chapter - iii - shodhgangashodhganga.inflibnet.ac.in/bitstream/10603/2880/12/12...1 articles 124-147...
TRANSCRIPT
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CHAPTER - III
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Evaluation– The Working of Adjudicating
Authorities, Their Function,
Power and Jurisdiction
1. Reasons and Growth of Adjudicating Authorities
A significant aspect of the expansion of the Adjudication in
the modern era is the power of adjudication by Administrative
authorities. Normally, the function of Adjudicating upon disputes
between two individuals or between the state and an individual is
vested in the courts and our Constitution has made ample
provisions for a well-regulated hierarchy of judicial system of
Supreme Court of India vide Part V chapter IV1, that of High
Courts vide Part VI chapter V2 and of Subordinate Judiciary vide
Part VI chapter VI.3 But side by side with the courts, innumerable
administrative bodies have sprung up to carry on the functions of
adjudication in a variety of situations. The tendency or practice of
vesting adjudicatory functions in persons, bodies or institutions is
becoming increasingly pronounced with the passage of time.
1 Articles 124-147 of the Constitution of India, for reference see P.M.Bakshi’s
Constitution of India Seventh Edition, 2006, Universal Law Publishing Co. Pvt. Ltd. Delhi., p 123-139.
2 Articles 214-232. 3 Articles 233-237.
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The main causes for the evolution of the system of
adjudication outside the courts are practically the same as have
led to the emergence of the delegated legislation viz. extension
of governmental operations, activities and responsibilities
because of socio-economic changes which are taking place in
the country. Along with the expansion in governmental
operations tax base has also been broadened resulting in levy of
new taxes and consequently, leading to vast proliferation of tax
assessing authorities. This in turn, has necessitated the
development of the technique of administrative adjudication
which may better respond to social needs and requirements than
the elaborate and costly decision through court litigation.
The courts are already faced with a large backlog of cases
and if the adjudications were also entrusted to the courts, it will
slow down the administrative process because of long delays,
which usually occur in the court proceedings. It is proverbial that
an ordinary judicial proceeding is dilatory as well as expensive.
The effective implementation of new policies often demands
speedy, cheap and decentrilisation, determination, with which
administrative adjudication can only cope with. Another
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important reason for the new development is that while the
courts are accustomed to deal with the cases primarily according
to law, exigencies of the modern administration often make it
incumbent that some types of controversies be disposed of by
applying not merely law, pure and simple but considerations of
policy as well, for example, what is in the public interest what is
expedient or what is reasonable.
It is only adjudication outside the ordinary judicial system,
which can take care of such matters. Thus technical problems or
questions requiring special expertise may have to be better left
to be determined by specialised adjudicatory bodies than courts.
For an example under The Customs Tariff Act 1975 the proper
determination of the question as to under what entry of the
schedule to the statute, a particular commodity falls for imposing
Customs duty or confiscation requires knowledge of science and
technology besides experience. Perhaps because of the lack of
such expert knowledge, The Hon’ble Supreme Court of India has
held that due deference is required to be given to the executive
adopted an interpretation which the reasonable person could
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adopt or which was perverse.4 Moreover the adjudication by
bodies other than courts is cheap, accessible, expeditious, free
from technicalities and flexible5. On the other hand too much
emphasis on administrative justice has its own dangers therefore
this is such a course/ path that require lot of discretion and
caution.
There is a great value in an independent judiciary
administering the law in an open court. There cannot be the
same degree of independence in case of a member of an
administrative body. The judge has the legal training, decides
cases according to accepted tenets of law, gives reasons for the
decisions, follows precedents and publishes his decisions. There
is an examination-in-chief, cross-examination and legal
representations of both the parties in a court of law. These
important features of the legal system are not always to be found
in the system of administrative adjudication.
There are multifarious adjudicatory bodies outside the
courts. In fact no one knows for sure as to how many of these 4 Collector of Customs v. Ganga Setty, AIR 1963, SC, p 1319. 5 Law Commission of India, 162nd Report, Review of functioning of Central
Administrative Tribunal; Customs, Excise and Gold (Control) Appellate Tribunal and Income Tax Act Appellate Tribunal, p 12.
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exist as no comprehensive study of these bodies has yet been
attempted in India. The methods of procedure and of giving
decisions differ from body to body. There is however one salient
common feature affecting the activities of all these bodies viz.
that they are required to follow the principles of natural justice.
2. Necessity of alternate system of administration of
Justice
The history of Public Finance shows that it is human nature
to avoid, evade or minimize the incidence of Tax. Therefore, in
order to discourage the attitude of avoidance or evasion of tax.
Various tax laws containing the mandatory harsh penalties are
framed and enacted to ensure the compliance of payment of tax.
These provisions are enacted not only to discourage the
dishonest tax payer but also to create a positive psychological
attitude among the honest tax payers. But many a time it is seen
that corrupt and dishonest officers use these provisions to fleece
and extort money from the gullible and honest tax payers. India
is now riding on the wave of growth at a targeted 9% growth of
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GDP;6 it is always required that proper tax is collected without
harassment.
For years together the world has been divided into two
categories i.e. developing and developed world. The developing
world countries like India, Pakistan Zimbabwe were the countries
which were the exploited ones by the developed countries. In
India the Tax laws were framed by the British Rulers to bleed
this nation7 and the same system has so far continued.
