Delhi High Court
M/S. Vallabh Textiles vs Additional Commissioner Central Tax … on 9 April, 2025
Author: Prathiba M. Singh
Bench: Prathiba M. Singh
$~60
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 9th April, 2025
+ W.P.(C) 4576/2025
M/S. VALLABH TEXTILES .....Petitioner
Through: Mr. Vivek Sarin, Mr. Akash Gupta,
Ms. Divyanshi Singh, Mr. Dhruv Dev
Gupta & Mr. Satish C. Kaushik,
Advocates.
versus
ADDITIONAL COMMISSIONER CENTRAL TAX GST, DELHI
EAST AND ORS .....Respondents
Through: Ms. Anushree Narain, Sr. Standing
Counsel with Mr. Ankit Kumar, Adv.
CORAM:
JUSTICE PRATHIBA M. SINGH
JUSTICE RAJNEESH KUMAR GUPTA
Prathiba M. Singh, J. (Oral)
1. This hearing has been done through hybrid mode.
CM APPL. 21170/2025 (for exemption)
2. Allowed, subject to all just exceptions. Application is disposed of.
W.P.(C) 4576/2025 & CM APPLs. 21169/2025 (for directions)
3. The present petition has been filed by the Petitioner – Vallabh Textiles
under Article 226 of the Constitution of India inter alia seeking setting aside
of the orders dated 20th January, 2025 and 29th January, 2025 and 1st February,
2025 as arbitrary and in violation of the provisions of the CGST Act, 2017
and Article 14, 19(1)(g), 265, 300A of the Constitution of India.
4. First of all, the present petition has been filed challenging the impugned
order dated 29th January, 2025 by which the Adjudicating Authority has
confirmed the GST liability of the Petitioner to the tune of Rs. 7,13,05,165/-
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and has imposed an equivalent penalty. Penalties have also been imposed on
Petitioner’s Directors.
5. At the outset, Mr. Sarin, ld. Counsel for the Petitioner submits that this
is the second round of the litigation by the Petitioner. Earlier, this Show Cause
Notice (hereinafter ‘SCN’) dated 29th May, 2024 from which the impugned
demand order dated 29th January, 2025 arose was challenged by the Petitioner
on the ground that consolidation of investigation for different financial years
is not permissible. The said writ petition being W.P.(C) 13855/2024 and the
order dated 3rd October, 2024 passed therein, has not been mentioned in the
present writ petition. He apologises for the same unconditionally and submits
that it was an inadvertent error. The Court has perused the order dated 3rd
October, 2024 passed in the said writ petition, wherein on the question of
consolidation, the Court has disposed of the matter.
6. The second grievance which is now being raised in this petition is that
the SCN proceedings continued before the Adjudicating Authority, however,
the Petitioner’s right to cross-examine certain third parties was denied vide
impugned order dated 20th January, 2025.
7. Ms. Narain, ld. Senior Standing Counsel for the Respondent No.1
(hereinafter ‘Department’) in response submits that the said order is an
appealable order under Section 107 and the same contention can be raised
even as a ground before the Appellate Authority. Therefore, she submits that
the Petitioner ought to be relegated to the appellate remedy.
8. Heard the parties. The brief facts of the case are that the Directorate
General of Goods and Services Tax Intelligence (hereinafter as ‘DGGI’)
gathered intelligence that M/S. Vallabh Textiles i.e., the Petitioner was acting
as a commission agent for selling of third-party goods to various clients in the
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local markets. The said sales were being made, according to the Department,
on a kaccha ledger and the details of various entities who were the purchasers
of the said goods from the Petitioner, was mentioned in the said Ledgers.
Thus, as per the Department, there was evasion of GST.
9. A SCN dated 29th May, 2024 contained all the evidence, which was
collected during the course of search including the hand-written kaccha
ledgers, parchas etc.
10. The Petitioner had challenged the issuance of SCN on the ground that
the same was issued as a consolidated notice for multiple years. This writ
petition, being W.P.(C) 13855/2024, was disposed of vide order dated 3rd
October, 2024. The said order reads as under:
“1. The instant writ petition seeks to assail the validity of
a Show Cause Notice [“SCN”] dated 29 May 2024 and
which raises issues pertaining to Financial Years
[“FYs”] 2017-18 to 2021-22.
2. The principal ground of challenge which was
addressed before us was with respect to the action of the
respondents who have proceeded to issue a consolidated
notice for the aforesaid period.
3. On an ex-facie perusal of Section 74 of the Central
Goods & Services Tax Act, 2017 [“CGST”]/Delhi Goods
& Services Tax Act, 2017 [“DGST”], we find ourselves
unable to sustain that challenge in the absence of any
prohibition that may have been statutorily engrafted in
this respect. That in any case would not constitute a
jurisdictional challenge warranting the writ petition
being entertained against a SCN.
