine the objection of the respondents that no cause of
action had arisen therefor.
8. We are, therefore, of the opinion that interest of justice
would be subserved if the impugned judgments are set aside
and the matters are remitted back to the High Court for
consideration thereof afresh. We direct accordingly.
9. The appeals are disposed of with the aforementioned
observations and direction."
10. It is in these circumstances we have to decide the question of
constitutional validity of Section 9-D of the Act. In the process, we
have also to determine as to whether cause of action for deciding this
issue arises or not.
11. Before we take up this issue, it would be necessary to point out the
provisions of Section 9-D of the Act and the circumstances under
which the Collector invoked these provisions in his impugned order.
Section 9-D reads as under :-
"9-D. Relevancy of statements under certain circumstances -
(1) A statement made and signed by a person before any
Central Excise Officer of a gazetted rank during the
course of any inquiry or proceeding under this Act shall
be relevant, for the purpose of proving, in any
prosecution for an offence under this Act, the truth of
the facts which it contains, -
(a) when the person who made the statement is dead
or cannot be found, or is incapable of giving
evidence, or is kept out of the way by the adverse
party, or whose presence cannot be obtained
without an amount of delay or expense which,
under the circumstances of the case, the Court
considers unreasonable; or
(b) when the person who made the statement is
examined as a witness in the case before the Court
and the Court is of the opinion that, having regard
to the circumstances of the case, the statement
should be admitted in evidence in the interests of
justice.
(2) The provisions of sub-section (1) shall, so far as may be,
apply in relation to any proceedings under this Act,
other than a proceeding before a Court, as they apply in
relation to a proceeding before a Court."
12. Bare reading of the above section manifests that under certain
circumstances, as stipulated therein, statement made and signed by
those persons before any Central Excise Officer of a gazetted rank
during the course of inquiry or proceedings under this Act can be
treated as relevant and taken into consideration if under the given
circumstances such a person cannot be produced for cross-
examination. Thus, this provision makes such statements relevant for
the purposes of proving the truth of the facts which it contains, in
any prosecution for an offence under the Act in certain situations.
Sub-section (2) extends the provision of sub-section (1) to any
proceedings under the Act other than a proceeding before the Court.
In this manner, Section 9-D can be utilized in adjudication
proceedings before the Collector as well. In the present case,
provisions of Section 9-D of the Act were invoked by the Collector
holding that it was not possible to procure the attendance of some of
the witnesses without undue delay or expense. Whether such a
finding was otherwise justified or not can be taken up in the appeal.
13. Section 14 of the Act confers powers on the Central Excise Officer to
summon persons to give evidence. Such statements are admissible in
evidence. By relying upon these statements so recorded, the Central
Excise Officer adjudicating the case may: (a) raise demand of Central
Excise duty; (b) confiscate any goods, plant or machinery, etc.; and
(c) levy penalties. Therefore, the adjudication proceedings are quasi-
judicial in nature {See - Sri T. Ashok Pai v. CIT, Bangalore, (2007) 7
SCC 162, Vinod Solanki v. Union of India, (2009) 233 ELT 157; and
Kothari Filaments & Anr. v. Commissioner of Customs (Port-
Kolkatta) & Ors., (2009) 233 ELT 289}.
14. Going by this nature of the proceedings, which can entail civil and/or
evil consequences to the show-cause noticees, submission of learned
counsel for the petitioner was that the right of the accused to cross-
examine persons, whose statements are relied upon against him, is a
very important facets of the principles of natural justice. Normally,
rule is that if the witness is not cross-examined, then the examination-
in-chief/statement of that witness cannot be termed as evidence and,
therefore, cannot be read in evidence. He submitted that necessity of
allowing cross-examination of the witnesses in departmental
adjudication proceedings is well-settled and accepted, as is clear from
the following decisions :-
(i) Laxman Exports Ltd. v. Collector of Central Excise
(2005) 10 SCC 634
(ii) Swadeshi Politex Ltd. v. Commnr. Of Central Excise
2000 (122) ELT 641 (SC)
(iii) Arya Abhushan Bhandar v. Union of India
2002 (143) ELT 25 (SC)
(iv) Gyanchand Sant Lal Jain v. Union of India
2001 (136) ELT 9 (Bombay High Court)
(v) Kellogg India Pvt. Ltd. & Madhukar Patil v. UOI
2006 (193) ELT 385 (Bombay High Court)
(vi) Ripen Kumar v. Deptt. of Customs
2003 (160) ELT 60 (Delhi High Court)
(vii) New Decent Footwear Industries v. UOI
2002 (150) ELT 71 (Delhi High Court)
He also referred to the judgment of the Supreme Court in the
case of CCE v. Duncan Agro Industries, (2000) 7 SCC 53 with regard
to relevancy of statements recorded by the departmental officers
under the Customs Act itself, in the following manner :-
"The inculpatory statement made by any person under Section
108 is to non-police personnel and hence it has no tinge of
inadmissibility in evidence if it was made when the person
concerned was not then in police custody. Nonetheless the
caution contained in law is that such a statement should be
scrutinized by the court in the same manner as confession made
by an accused person to any non-police personnel. The court
has to be satisfied in such cases, that any inculpatory statement
made by an accused person to a gazetted officer must also pass
the tests prescribed in Section 24 of the Evidence Act. If such a
statement is impaired by any of the vitiating premises
enumerated in Section 24 that statement becomes useless in
any criminal proceedings.