In the late eighties, world over an effort was made by all
the so called developing countries to assert there presence in
the world economy. Local factors have resulted into different
success levels. If we are to compare the growth of GDP to Tax
collection of similar placed countries over the world as to India,
we can take the model of China, Turkey and Brazil. In early
eighties all these countries along with India were categorized as
developing countries. These countries took onto the path of
development. The research done so far has revealed that the
compliance of Tax payment acts as a mirror to the growth of the
6 The Tribune, daily Newspaper Chandigarh dated 21-02-08. 7 Percival Spear, A History of India, volume 2, Pelican books, 1984, p 138.
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nation on the whole. GDP to Tax ratio reflect the progress in this
matter. On comparison we find that over the nineties these
countries have improved the GDP to Tax ratio whereas in India it
has worsened8.
The officers of the revenue department while adjudicating
the cases are many a time considered to be biased towards the
Government. They some times do not do justice while passing
orders; this may be due to incompetence, revenue consideration
or blatant corruption. The society lacks confidence in the tax
officials. The Hon’ble Supreme Court of India 9 has observed
that;
Ends of justice are not satisfied only when the accused in
a criminal case is acquitted. The community acting through the
state and the Public Prosecutor is also entitled to justice. The
cause of the Community deserves equal treatment at the hands
of the Court in the discharge of its judicial functions. The
community or the State is not a persona non-grata whose cause
may be treated with disdain. The entire Community is aggrieved 8 Consultation paper by Task Force on Indirect Taxes as constituted by
Ministry of Finance & Company Affairs, Oct. 2002. 9 State of Gujrat v. Mohanlal Jitamalji Porwal and Others, 1987, Cr. L. J., p
1061(SC).
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if the economic offenders who ruin the economy of the State are
not brought to book. A murder may be committed in the heat of
moment upon passion being aroused. An economic offence is
committed with cool calculation and deliberate design with an
eye on personal profit regardless of the consequence to the
Community. A disregard for the interest of the Community can
be manifested only at the cost of forfeiting the trust and faith of
the Community in the system to administer justice in an even
handed manner without fear of criticism from the quarters which
view white collar crimes with a permissive eye unmindful of the
damage done to the National Economy and National Interest.
3. Principles of Natural Justice, their observance by the
Adjudicating Authorities under Indirect Taxes
It has been seen that the adjudicating officers many a
times do not observe the rules of natural justice while deciding
the cases resulting in avoidable delay in finalisation of the
cases10. No doubt rules of natural justice have not been defined
anywhere. But the necessity of observance of rules of natural
10 Sadan Vikas India Ltd. v. Commissioner of C. Ex., Delhi-IV, 2009, ELT, p 322
(Tri.-Del).
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justice in administrative orders have been discussed and
clarified time and again by the courts.11
It is now a well-settled principle of Indian Administrative
Law that a quasi-judicial body should act according to the
principles of Natural Justice in discharging its adjudicatory
functions. This principle has been borrowed from England where
its necessity was very clearly expounded by the House of
Lords.12 It has also been held that the principles of natural justice
are easy to proclaim, but their precise extent is far less easy to
define.13There are few essential ingredients of principles of
Natural Justice viz.
(i) Full disclosure of Facts
One of the fundamental rules of natural justice is that the
party affected should have full and true disclosure of facts which
should be used against him. Such disclosure is essential for wise
and just application of administrative authority. However, the
statements not relied by Department and the persons very well
available to applicants if they wanted to examine them and mere
11 Maneka Gandhi v. Union of India, AIR, 1978, SC, p 597. 12 Ridge v. Baldwin, 1964, AC, p 40. 13 Abbot v. Sullivan, 1952(1), K.B., p 189.
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non-reliance of statements or non-disclosure of any statements,
in spite of having recorded, cannot lead to conclusion of any
prejudice having been resulted.14 This requirement of full
disclosure is mainly fulfilled by way of issue of show cause
notice.
(ii) Show Cause Notice
Show Cause Notice is one of the fundamental principles of
natural justice that before adjudication starts the adjudicatory
authority should give to the affected party a notice of the case
against him so that he may adequately defend himself.15 Any
proceedings taken without notice would be against the principles
of natural justice, unless the same may at the request of the
person concerned be oral. Notice is regarded as the Sine-Qua-
Non of the right of fair hearing. It, therefore, follows that the
grounds given in the notice on which the proposed action taken
should be clear, specific and unambiguous16.
A notice, which is vague is not a proper notice and all
subsequent proceedings, would be vitiated. The notice must give 14 Jitendra Kejriwal v. Commissioner of Central Excise, Rohtak, 2009, ELT, p
422 (Tri.-Del). 15 Metal Forgings v. Union of India, 2002, ELT, p 241(SC). 16 Sinha Govindji v. Deputy Chief Controller of Imports, 1962(1), SCR, p 540.
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a reasonable opportunity to comply with its requirements. The
notice must mention of giving to the party a reasonable
opportunity of being heard in the matter.17 The notice must be
served within time limit prescribed under the Statute. If the
provisions of extended period under sections 11A(1) of the
Central Excise Act, 1944,18 28 of The Customs Act, 196219 or 73
of The Finance Act, 199420 are to be invoked, then the show
cause notice must put the assessee to notice which of the
various commissions or omissions stated in the above
mentioned sections is committed.21 Similarly, the hon’ble
Supreme Court has observed that to invoke the extended period
of time, something positive other than mere inaction or failure on
the part of manufacturer or producer or conscious or deliberate
withholding of information when manufacturer knew otherwise, is
required to be established.22 Further, where the department had
full knowledge about the facts, and the manufacturer’s action or
17 Board of Education v. Rice, 1911, AC, p 179. 18 For reference see R. K. Jain’s, Central Excise Law Manual, Golden Jubilee
Edition, 2010 (March), Centax Publication Pvt. Ltd. 1512-B, Bhisham Pitamah Marg, New Delhi, p 1.114.
