At, High Court of Judicature at Allahabad
By, THE HONOURABLE MR. JUSTICE YASHWANT VARMA
For the Applicant: Rakesh Ranjan Agrawal, Senior Advocate, Suyash Agarwal, Advocate. For the Opposite Party: A.C. Tripathi, Standing Counsel.
1. Heard Sri Suyash Agarwal, learned counsel for the revisionist and Sri A.C. Tripathi, the learned Standing Counsel for the State-respondent.
2. On 19 May 2003, the Tribunal while dealing with the appeal of the assessee relating to the Assessment Year 1995-96 remanded the matter to the Assessing Authority noticing that no opportunity to cross examine one Ghanshyam Pandey was afforded. It also took into consideration the fact that the statement of Ghanshyam Pandey alone had formed the bedrock for the additions in taxable turnover. It further noted that the assessee from the very beginning disputed the statement of Ghanshyam and therefore the imperative necessity that the revisionist be granted an opportunity to cross examine.
3. The issue itself arose out of the fact that the Department is stated to have obtained the statement of Ghanshyam Pandey in which he alleged that no transport of goods was effected to Daman at the behest of the assessee. Upon subsequently being confronted with the transport bill, he is purported to have stated that the said bill was generated only on the instructions of the assessee. On this material alone, the respondents took the view that the entire transaction was a ruse in order to evade payment of tax.
4. Consequent to the order of remand made by the Tribunal on 19 May 2003, the Assessing Authority notes that although a notice was sent to Ghanshyam Pandey, he did not respond and therefore the assessee could not cross examine. The Assessing Authority thereafter proceeded to assess the escaped turnover at Rs. 10,00,000/and imposed tax on the premise that no transport of goods had in fact taken place to Diu. On an appeal preferred by the assessee before the Tribunal in the second round, the Tribunal has upheld the above by noticing that although notices had been issued to Ghanshyam Pandey, he could not be traced out since the transport company itself had been closed down. However, the statement of Ghanshyam Pandey alone was relied upon by the Tribunal as well as the Assessing Authority to sustain the addition of turnover and a consequential levy of additional tax. The Court finds itself unable to sustain the view taken both by the Assessing Authority as well as the Tribunal. The reasons are not far to seek.
5. The order of the Tribunal dated 19 May 2003 clearly mandated the Assessing Authority to produce Ghanshyam Pandey and make him available for cross examination. This for the simple reason that the assessee was to necessarily be accorded an opportunity to rebut the evidence or material which was adverse and was sought to be relied upon. It is not disputed before this Court that it was the statement of Ghanshyam Pandey alone on which rested the view adopted by the respondents that tax had been evaded and the theory of transportation of goods to Diu a falsity. Since the edifice for addition in turnover and imposition of tax rested on the statement of Ghanshyam Pandey, it was necessary for the respondents to grant an opportunity to the assessee to cross examine him. It is also not disputed that from the inception, the assessee had been demanding a right of opportunity to cross examine Ghanshyam Pandey.
6. Regard must also be had to the fact that the assessment proceedings themselves related to the Assessment Year 1995-96. The fact that the business had closed down by the time the Assessing Authority proceeded to frame the assessment order all over again on 17 October 2006, cannot result in the assessee being visited with adverse consequences since undisputedly he had been insisting from the very beginning that the statement of the said witness was being denied and that an opportunity to cross examine must be provided. Sri Agarwal has rightly placed reliance upon the following observations as made by the Supreme Court in Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II(2016) 15 SCC 785:
"6. According to us, not allowing the assessee to cross examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the adjudicating authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the adjudicating authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their exfactory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.
7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the adjudicating authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject-matter of cross-examination. Therefore, it was not for the adjudicating authority to presuppose as to what could be the subject-matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came up before this Court in CCE v. Andaman Timber Industries Ltd.[CCE v. Andaman Timber Industries Ltd., (2005) 12 SCC 151] , order dated 17.3.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.
8. In view of the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show-cause notice."
7. The above observations clearly establish that when taxing authorities choose to levy tax or conclude that paym
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ent of tax has been evaded on the basis of statements of individuals, the assessee must necessarily be granted an opportunity to cross examine. Such adverse material can neither be introduced nor form the foundation for the imposition of additional tax without an opportunity being accorded to the assessee to challenge the statement in cross examination. In view of the above settled position, this Court finds itself unable to sustain the orders passed by the Assessing Authority as well as the Tribunal. 8. Accordingly, this revision is allowed. The order of the Tribunal as also of the Assessing Authority impugned herein dated 9 November 2005 and 9 May 2007 respectively, shall stand set aside. The assessee shall be entitled to all consequential benefits.