xx xx xx
We hold that a statement recorded by Customs Officers under
Section 108 of the Customs Act is admissible in evidence. The
court has to test whether the inculpating portions were made
voluntarily or whether it is vitiated on account of any of the
premises envisaged in Section 24 of the Evidence Act."
15. He also extensively read out the portions of the recent judgment
reported in Vinod Solanki (supra), wherein the Supreme Court again
reiterated the above principles. It was held in that case that violation
of the provisions of Foreign Exchange Regulation Act, 1973 attracted
penalty and the proceedings under the Act are quasi-criminal in
nature. It was further held that the initial burden to prove that
confession was voluntary in nature would be on the Department.
While dealing with Section 24 of the Evidence Act, the Court
reiterated the following principles laid down in State (NCT of Delhi)
v. Navjot Sidhu, (2005) 11 SCC 600 :-
"Section 24 lays down the obvious rule that a confession made
under any inducement or threat or promise becomes irrelevant
in a criminal proceeding. Such inducement, threat or promise
need not be proved to the hilt. If it appears to the Court that
the making of the confession was caused by any inducement,
threat or promise proceeding from a person in authority, the
confession is liable be excluded from evidence. The expression
„appears‟ connotes that the Court need not go to the extent of
holding that the threat etc. has in fact been proved. If the facts
and circumstances emerging from the evidence adduced make
it reasonably probable that the confession could be the result
of threat, inducement or pressure, the court will refrain from
acting on such confession, even if it be a confession made to a
Magistrate or a person other than police officer."
In this backdrop, he pointed out that Section 9-D of the Act
makes a complete departure from the aforesaid well-settled principles
relating to cross-examination. It was an exception to the normal rule
and in the circumstances enumerated in the provision the
accused/noticee is deprived of its valuable right of cross-examination.
16. Mr. S.K. Bagaria, learned senior counsel appearing for the petitioners,
was candid that the petitioners had no quarrel about sub-section (1)
to Section 9-D which applies to the proceedings under the Act before
a court of law. The objection was about the extension of this
provision, by sub-section (2), upon the Central Excise Officers.
Learned counsel also conceded that there can be circumstances in
which departure can be made from the aforesaid important principle
relating to cross-examination even with regard to proceedings before
the Central Excise Officers. However, his objection was that
wherever any such departure is to be made, the law, at the same
time, should also lay down full and proper safeguards, conditions,
guidelines and restrictions. This was so done while enacting Sections
32 and 33 of the Indian Evidence Act, which also incorporated such
exceptions to the aforesaid general rule. For this reason, conferring
of such a power upon the court was not questioned, as the learned
senior counsel submitted that in proceedings before the court, the
court would be guided by the provisions contained in Sections 32
and 33 of the Indian Evidence Act. Insofar as sub-section (2) of
Section 9-D is concerned, the argument to the validity of such
provision proceeds on the premise that Section 9-D(2) read with
Section 9-D(1) confers uncontrolled, unguided, unfettered and
sweeping powers/discretion upon any Central Excise officer
conducting "any proceeding" under the Act to unilaterally decide,
inter alia, about any of the following factors :-
(a) Whether the witness is dead.
(b) Whether he cannot be found.
(c) Whether he is incapable of giving evidence.