19 For reference see R. K Jain’s, Customs Law Manual, 39th Edition, 2009(July), Centax Publications Pvt. Ltd. 1512-B, Bhisham Pitamah Marg, New Delhi, p 1.72.
20 For reference see S.S.Gupta’s, Service Tax How To Meet Your Obligation, Vol.2, 29th Edition, 2010(June), Taxmann Allied Services Pvt. Ltd., p 2462.
21 Commissioner of Central Excise v. H.M.M. Ltd., 1995, ELT, p 497(SC). 22 Collector of Central Excise v. Chemphar Drugs and Liniments, 1989, ELT, p
276(SC).
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inaction is based on there belief that they were required or not
required to carry out such action or inaction, the extended period
cannot be invoked.23Therefore, it has now attained legality that
due notice has to be given to the person against whom
proceedings are initiated.24
Manner of the Show Cause Notice is not prescribed but the
mode is clear. It must contain all the major facts, contraventions
committed must be stated in it and it must contain the reasons of
its being served. The proposal for confiscation of goods and
imposition of penalty should be stated. The duty recoverable
should be specified. It should also specify the documents and
the evidence relied upon to prove the case.
The hon’ble Supreme Court has directed that the show
cause notice should be accompanied by the copies of all the
documents relied upon.25 Further it has been held that the notice
has a right to be given inspection of seized records and be
supplied copies of essential evidence relied upon by the
23 Easland Combines v. Collector of Central Excise, Coimbator, 2003, ELT, p
39(SC). 24 State of Orissa v. Doctor Binapani, AIR, 1967, SC, p 1269. 25 Sahi Ram v. Avtar Singh, 1999(4), SCC, P 511.
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department at Government cost.26 Therefore is required that
documents relied upon by the department must be made
available to the party either at the time of the Show Cause
Notice issued or at a later date by way of allowing inspection of
the documents relied upon which include the seized records and
records taken over and other documents relied upon.
Any denial to supply such documents and or the giving of
inspection of the documents to enable the party to take a copy of
the same may result in the denial of reasonable opportunity to
the party to defend them appropriately. A document may be
relevant either for the prosecution or for the defence. Non supply
of relied upon documents to assesse despite repeated written
requests amounts to violation of the rules of natural justice.27
A Show Cause Notice can be disposed of on an exparte
basis only after satisfying that the Show Cause Notice stands
served to the person to whom issued as governed by section
37C of The Central Excise Act, 194428 for the purpose of serving
the notice. To ignore these requirements may result in the denial 26 Sanghi Textiles Processors v. Union of India, 1993, ELT, p 357(SC). 27 Commissioner of Central Excise and Customs v. Chandan Steel Ltd., 2009, ELT,
p 716(Guj.) 28 Supra note 18, p 1.150.
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of natural justice and reasonable opportunity for the accused or
persons against whom the proceedings are initiated.
(iii) Right of Hearing
Generally speaking, Natural Justice implies fair hearing.
The concept of fair hearing as it is sometimes called the rule of
audi alterm Partem has a number of components i.e.
(a) That the parties concerned should have adequate notice.
(b) That they should be shown all the relevant and material
evidence available against them.
(c) That they should be given reasonable opportunity of
meeting the case against them and to make representation
if any.
(d) That they should be given a personal hearing if asked for.
In adjudications procedure role of Audi Alterm Partem
applies. This rule simply means no man should be condemned
unheard.29 Personal hearing is not an inevitable part of natural
justice but the court often held that personal or oral hearing
should be given in order to extend reasonable opportunity for the
29 Nagendernath Bora v. Commissioner of Hills Division, AIR,1958, SC, p 398.
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defaulter to explain the complications in the case and to interpret
his actions.30 .
A hearing is a must in all quasi-judicial proceedings.
Adjudication under section 33 of The Central Excise Act, 194431
is quasi-judicial proceedings. A reasonable opportunity has to be
afforded for personal hearing. This is a apart from the
opportunity for written submission in reply to the Show cause
Notice, section 33A32 makes it obligatory on the adjudicating
authority to give reasonable opportunity for making written
representations within such time as specified in the Show Cause
Notice and to allow personal hearing when requested. Even
otherwise it is necessary to give personal hearing.
A brief record of the personal hearing is required to be
maintained on the records of adjudication and must be
incorporated in the adjudication order. The principle that both
sides should be heard, implies that evidence must not be given
behind the back of the other party but in his presence, so that if
written evidence is given it must be made available to the other
30 Travencore Rayon Ltd. v. Union Of India,1969(3), SCC, p 868. 31 Supra note 18, p 1.134. 32 Id., p 1.135.
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party with opportunity to contradict it.33 The hon’ble Supreme
Court has held that it was a violation of the principle of natural
justice, when the Income Tax Appellate Tribunal did not convey
to the assessee the information which had been supplied to it by
the departmental representative and give him an opportunity to
contradict it.34 Even if the government wants to exercise its suo
moto power, it can not be exercised without the affected party
being informed of this fact and grounds on which it proposes to
exercise that power.35
Any adjournment of hearing is discretionally on the part of
the adjudicating officer. However, where evidence of persons is
required to be recorded and if so not available whether of
defence or of prosecution the adjournment can be allowed. This
is an inherent power flowing from quasi-judicial proceedings.