4. Insofar as FY 2017-18 is concerned, it was the
submission of learned counsel for the writ petitioner that
the same would not sustain bearing in mind the
provisions contained in Section 74(10) of the CGST Act,
2017/DGST Act, 2017. Insofar as that question is
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initiate appropriate proceedings independently.
5. Bearing in mind the well settled principles which
govern situations and contingencies in which a SCN
challenge may be entertained by a Court under Article
226 of the Constitution, we find no ground to entertain
the instant writ petition.
6. It shall, subject to the aforesaid observation, stand
dismissed.”
11. After the writ petition was disposed of on 3rd October, 2024, the Show
Cause Notice proceedings continued before the Adjudicating Authority and
the Petitioner made a request for cross-examination of five persons, namely,
Sh. Vinod Baid, Sh. Kamal Kishore Karnani, Sh. Saurabh Aggarwal, Sh.
Deepak Kumar Jha and Sh. Anil Kumar. The said prayer for cross-
examination was denied/ rejected by the Adjudicating Authority on 20 th
January, 2025, inter alia, on the ground that the statements in question were
only corroborative of undisputed documentary evidence already on record,
and thus, did not warrant cross-examination.
12. The Adjudicating Authority in this regard has relied on the decision of
the High Court of Telangana in Mohammed Muzzamil and Another vs. The
CBIC (W.P(C) 18081/2020) which held that cross-examination cannot be
claimed as a matter of right especially if it does not make any material
difference. The observation of the Adjudicating Authority is as under :-
“Further the request for cross examination of said
individuals or witnesses has been carefully examined. It
is observed that –
i. The evidence relied upon is documentary in
nature and does not require corroboration through oral
testimony.
ii. The statements in questions are supported by
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undisputed, rendering cross examinations unnecessary.
iii. The requested cross examination is irrelevant to
the specific under adjudication.
Therefore the request for cross examination is denied
under the principles laid doen K.L. Tripathi V. SBI,
1984(1)SCC 43 and other relevant precedents, as it is
not essential for ensuring natural justice in this case.
In view of the above facts and case laws cited, it
appears that the request made by the noticee vide male
dated 11.01.2025 do not contain merit for acceptance
and are liable to be rejected.”
13. Accordingly, the right for cross-examination was denied and, thereafter
the impugned orders dated 29th January, 2025 and 1st February, 2025 were
passed raising the demand upon the Petitioner.
14. It can be seen that the impugned order is a very detailed order passed
by the Adjudicating Authority running into more than 60 pages, which has
discussed all the evidence which clearly as per the Authority demonstrates
that undeclared sales were being made by the Petitioner to avoid the payment
of GST. Moreover, the question as to whether in a particular year, the proper
declaration was given, whether the facts given by a particular witness are right
or wrong and whether the Petitioner needs to be permitted to rebut are all
factual issues that cannot be considered in writ jurisdiction.
15. While cross-examination can be granted in certain proceedings, if it is
deemed appropriate, the right to cross-examine cannot be an unfettered right.
This has been so held recently by this Court in Sushil Aggarwal v. Principal
Commissioner Of Customs (2025:DHC:698-DB). The relevant portion of the
decision reads as under:
“15. Accordingly, this Court is of the opinion that in
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order to ensure that there is compliance of Section
138(B) of the Act, though the same cannot be claimed
as an unfettered right in all cases, in the facts of the
present case, both Mr. Sushil Aggarwal and Mr.
Aidasani are afforded an opportunity to cross examine
Mr. Bhalla.”
16. The rationale behind setting aside an order/judgment on the grounds of
non-provision of the right to cross-examine is to safeguard the affected party
from being prejudiced due to non-providing of cross examination. Therefore,
such reasoning presumes/implies the existence of prejudice. In other words,
if the alleging party fails to prove any substantial prejudice caused to it due to
such non-provision, it shall not have the inherent right to set aside such an
order/judgment. This view has been upheld by the Supreme Court in various
judgments including M/s. Telestar Travels Pvt. Ltd. v Special Director Of
Enforcement 2013(9) SCC 549. The relevant portion of the said judgment
reads as under:
“23. That brings us to the third limb of the attack mounted
by the appellants against the impugned orders. It was
argued by Mr Divan that while holding that Bountiful Ltd.
was a paper company and was being controlled and
operated from India by the appellants through Shri Sirish
Shah, the adjudicating authority had relied upon the
statements of Miss Anita Chotrani and Mr Deepak Raut,
and a communication received from the Indian High
Commission in London. These statements and the report
were, according to Mr Divan, inadmissible in evidence as
the appellant’s request for an opportunity to cross-
examine these witnesses had been unfairly declined,
thereby violating the principles of natural justice that
must be complied with no matter the strict rules of the
Evidence Act had been excluded from its application. …
…
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24. Mr Malhotra, on the other hand, argued that the right
of cross-examination was available to a party under the
Evidence Act which had no application to the
adjudication proceedings under FERA. … …He also
placed reliance upon a decision of this Court in Surjeet
Singh Chhabra v. Union of India(1997(1) SCC 508=1997
SCC (Cri) 272) to argue that cross-examination was
unnecessary in certain circumstances such as the one at
hand where all material facts were admitted by the
appellants in their statements before the authority
concerned.