(d) Whether he is kept out of the way by the adverse party.
(e) Whether his presence cannot be obtained without an
amount of delay or expense which the officer considers
unreasonable.
17. His submission was that in Section 9-D there are no conditions or
restrictions or guidelines for exercise of the powers and discretion
conferred thereunder upon a Central Excise Officer. There are no
guidelines at all to decide any of the five factors mentioned in the
Section and a Central Excise Officer may take any view with regard
to existence of any of the aforesaid five facts solely as per his own
whims and fancies. Conferment of such arbitrary, uncontrolled and
blanket discretion without laying down any guidelines is itself per se
violative of Article 14 of the Constitution of India. Sweep of powers
conferred upon the Central Excise Officers under Section 9-D is so
wide that it is capable of being misused in the absence of any
guidelines regulating the exercise of the power. Reliance is being
placed on the following judgments of the Supreme Court :-
(i) Devi Das Gopal Krishnan & Ors. v. State of Punjab & Ors.,
AIR 1967 SC 1895
(ii) State of Punjab & Anr. v. Khan Chand,
(1974) 1 SCC 549
(iii) Dist. Registrar & Collector, Hyd. & Anr. v. Canara Bank,
(2005) 1 SCC 496
18. Learned counsel dilated the aforesaid arguments by pointing out that
invocation of Section 9-D of the Act by a Central Excise Officer in
any adjudication proceeding may result in huge financial and other
liabilities upon the assessee and one of the bare minimum safeguards
that ought to be there is giving of prior intimation and grant of an
opportunity to the assessee to make its submissions on invocability of
Section 9-D itself and thereby enabling the assessee to take
appropriate steps, as may be possible, in the circumstances of the
case. Thus, for instance, if it is a matter of unreasonable expense,
assessee may satisfy the officer that keeping in view the demand
involved, the expenses are not unreasonable or may offer to bear the
expenses. If it is a matter of unreasonable delay, the assessee may
satisfy the officer that it is not attributable to the assessee and that it
is ready and willing to take all possible steps to expedite the cross-
examination. The assessee may also try to contact the witness
through his own resources and inform him about the time and place
of cross-examination. In case the adjudicator is of the view that the
witness is "kept out of the way" by the assessee, the assessee may
clarify the relevant facts and assist and cooperate with the
adjudicator in contacting the witness. Giving these examples as
merely illustrative examples, the learned counsel submitted that there
may be several such situations where prior intimation and grant of
opportunity to the assessee may eliminate the very existence of the
factors mentioned in Section 9-D. According to him, however, the
drastic nature of the powers and discretion conferred under Section
9-D does not even provide for any intimation or opportunity to the
assessee.
19. He also submitted that the provisions of the Act itself, while
conferring discretion and powers on the adjudicating authority, have
simultaneously provided an important safeguard by mandating to
record reasons and to take prior approval of either the Central Board
of Excise and Customs or the Chief Commissioner of Central Excise.
Recording of such reasons and requirement of prior approval is quite
a normal methodology to provide safeguard against arbitrary
exercise of such powers and discretion by the officer concerned. Such
provisions are there in Sections 11DDA, 13, 14A, 33A etc. As against
this, Section 9-D does not even require the recording of reasons or
taking of any prior approval and this also clearly demonstrates the
most arbitrary and sweeping nature of the powers and discretion
conferred by Section 9-D upon the adjudicating officers.
20. Mr. Mohan Parasaran, learned Addl. Solicitor General who appeared
on behalf of the respondents, argued that there were sufficient
guidelines inherent in Section 9-D of the Act itself. Such a provision
was not unique in the Central Excise Act, but existed in number of
other enactments. He submitted that this provision was pari materia
with Section 32 of the Indian Evidence Act. Relevancy of statement
of relevant fact by a person who is dead or cannot be found etc. has
been provided under Section 32 of the Evidence Act, as an exception
to the rule of „exclusion of hearsay evidence‟ under certain
circumstances. Under these provisions, even a statement made
before a police officer, under certain circumstances, which otherwise
is not admissible in evidence, can be treated as relevant without
examination of the witness. On the contrary, the statements
recorded under Section 14 of the Act, referred to under Section 9-D
are ex facie admissible in evidence as has been held by the Supreme
Court in the case of Duncan Agro Industries (supra) and, therefore,
such statements are not covered by the principle of exclusion of
hearsay evidence and cross-examination of witnesses is not necessary
in each and every case. Even then, in the interest of justice, cross-
examination of witnesses, to the extent possible has been allowed by
the adjudicating authority in the instant quasi-judicial proceedings
under the Act. These statements, relied upon in the impugned case,
are primarily based on documentary evidences collected/seized
during investigations and, therefore, are relevant also in terms of
provisions under Section 32(2) of the Evidence Act. The facts stated
therein do not necessarily require the test of cross-examination. The
test of cross-examination, may in given circumstances, be superfluous,
especially if the test is impossible of employment.