However no specific orders or notification to the effect has been
noticed during the course of research. Therefore, every
opportunity to the assessee to produce all relevant evidence and
material in support of his case during the course of adjudication,
which he intends to produce, should be afforded.
33 Prayagdas Tushnial v. Collector, AIR, 1962, Assam, p 100. 34 Dhakeshwari Cotton Mills v. CIT, AIR, 1955, SC, p 65. 35 J.S.Saluja v. Chief Settlement Commissioner, 1972(4), SCC, p 78.
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(iv) Method of Service of Show Cause Notice,
Summons, Letters of Personal Hearing,
Adjudication Orders etc.
Method of service of Show Cause Notice, Summons, letter
of Personal Hearing and Adjudication orders is provided vide
section 37C of The Central Excise Act 1944 36 as made
applicable to the Service Tax matters by section 83 of The
Finance Act 199437 and similar provisions are there pari materia
under section 153 of The Customs Act 196238 and the same can
be done by way of:-
a) Personal service delivery by hand
b) By registered Post Acknowledgement due
c) By pasting /affixing the order in presence of panchas
(either residence or office)
d) By display of the order/notice on notice Board in office.
If an advocate has been engaged then notice regarding
personal hearing should have been sent to advocate engaged
36 Supra note 18, p 1.150. 37 Supra note 20, p 2472. 38 Supra note 19, p 1.126.
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instead of serving on the authorized representative of applicant-
company, is in violation of principles of natural justice39
Personal hearing is the requirement of Natural Justice, and
it has been observed that quasi-judicial bodies take a decision
adverse to the party without giving to him an effective
opportunity of meeting any relevant allegations against him,
including a reasonable opportunity of being heard, which result
in failure on their part and multiplication of litigations.
The right of hearing is a right, no more and no less, to a
hearing that is adequate to safeguard the right for which such
protection is afforded. It must be a hearing in substance and not
form. If such a hearing is denied the administrative action
becomes void. No doubt the administrative agency in holding
hearings in exercise of quasi-judicial functions is not held to be in
strict conformity with judicial procedure and as required in a
court of law. Yet it must be a hearing in substance confined to
the points in issue. Under the requirements of a full hearing a
party has the right to defend his action and his rights by way of
39 Shiv Seva Sadan v. Commissioner of Central Excise, Ludhiana, 2009, ELT 695
(Tri.-Del).
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arguments, by proof and examination of witnesses where
necessary. Then alone can it be said that the hearing is a
meaningful hearing. When the documents relied upon in the
show cause notice were not supplied, opportunity of cross
examination of witnesses was not given the documents were
supplied only after the directions of the Tribunal, the matter was
remanded back for violation of principles of natural justice.40
(v) Fair, Just & Equitable
The Adjudicating Officer while conducting adjudicating
proceedings must act with fairness in a just and equitably
manner.
(vi) Adjudicating Authority should be free from bias
If the adjudicating authority is influenced to improperly
favour one party against the other, it is said to be biased. The
bias disqualifies an individual from acting as an adjudicator flows
from two principles: -
(a) No one should be a judge in his own cause;
(b) Justice must not only be done but must seen to be done.
40 Turnkey Sofrware Solution v. Commissioner of Customs, 2004, ELT, p 638(Tri.
Del.)
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Under both these principles it is not necessary to prove
that a particular decision was in fact influenced by bias. It would
be sufficient if there is reasonable suspicion about the judge’s
fairness or if his position creates in the public at large a
reasonable doubt about the fairness of the administration of
justice. Bias is usually of three types, i.e. Pecuniary bias,
Personal bias and Bias as to subject matter.41
A pecuniary interest, however, small and insignificant will
disqualify a person for acting as an adjudicator. Personal bias
may be that one of the parties is a friend, relation of the
adjudicating authority or has some business of professional
relationship with him. Bias as to the subject matter may arise
because the adjudicator has a general interest in the subject
matter, or his attachment with the administration in his official
capacity or by his utterances. Generally speaking these do not
operate as a disqualification unless the adjudicator has
intimately identified himself with the issues.
41 See Jain and Jain, Administrative Law in India, 12th edition, Eastern Book
Company, Lucknow, p 128.
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Natural Justice requires the deciding authorities should be
impartial. Bias disqualifies the authorities that adjudicate such
as. Bias could either peculiarly or other reasons such as official
bias, or departmental bias.42 Association of an official which is
deciding authority is not a sufficient reason to violate
proceedings on the basis of the bias. However in the case of
special laws such as Central Excise Act, Customs Act, Foreign
Exchange Regulation Act departmental officers who were
associated with the investigation should not be allowed to
adjudicate case.
(vi) Fair Hearing and Adjudicatory bodies
Fair hearing in the adjudication procedure means that the
decision must be given with a sense of responsibility by the
person, whose duty is to meet our justice. The adjudicating
Officer must give to each of the parties, the opportunity of
adequately presenting the case.