25. There is, in our opinion, no merit even in that
submission of the learned counsel. It is evident from Rule
3 of the Adjudication Rules framed under Section 79 of
FERA that the rules of procedure do not apply to
adjudication proceedings. That does not, however, mean
that in a given situation, cross-examination may not be
permitted to test the veracity of a deposition sought to be
issued against a party against whom action is proposed
to be taken. It is only when a deposition goes through the
fire of cross-examination that a court or statutory
authority may be able to determine and assess its
probative value. Using a deposition that is not so tested,
may therefore amount to using evidence, which the party
concerned has had no opportunity to question. Such
refusal may in turn amount to violation of the rule of a
fair hearing and opportunity implicit in any adjudicatory
process, affecting the right of the citizen. The question,
however, is whether failure to permit the party to cross-
examine has resulted in any prejudice so as to call for
reversal of the orders and a de novo enquiry into the
matter. The answer to that question would depend upon
the facts and circumstances of each case.”
17. In the present case, the request to cross-examine certain witness
statements was rejected, as mentioned above, on the grounds that the
statements in question were only corroborative of undisputed documentary
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evidence already on record, and thus, did not warrant cross-examination. The
Supreme Court in Telestar Travels (Supra) while, in fact, dealing with similar
circumstances has observed as under:
“28. Coming to the case at hand, the adjudicating
authority has mainly relied upon the statements of the
appellants and the documents seized in the course of the
search of their premises. But, there is no dispute that
apart from what was seized from the business premises
of the appellants, the adjudicating authority also placed
reliance upon the documents produced by Miss Anita
Chotrani and Mr Raut. These documents were, it is
admitted, disclosed to the appellants who were permitted
to inspect the same. The production of the documents
duly confronted to the appellants was in the nature of
production in terms of Section 139 of the Evidence Act,
where the witness producing the documents is not
subjected to cross-examination. Such being the case, the
refusal of the adjudicating authority to permit cross-
examination of the witnesses producing the documents
cannot even on the principles of the Evidence Act be
found fault with. At any rate, the disclosure of the
documents to the appellants and the opportunity given
to them to rebut and explain the same was a substantial
compliance with the principles of natural justice. That
being so, there was and could be no prejudice to the
appellants nor was any demonstrated by the appellants
before us or before the courts below. The third limb of
the case of the appellants also in that view fails and is
rejected.” ( emphasis supplied)”
18. A perusal of the above decisions reveals that while cross-examination
would be required in certain cases, it need not be given as a matter of right in
all cases. The provision of the opportunity to cross-examine depends on the
facts and circumstances of each case and is warranted only when the party
seeking such an opportunity is able to demonstrate that prejudice would be
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caused in the absence thereof.
19. The Court is of the considered view that parties cannot, by praying for
cross-examination, cannot convert Show-cause Notice proceedings into mini-
trials. Persons seeking cross-examination ought to give specific reasons why
cross-examination is needed in a particular situation and that too of specific
witnesses. A blanket request to cross-examine all persons whose statements
have been recorded by the Department, many of whom are typically
employees, sellers, purchasers, or other persons connected to the entity under
investigation, cannot be sustained. If a prayer for cross-examination is made,
the Authority has to consider the same fairly and if the need is so felt in respect
of a particular person, the same ought to be permitted. If not, the Authority
can record the reasons and proceed in the case. Moreover, cross examination
need not also be of all persons whose statements are recorded. It could be
permitted by the Authority in case of some persons and not all.
20. In the present case, the mere rejection of the Petitioner’s request for
cross-examination cannot, in and of itself, be treated as a sufficient ground to
bypass the statutorily prescribed appellate remedy and invoke the writ
jurisdiction of this Court.
21. Therefore, the Court is of the opinion that the Petitioner ought to avail
of its appellate remedy in accordance with law in respect of both orders dated
20th January, 2025 and 29th January, 2025 including the demand raised on 1 st
February, 2025.
22. The Petitioner is, accordingly, permitted to approach the Appellate
Authority by way of an appeal under Section 107 of the CGST Act within
thirty days. If the appeal is filed within the said period, the same shall be
considered on merits and shall not be dismissed on the ground of being barred
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by limitation.
23. Needless to add, that the appeal, which may be filed by the Petitioner
shall be considered on its own merits without being influenced by any
observations made today in this order.
24. The petition is disposed of. Pending application(s), if any, also stand
disposed of.
PRATHIBA M. SINGH
JUDGE
RAJNEESH KUMAR GUPTA
JUDGE
APRIL 9, 2025/nd/Ar.
(corrected & released on 15th April, 2025)
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