21. The learned ASG also referred to the earlier order passed by this
Court in extenso and submitted that the petitioner was given proper
opportunity to cross-examine the available witnesses even when
provisions of Evidence Act apply only to judicial proceedings and
have no strict application in quasi-judicial proceedings. He also
submitted that no specific or sufficient grounds were to be fulfilled by
the petitioners while challenging the provisions of Section 9-D of the
Act. What exactly is the arbitrary or canalized power has not been
spelled out. The only ground referred to by the petitioners was that
this provision was capable of being misutilised, which could not be a
ground to strike down the statutory provision.
22. We have given our due consideration to the submissions made by
both the learned counsel.
23. At the outset, we have to keep in mind that while dealing with the
constitutional validity of a provision, one cannot take into
consideration the apprehensions expressed by the petitioners
regarding the misuse of such a provision. Validity of a provision
would be totally different from the valid exercise of powers
conferred upon the authority under such a provision. If powers are
not exercised properly and in a legal manner in a particular case,
then that particular act of the quasi-judicial authority can be set at
naught. This would not be a ground for declaring a provision of the
Act itself as unconstitutional.
24. We may also point out at this stage itself that the power of the
Parliament to make such a provision is not in question. It is also
conceded by the learned senior counsel appearing for the petitioners
in this case that such a provision could be incorporated in the statute,
which is pari materia of Section 32 of the Evidence Act viz., to rely
upon statements of certain persons even when they have not been
produced for cross-examination, under the given circumstances.
Thus, though it cannot be denied that the right of cross-examination
in any quasi-judicial proceeding is a valuable right given to the
accused/noticee, as these proceedings may have adverse
consequences to the accused, at the same time under certain
circumstances, this right of cross-examination can be taken away. Of
course, the circumstances have to be exceptional.
25. Section 9-D of the Act stipulates following five circumstances, already
taken note of, under which statements previously recorded can be
made relevant. These are :-
(a) when the person who had given the statement is dead;
(b) when he cannot be found;
(c) when he is incapable of giving evidence;
(d) when he is kept out of the way by the adverse party; and
(e) when his presence cannot be obtained without an amount of
delay or expense, which the Officer considers unreasonable.
26. Interestingly, the learned senior counsel for the petitioners did not
join the issue that the aforesaid circumstances are not exceptional
circumstances. They are the circumstances which naturally would be
beyond the control of the parties and it would not be possible to
produce such a person for cross-examination who had made a
statement on earlier occasion. The provisions under Section 9-D of
the Act are necessary to ensure that under certain circumstances, as
enumerated therein, viz. if the witness has been won over by the
adverse party or is avoiding appearance despite several opportunities
being given. The rationale is that decision making in a case cannot
be allowed to continue in perpetuity. These provisions are based on
the Doctrine of Necessity. It provides for relevancy of statements
recorded under Section 14 of the Act dispensing with or without the
opportunity for testing the truth of such evidence by cross-
examination. For, when a person is dead or incapable of giving
evidence or cannot be found, no better evidence can be had in the
circumstances than the statement tendered by witnesses before a
quasi-judicial authority.
The safeguards which are enumerated in the provision under
Section 32 of the Evidence Act are essential as the provision provides
for an exception to the rule of exclusion of hearsay evidence, while
proving for relevancy of even direct oral evidence of the fact under
enquiry, which otherwise is not admissible, to ensure that there is no
miscarriage of justice. Similarly, provisions under Section 9-D
provide for relevancy of statements recorded under Section 14 of the
Act, under certain circumstances, in criminal as well as quasi judicial
proceedings, to meet the ends of justice.