The Supreme Court of India has stated time and again that
the principles of Natural Justice are not embodied rules. The
courts are to be satisfied that the person against whom an action
42 Gulapalli Nagashwar Rao v. Andhra Pradesh State, AIR, 1959, SC, p 1376.
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is to be taken had a fair chance of convincing the administrative
authority concerned that the grounds on which the action was
proposed were either non-existent or even if they existed they
did not justify the action.
The concept of fair hearing is thus an elastic one and is not
susceptible of easy and precise definition. The question where
the individual concerned has had a reasonable opportunity of
hearing or not in a particular case is ultimately for courts to
decide depending upon the specific facts and circumstances of
each case including the nature of the Tribunal in question, the
nature of the action proposed, the material on which the
allegations are based, the attitude of the party against whom the
action is proposed showing cause against such proposed action,
the nature of the plea raised by him in reply, the requests for
further opportunity that may be made, his admission by conduct
or otherwise of some or all the allegations and such other
material as may help in coming to a fair conclusion on the
question.
Basically, the contents of fair hearing will vary according to
the law under which the authority constituted and the nature of
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53
the subject matter. Natural justice does not stipulate that
proceedings under going as normal as in court. It is also true that
the Indian Evidence Act does not apply to the quasi-judicial
authorities. Adjudicatory bodies enjoy a good deal of freedom in
ordering their hearing procedures subject however, to the
condition that the party affected gets a reasonable opportunity of
presenting his case.
Firstly the adjudicating authority should receive all the
relevant material, which the party wants to produce in support of
his case. It is also seen that sometimes the adjudicating
authorities do not receive all the relevant material, which the
party wants to produce in support of his case.
The Supreme Court has held that the principles of natural
justice were violated, where the authority refused to look into the
account books produced by the party in his defence. It has also
been held that when the affected party requests the adjudicating
body to exercise its power to summon witnesses and documents
to prove its defence. It would be a denial of natural justice if his
request is not acted upon. It was held by the honorable court that
the petitioner should have been afforded the necessary
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54
opportunity to summon the materials and it is not disputed that
the materials asked for by him were relevant to the enquiry, that
in all such matters a dedicated devotion to rule of law is
expected to be observed by the authorities exercising judicial or
quasi-judicial powers. The demands and the claims of natural
justice cannot be treated with scant respect. The circumstances
of this case show that there has been a clear violation of natural
justice43.
Personal hearing is the requirement of Natural Justice that
quasi-judicial bodies should not take a decision adverse to the
party without giving to him an effective opportunity of meeting
any relevant allegations against him, including a reasonable
opportunity of being heard.44
The requirement to give an opportunity of proceeding
evidence does not mean that the parties can produce any
amount of evidence they like and thus prolong the proceeding
unduly. It is, therefore, for the hearing officer concerned to
43 Sita Ram Aggarwal v. Union Of India, AIR,1967,Delhi, p 38. 44 Ibid.
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decide in case any party desires to lead evidence whether the
evidence is necessary and relevant to the enquiry before it.
Secondly the quasi-judicial body has to decide the matter
on the basis of materials placed before it in the course of the
proceedings. It cannot take extraneous matters into
consideration, nor can it base its decision on materials unless
the person against whom it sought to be utilized has been given
an opportunity to meet these materials or to explain them.
Thirdly the quasi-judicial body should not only disclose the
relevant materials which it desire to use, but it should also give
an opportunity of rebuttal against the material to the affected
party by way of cross examination is to be given or not depends
upon the circumstances of each case and the statute under
which the hearing is being held. In tax cases the judiciary has
not insisted on the right of cross-examination of their
departmental witnesses by the taxpayer, though this is not an
invariable rule, however, when an evidence is given orally
against a person he must have the opportunity to hear it and to
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put the witnesses questions in cross examination.45 In case
where cross-examination of witness is permitted, it is not
necessary to follow the procedures laid down in the Indian
Evidence Act. It is sufficient if the party is given an adequate
opportunity of cross-examination.46 Moreover it has been held
that in Central Excise cases, for the statements given at the time
verification by Excise authorities, if not retracted by the
management, then cross-examination of such persons is not
needed47
The requirement to give an opportunity of proceeding
evidence does not mean that the parties can produce any
amount of evidence they like and thus prolong the proceeding
unduly. It is, therefore, for the hearing officer concerned to
decide in case any party desires to lead evidence whether the
evidence is necessary and relevant to the enquiry before it.
Lastly the quasi-judicial body has to decide the matter on
the basis of materials placed before it in the course of the
proceedings. It cannot take extraneous matters into 45 Meenglas Tea Estate v. Workmen, AIR, 1963, SC, p 1719. 46 Union of India v. T.R. Verma, AIR, 1957, SC, p 882. 47 Gulabchand Silk Mills (P) Ltd. v. Commissioner of Central Excise, 2005, ELT, p
263(Tri.-Bang.)
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57
consideration, nor can it base its decision on materials unless
the person against whom it sought to be utilized has been given
an opportunity to meet these materials or to explain them.
Cross-examination of witnesses in adjudication of cases at
the time of hearing is permissible. As the department relies upon
the statements of witnesses the cross examination is inevitable
when requested for by the defence. To refuse cross-examination
in quasi-judicial proceedings of departmental witnesses or any
other witness, requested for by the defence may amount to
violation of natural justice. But the defence must make the
request for cross-examination. This has been held that denial of
cross examination is a violation of the principle of natural
justice.48 Every opportunity must be given to the accused for the
purpose of cross examination of witness.49
It has also been held that an uncrossed statement of the
witness can not be relied upon for proving the evasion of
duty/tax against the assessee especially when those statements
48 C.V. Steels Ltd. v. Commissioner of Central Excise, 2003, ELT, p 451 (Tri.). 49 C. Kuyalal v. Commissioner of Central Excise,2003, ELT, p 62 (Mad).
