Isabella Mariam

The High Court of Gujarat Division Bench of Justice A.S. Supehia and Justice Pranav Trivedi allowed a petition by an assessee entity challenging a customs adjudication order and sent the matter back to the adjudicating authority for fresh consideration. The Court stated that under Section 138B of the Customs Act, statements recorded by customs officers from witnesses who are not produced for cross-examination can be treated as relevant only after the authority establishes the reasons for their non-availability and records a finding that securing their presence is not feasible, while still giving the assessee an opportunity to respond. The petitioner had contended that the appellate tribunal, while remanding the case, had directed that it be given an opportunity to cross-examine witnesses who were not examined earlier.

The petitioners, including a partnership firm engaged in manufacturing excisable goods such as copper ingots and billets, and its partners, were issued a show cause notice dated 04.05.2012 proposing penalties under Sections 112(a) and 114(iii) of the Customs Act, 1962. The adjudicating authority passed an order on 28.05.2014 imposing penalties based on statements of six witnesses whose cross-examination had been requested but not provided. The petitioners challenged the order before the Tribunal, which on 13.03.2023 set aside the decision and remanded the matter for fresh adjudication after granting an opportunity for cross-examination

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Upon remand, three witnesses appeared and were cross-examined, and they deposed in favour of the petitioners. Three other witnesses, despite four opportunities, did not appear. The adjudicating authority nonetheless relied on the statements of the three absent witnesses, while disregarding the testimony of the witnesses who appeared. The petitioners contended that this approach violated the Tribunal’s directions and the statutory mandate of Section 138B, which governs the admissibility and relevancy of statements recorded during inquiry.

The respondents argued that the statements of the absent witnesses were admissible under clause (a) of Section 138B(1). The petitioners therefore challenged the impugned order dated 18.03.2025.

The Court recorded that the Tribunal had remanded the matter because “the statement of six persons who the appellant sought to cross-examine has been relied in the Impugned order” and that “no examination/cross-examination of the said witness was undertaking by the adjudicating authority in terms of 138(B) of the Customs Act, 1962.” The Court noted that the Tribunal required fresh adjudication “after granting the appellant to due opportunity for cross-examination.”

The Court observed that the adjudicating authority had relied on the statements of three witnesses who remained absent despite “having been given four opportunities,” while simultaneously disregarding the statements of three witnesses who appeared and “deposed in favour of the petitioners after cross-examination.” It recorded that the respondents did not dispute these facts.

The Court examined Section 138B and stated that clause (b) “relates to the admissibility of the statements in evidence in the interest of justice, which are made by the witness, who is available… and has offered for cross-examination.” It further stated that “unless an opportunity of cross-examination is given… the same is inadmissible in evidence.” Discussing clause (a), the Court observed that it “authorizes the officer to consider the relevancy of the statements of that witness… who cannot be produced or is unavailable for cross-examination” and that the circumstances must be “established and a finding is recorded to the extent that it is impossible to secure the presence of the person.”

It recorded that before invoking clause (a), “an opportunity is also required to be offered to the assessee for securing presence of the witness at his/her expense.” The officer must also ensure that the inquiry “should not procrastinated beyond a reasonable time,” and after all attempts fail, “a finding has to be recorded on this aspect.” The statement cannot be used unless the assessee “is confronted with the statement and has been afforded full opportunity to deal with the same.” It was further stated that reliance cannot be placed “unless some corroborative material is produced to support such statement.”

The Court observed that the adjudicating authority was required “to consider the evidence of three witnesses, who appeared… along with the statements of three other witnesses who did not come for cross-examination” and that the relevancy of the latter “was required to be undertaken by adopting the course as narrated hereinabove.” The Court stated that the adjudicating authority must weigh all evidence with corroborative proof and the assessee’s defence.

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The Court held that: “Hence, the present writ petition merits acceptance. The impugned order dated 28.05.2014, is quashed and set aside. The matter is remanded back to the adjudicating authority i.e the respondent No.2 for fresh adjudication in light of the foregoing observations. Appropriate order shall be passed within a period of 12 weeks from the date of receipt of the order. Nothing is expressed by us on merits. All the rights and contentions of the respective parties are left open. Rule made absolute.”

Advocates Representing The Parties

For the Petitioners: Mr. Paresh Dave, Advocate for Mr. Paresh V. Sheth

For the Respondents: Mr. Pradip D. Bhate. Mr. Utkarsh R. Sharma

Case Title: M/s Mitesh Impex & Ors. v. Union of India & Anr.
Neutral Citation: 2025: GUJHC:67233-DB
Case Number: R/SCA/11791/2025
Bench: Justice A.S. Supehia and Justice Pranav Trivedi