27. We, thus, are intent to agree with the submission of the learned
Addl. Solicitor General that if an Act of Parliament uses the same
language which was used in a former Act of Parliament referring to
the same subject, viz. relevancy of statement of fact by person who is
dead or cannot be found under certain circumstances, passed with
the same purpose and for the same object, the safe and well known
rule of construction is to assume that the legislature, when using well-
known words upon which there have been well known decisions,
use those words in the sense which the decisions have attached to
them. The provisions under Section 32 of the Evidence Act have not
been found to be ultra vires of the Constitution. Therefore, the
provisions under Section 9-D of the Act, which are pari materia with
the provisions under Section 32 of the Evidence Act, cannot be held
as ultra vires of the Constitution.
28. The moot question that arises at this stage is as to whether the
provision in question is arbitrary. Such a provision can still be held
to be offending Article 14 of the Constitution and can be termed as
arbitrary if it is established that the provision gives uncanalised and
uncontrolled power to the quasi judicial authorities.
But, we are of the opinion that it is not so. The safeguards are
inherent in the provision itself. In the first instance, only those
statements of such persons, which are made and signed before the
Central Excise Officer of a gazetted rank, are treated as admissible.
Thus, protection is taken to treat the statements relevant only if they
are made before an officer enjoying a higher rank/status. Secondly,
(and that has already been taken note of) such statements are made
relevant only under certain specified circumstances, and these are the
ones which are beyond anybody‟s control. Thirdly (and this is most
important), the quasi-judicial authority can rely upon the statement
of such a person only when the stated ground is proved. For
example, in those cases where the person who made the statement is
dead, there should be sufficient proof that he is dead. In case, where
a person cannot be found, the authority would have to form an
opinion, based on some material on record, that such a person
cannot be found. It would not be mere ipse dixit of the officer. In
case, cogent material is not there to arrive at such a finding, the
persons against whom the statement of such a person is relied upon
can always challenge the opinion of the authority by preferring
appeal to the higher authority, which appeal is statutorily available.
Same yardsticks would apply to other grounds. If the quasi judicial
authority opines that a person is incapable of giving evidence,
formation of such an opinion has also to be predicataed on proper
material on record, which could be in the form of mental or physical
disability of such a person.
29. Thus, when we examine the provision as to whether this provision
confers unguided powers or not, the conclusion is irresistible, namely,
the provision is not uncanalised or uncontrolled and does not confer
arbitrary powers upon the quasi judicial authority. The very fact that
the statement of such a person can be treated as relevant only when
the specified ground is established, it is obvious that there has to be
objective formation of opinion based on sufficient material on record
to come to the conclusion that such a ground exists. Before forming
such an opinion, the quasi-judicial authority would confront the
assessee as well, during the proceedings, which shall give the assessee
a chance to make his submissions in this behalf. It goes without
saying that the authority would record reasons, based upon the said
material, for forming the opinion. Only then, it would be possible
for the affected party to challenge such a decision effectively.
Therefore, the elements of giving opportunity and recording of
reasons are inherent in the exercise of powers. The aggrieved party
is not remediless. This order/opinion formed by the quasi judicial
authority is subject to judicial review by the appellate authority. The
aggrieved party can always challenge that in a particular case
invocation of such a provision was not warranted.
30. Therefore, it cannot be said that the provision gives uncanalised or
uncontrolled power upon the quasi judicial authority. Granting of
opportunity and passing reasoned order are the conditions inbuilt in
exercise of power by any quasi judicial authority and, therefore, it is
not necessary that these conditions should be specifically mentioned
in the provision. The very fact that before power under Section 9-
D(2) of the Act could be exercised, the authority has to satisfy itself
about the existence of any of the conditions stipulated therein, which
provides clear and sufficient guidance to such quasi judicial authority
to exercise its power under the section. We may also state that such
arguments have been repelled by the Supreme Court on number of
occasions. {See - Harishankar Bagla v. State of Madhya Pradesh, AIR
1954 SC 465; and Bhatnagars & Co. Ltd. v. Union of India, AIR 1957
SC 478}.