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do not find corroboration from any other reliable evidence.50 If
the assesse is not given the opportunity to cross examine the
witnesses whose statements are recorded at their back and are
relied upon by the department, it has certainly resulted in
miscarriage of justice and hence not permissible.51 Where the
statements of witnesses are contradictory, the statements could
not be accepted till the cross examination of such persons by the
appellants and likewise, when the Revenue has not corroborated
their statement or have explained or given a different version
then the statement loses its evidentiary value.52
The opportunity for cross examination could not be denied
by taking the plea of loss of time as well as blockage of
revenue.53
The hon’ble Customs Excise and Service Tax Appellate
Tribunal has held that where neither the company about
clandestine removal nor the purchase about receipts of such
goods were admitted. The basis of the department was the
50 Takshila Spinners v. Commissioner of Central Excise, 2001, ELT, p 568 (Tri.) 51 Standard Industries v. Commissioner of Central Excise, 2000, ELT, p 59 (Tri.) 52 Nutrend Business Machines Pvt. Ltd. v. Commissioner of Central Excise, 2002,
ELT, p 119 (Tri.) 53 Orient Cable Industries v. Commissioner of Central Excise, 2003, ELT, p 658
(Tri.).
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statement of Vice President of the company, based upon the
diary and loose sheets maintained by him, who had failed to
disclose the basis of such entries, there was no corroboration to
his evidence from any source also, and he failed to submit
himself for cross examination, the statement cannot be made the
basis for confirming the demand.54
Provisions of section 14 of Central Excise Act 194455 can
be used in summoning any person either of his own or at the
instance of the party. Section 14 of The Central Excise Act 1944,
lays down the power in the hands of a gazzetted officer of
Central Excise to summon any person for giving evidence or
producing documents necessary for an enquiry, which the
summoning officer may be making for the purpose of the Act.
The person must attend in response to summons and answer
such questions which do not incriminate him.
The exemptions under section 132 and 133 of the code of
Civil Procedure, 190856 shall be applicable to requisitions for
54 Globe Synthetics Ltd. v. Commissioner of Central Excise, 2003, ELT, p 228
(Tri.). 55 Supra note, 18 , p 1.124 56 See Krishan Arora’s, Code of Civil Procedure, Professional Book Publishers,
New Delhi, 2007, p 68-69.
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60
attendance, while the enquiry shall be a judicial proceeding
within the meaning of sections 19357 and 22858 of the Indian
Penal Code, 1860. In other words, the person is required to
answer the questions put to him under section 108 of The
Customs Act 196259 or section 14 of The Central Excise Act
194460 and on his failure to so, he attracts penalties. It has also
been provided vide section 83 of The Finance Act 199461 that
these provision are mutatis mutandi applicable to the Service
Tax matters. It is not that provisions of section 14 are meant to
be used only for enquiry and recording of the statements. In
such cases the summons could be issued in duplicate and the
receipt of the summons could be acknowledged on the duplicate
copy. The powers under Sec. 14 can be use not only for the
purposes of enquiry to summon persons to give evidence in
favors of the department alone, but also in all such cases where
at the instance of the party, persons have to be summoned to
produce documents and records that may be found to be helpful
to the defence. Sec.108 of Customs Act, 1962,62 corresponds
57 D.D.Basu, Indian Penal Code 1860, Asoke K. Ghosh, Prentice-Hall of India
Private Limited, M-97, Cannaught Circus, New Delhi-110001,1997, p 139 . 58 Id., p 156. 59 Supra note 19, p 1.96. 60 Supra note 18, p 1.124. 61 Supra note 20, p 2472. 62 Supra note 19, p 1.96.
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to Sec. 14 of Central Excise Act, 1944 and is pari-materia in all
respects.
(viii) Right of counsel
Generally speaking, assistance of a counsel cannot be
claimed as a matter of right unless it is specifically provided in a
statute. But in a case where complicated questions of law and
fact arise and where the evidence is elaborate and the party
charged is not in a position to defend without the assistance of a
lawyer, denial of legal assistance may amount to a denial of
Natural Justice. In common law counsel like America, the right of
legal counsel is statutorily provided, in Australia, appearance of
a lawyer before a Tribunal is a rule, non-appearance is an
exception in England but the right of legal representation has
been unanimously upheld, especially in those matters which
effect a man’s reputation or livelihood on any matter of serious
importance least where there is a right of an oral hearing.
(ix) Reasoned decisions
Earlier, it was said that requirement to give reasons was
not of the principles of natural justice and accordingly quasi-
judicial bodies need not give reasons in support of their
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62
decisions though in some cases the courts did insist upon
making speaking orders i.e. orders which told there own story or
in other words gave reasons. But, for sometimes past there is
clearly a change of approach in this regard and a growing
emphasis on these bodies to give reasons for their decisions.
The best enunciation of this approach is to be found in the
concurring judgment of Justice Subha Rao,63 wherein he
stated: -
“ In the context of a welfare state, Administrative Tribunals
have come to stay…. But arbitrariness in their functioning
destroys the concept of a welfare state itself…The best that a
Tribunal can do is to disclose its mind. The compulsion of
disclosure guarantees consideration. The condition to give
reasons introduces clarity and excludes or at any rate minimizes
arbitrariness; It give satisfaction to the to the party against whom
the order is made.”