31. Interestingly, even in the present case, the attempt of learned senior
counsel appearing for the petitioners was to show that the
respondent No.1 ought to have given prior intimation and granted
an opportunity to the assessee to make its submissions on invocability
of Section 9-D itself and thereby enabling the assessee to take
appropriate steps, as may be possible, in the circumstances of the
case. He submitted that if a particular witness was not allowed to be
cross-examined by stating that it was not possible to procure his
presence without delay or expense, had the opportunity been given
to the petitioners to meet the expenses, the petitioners would have
borne the expenses and could have procured the presence of
witnesses. Likewise, he argued that if the opinion was that it is the
adverse party, i.e. the petitioner, who kept a particular person out of
the way, the petitioner should have been confronted with that so as
to enable him to contact the witness through his own resources and
inform him about the time and place of the cross-examination, or
else, to enable the petitioners to clarify the relevant facts and assist
and cooperate with the adjudicator in contacting the witness. These
examples, at the most, would indicate as to how the powers are to
be exercised by the adjudicating authority. That would not make the
provision arbitrary. As stated in the beginning, validity of the
provision is totally different from exercise of powers by an authority
invoking those provisions. We may only refer, at this stage, to the
judgment of the Supreme Court in the case of Mahesh Chandra v.
Regional Manager, U.P. Financial Corporation, (1993) 2 SCC 279. In
that case, the Supreme Court categorically observed that wherever
vide power is conferred by statutes on public functionaries, the same
is subject to inherent limitation that it must be exercised in just, fair
and reasonable manner, bona fide and in good faith; otherwise, it
would be arbitrary. In such cases, test of reasonableness is more
strict. Following observations therefrom are worth quoting :-
"15. Every wide power, the exercise of which has far reaching
repercussion, has inherent limitation on it. It should be
exercised to effectuate the purpose of the Act. In legislations
enacted for general benefit and common good the
responsibility is far graver. It demands purposeful approach.
The exercise of discretion should be objective. Test of
reasonableness is more strict. The public functionaries should
be duty conscious rather than power charged. Its actions and
decisions which touch the common man have to be tested on
the touchstone of fairness and justice. That which is not fair .
and just is unreasonable. And what is unreasonable is arbitrary.
An arbitrary action is ultra vires. It does not become bona fide
and in good faith merely because no personal gain or benefit
to the person exercising discretion should be established. An
action is mala fide if it is contrary to the purpose for which it
was authorised to be exercised. Dishonesty in discharge of duty
vitiates the action without anything more. An action is bad
even without proof of motive of dishonesty, if the authority is
found to have acted contrary to reason."
32. Thus, we summarize our conclusions as under :-
(i) We are of the opinion that the provisions of Section 9-D (2) of
the Act are not unconstitutional or ultra vires;
(ii) while invoking Section 9-D of the Act, the concerned authority
is to form an opinion on the basis of material on record that a
particular ground, as stipulated in the said Section, exists and is
established;
(iii) such an opinion has to be supported with reasons;
(iv) before arriving at this opinion, the authority would give
opportunity to the affected party to make submissions on the
available material on the basis of which the authority intends
to arrive at the said opinion; and
(v) it is always open to the affected party to challenge the
invocation of provisions of Section 9-D of the Act in a
particular case by filing statutory appeal, which provides for
judicial review.
33. Thus, insofar as the vires of the provision are concerned, we find no
merit in these writ petitions and dismiss the same.
No costs.
(A.K. SIKRI)
JUDGE
(VALMIKI J. MEHTA)
JUDGE
August , 2009
nsk
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ WP (C) No. 1895/1992
% Reserved on : July 20, 2009
Pronounced on : August 28, 2009
M/s. GTC Industries Ltd. . . . Petitioner
through : Mr. S.K. Bagaria, Sr. Adv. with
Ms. Rohina Nath, Ms. Nisha
Baghchi, Ms. Priyadeep
Mr. S.K. Mongia and
Ms. Suchi Kakkar, Advocates
VERSUS
Collector of Central Excise & Ors. . . . Respondents
through : Mr. Mohan Parasaran, ASG with
Mr. Rajesh Katyal, Advocates and
Mr. Satyavir Singh (SIO).
CORAM :-
THE HON‟BLE MR. JUSTICE A.K. SIKRI
THE HON‟BLE MR. JUSTICE VALMIKI J. MEHTA
1. Whether Reporters of Local newspapers may be allowed
to see the Judgment?
2. To be referred to the Reporter or not?
3. Whether the Judgment should be reported in the Digest?
A.K. SIKRI, J.
For orders, see WP (C) No. 1854/1992.
(A.K. SIKRI)
JUDGE
(VALMIKI J. MEHTA)
JUDGE
August 28, 2009
nsk