The Supreme Court has held that it is necessary for
Central government, hearing revision applications against the
orders of the Collector of Customs, to give reasons for its
63 M.P. Industries v. Union of India, AIR, 1966, SC, p 671.
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decisions even though the Collector of customs had given
detailed reasons64.
(x) Institutional Decisions
A quasi-judicial authority has to discharge the functions of
adjudication along with other administrative duties except where
specialized bodies have been set up exclusively for adjudication.
If an administrator has to carry to him, it becomes essential for
him to take the assistance of subordinates within the
department. A decision in such a case is called institutional
because the decision as a whole is that of the concerned
department. In this context, it has been held in various decisions,
herein before that one who decides must hear.
(4) Powers and Jurisdiction of Adjudicating Authorities
The adjudication powers to adjudicate the cases are fixed
as per monetary limits vide sections 33 of the Central Excise Act,
194465, 122 of the Customs Act, 196266 and 83A of the Finance
Act 199467. These limits are often subjected to review and
changes and presently these are prescribed the CBEC in 64 Travanceore Rayons v. Union of India, AIR, 1971, SC, p 862. 65 Supra note 18, p 1.134. 66 Supra note 19, p 1.101. 67 Supra note 20, p 2472.
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respect of Central Excise / Service Tax vide circular no
752/68/2003-CX dated 1-10-200368 and in respect of Customs
vide circular no 23/2009-Customs dated 1-9-200969:
Table I. Powers and jurisdiction of Adjudicating Authorities
in The Central Excise Act, 1944 & The Finance Act, 1994
S.No. Designation Work Powers
1 2 3 4
i. Assistant
Commissioner/ Deputy
Commissioner
Amount of duty
or Cenvat credit and
Service Tax
up to Rs 5
lacs
ii. Joint Commissioner Amount of duty
or Cenvat credit and
Service Tax
from Rs 5
lacs to Rs.20
lacs
iii. Additional
Commissioner:
Amount of duty
or Cenvat credit and
Service Tax
from Rs 20
lacs to Rs.50
lacs
iv. Commissioner Amount of duty
or Cenvat credit and
Service Tax
Review/ revision of the
orders passed by the
authorities at 1 to 3
No Limit.
No Limit.
68 Id., p 2118. 69 www.taxguru.in visited on 27-8-10.
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Table II. Powers and jurisdiction of Adjudicating
Authorities in the Customs Act, 1962
S.No. Designation Work Powers
1 2 3 4
i. Assistant
Commissioner/
Deputy
Commissioner
SCN with/ without invoking
extended period value of goods
Upto 2 lacs
ii. Additional
Commissioner/
Joint
Commissioner
Cases involving collusion, willful
mis-statement or suppression of
facts etc. duty involved
Upto 50 lacs
iii. Additional
Commissioner/
Joint
Commissioner
Other cases, value of goods Upto 50 lacs
iv. Commissioner No limit
Note: in case of baggage the power of ADC/JC is without any
limit, because at the point entry of passengers it is found
expedient to entrust these powers in these officers.
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It has also been noticed that the appellate powers given to
Commissioner (Appeals) vide sections 35 of The Central Excise
Act, 1944,70 84 of the Finance Act, 199471 and 128 of the
Customs Act, 196272 are exercised by the departmental officers,
who are again administrative functionaries, therefore all these
provisions regarding adjudication like observance of natural
justice etc. are mutatis mutandi applicable to them. The second
appeal against the orders of the Commissioner (Appeals) and
first appeal against the orders of the Commissioner lies with
Customs Excise and Service Tax Appellate Tribunal.
During the course of research, random
interviews/interaction conducted with the Advocates practicing in
this field, Chartered Accountants, Assessees, officers of the
department and public at large pointed towards only one
direction that the decisions/quality of adjudication differs from
officers to officers. The officers posted at different places pass
different type of orders in respect of similar issues. In order to
test this prevalent notion, information was got called through a
volunteer under Right to Information Act, 2005, seeking the
70 Supra note 18, p 1.135. 71 Supra note 20, p 2472. 72 Supra note 19, p 1.107
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details of adjudication orders passed by various officers of the
rank of Commissioner in Northern India comprising of jurisdiction
over the states of Punjab, Himachal Pradesh, Jammu and
Kashmir and Union Territory of Chandigarh. Although
voluminous information in respect of first three points was
received but as regards to fourth point it was informed that no
such information is available.
This data was called from a sizeable area and where the
litigation in respect of cases is almost on similar disputes and all
the officers are working under the same officer i.e. Chief
commissioner Chandigarh Zone. The public at large is almost
similar. It is also pertinent to point out that the
advocates/chartered accountants practising in this field are
same. They represent the litigants in different places before
different adjudicating authorities. These findings have been
tabulated arithmetically on the basis of figures supplied by the
department and the same are given below.
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Table III. Details of Adjudication orders passed by various
Commissioners in Chandigarh Zone during the period 1-1-
07 to 30-6-09
Sr.
no.
Name of
Commissi
onerate
Total no. of
adjudication
orders
passed
No. of
orders in
favour of
department
No. of
orders
against
the
department
Partial
orders
Ratio
%age
of 4
and 5
to 3
1 2 3 4 5 6 7
i. Chandigarh 291 95 181 15 33:62
ii. Jammu 97 11 86 -- 11:89
iii. Jalandhar 142 112 30 -- 79:21
iv. Ludhiana 118 46 72 -- 39:61
v. Amritsar 25 22 1 2 88:4
Note: Data collected through Right to Information Act, 2005.73
73 Gist of the information sought under right to Information Act, 2005 from the
Central Public Information Officer office of Chief Commissioner ( Chandigarh Zone) Central Excise, Chandigarh:
1. Details of Adjudication Orders passed by all the Commissioners in the Chandigarh Zone w.e.f. January 2007 till June 2009 ( Commissioner wise) along with names of the parties, amount involved, whether pro revenue or anti revenue.
2. Number and percentage of these orders of each Commissioner as to pro/ anti along with revenue there of.
3. Copies of all the review orders passed by Commissioner Central Excise Ludhiana along with note sheets of the same.
4. Any correspondence regarding quality of adjudication done by him. Any adverse findings, details there of.
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The analysis of the information reveals that there is major
difference in working of Adjudicating authorities in various
commissionerates. It depended from person to person and area
to area. In Chandigarh Commissionerate, there was some
quality of adjudication was better than that of other
Commissionerates. 33% orders were pro revenue, 62% anti
revenue and 5% partial and less than 10% anti revenue orders
were considered fit for filling appeal against them. Thus, issues
getting finality. However, it also pointed out that many frivolous
Show Cause Notices have also been issued leading to
harassment and economic burden on assesses and
Government.
In Jammu the ratio was worse 11:89 i.e. against the
department, but again these anti revenue order were accepted to
be true in majority of cases. It also pointed out that many
frivolous Show Cause Notices have also been issued leading to
harassment and economic burden on assesses and
Government.
In Jalandhar the ratio was worse 79:21 i.e. against the
Assessees. Therefore, forcing them to seek relief in Customs
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Excise and Service Tax Appellate Tribunal, after incurring
avoidable harassment and financial burden.
In Ludhiana, although the ratio was 39:61 as regard to pro
revenue and anti revenue, but it was observed that out of 72
cases anti revenue cases 64(89%) cases were appealed against
by the department. This reveals that litigation continues, entailing
huge wastage of time and money, both by assesses and
department.
In respect of Amritsar Customs Commissionerate, dealing
with matters relating to customs matters, the ratio is 88:4 in
respect of orders. But this trend is not in consonance with other
findings, because, they deal with mainly Customs seizure cases
involving smuggled goods, where the adjudication orders are
mostly in favour of the department .
5. Concluding Remarks
Therefore, it is seen that many a times these cases are
adjudicated with scant regard to rules and regulations and there
is need to impart some kind of training to the different tax
authorities in Judicial practice and procedure because the tax
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authorities are not having some kind of professional educational
back ground generally, when they get entry in the department,
because all the time these tax officers more or less write
Judgments and the points for determination and finding there on.
Justice should not only be done, but should also appear to
be done and should inspire confidence in the persons
concerned. It is an elementary principle of the law that person
should not be a judge in his own cause. In the existing system all
adjudicating/ appellate authorities, being under the direct control
of the Central Board of Excise and Customs, are not considered
as a satisfactory authorities to hear and dispose off
cases/appeals against the order of their subordinate officers.
Now the million dollar question, which require a careful
thought is whether these appellate authorities should be placed
under the supervisory control of Appellate Tribunal, so as to
make them Independent authority, so that they are not under the
influence of the Central Board of Excise and Customs and their
Judgments are not affected by any considerations and are
irrelevant to the decisions of the appeal in the matter.
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It is seen that large number of posts in the department are
lying vacant. This results long delay in handling of the
adjudication matters, which are already accorded least
importance. At the beginning of year 2010 there were more than
400 top level posts lying vacant in Customs and Central Excise
department.74 At least an effort can be made to fulfill these
vacant posts. This is necessary because huge revenue is locked
up in litigation.
Long back the hon’ble Supreme Court of India had
observed,75 “ It must be remembered that the appointments,
after all have to be made from whatever legal and judicial talent
is available and the situation is not going to improve by waiting
for year or two; a new star is not going to appear in the legal
firmament within such a short time and the appointments can not
be held up indefinitely.”
Despite of such a clear cut directions from the apex court,
still there are so many vacancies at all levels and no significant
effort has been made in this regard.
74 2010(256), ELT, p A177. 75 Mahendra and Mahendra Ltd. v. M.R.T.P., AIR, 1979, SC, p 798.
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It is also seen that the system of review of orders and filing
of appeals is also fraught with manipulation and is not foolproof.
Although adjudication orders of Commissioner are reviewed by a
committee of two Chief Commissioner assisted by a battery of
subordinate officers, some times due to reasons well known,
appeals are filed in wrong court. If by virtue of the provisions
contained in the Acts, the same lies to the Supreme Court of
India against the adjudication orders, the order is reviewed and
appeal is filed in High Court.76 Such filing of appeal ultimately
fails, defeating the very purpose of review and government loses
revenue worth crores of rupees.
Therefore, it is purposed that accountability of officers at all
levels of dealing with adjudication matters must be fixed. Special
nodal agency may be created for this purpose. Officers must be
made responsible for raising wrong issues, making frivolous
appeals and wrong appeal.
-o-o-o-o-o-
76 2010(257), Excise Law Times, p A59.