Kerala High Court
The Joint Commissioner vs Nishad K.U on 17 February, 2025
Author: A.K.Jayasankaran Nambiar
Bench: A.K.Jayasankaran Nambiar
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR
&
THE HONOURABLE MR. JUSTICE EASWARAN S.
MONDAY, THE 17TH DAY OF FEBRUARY 2025 / 28TH MAGHA, 1946
WA NO. 303 OF 2025
AGAINST THE ORDER/JUDGMENT DATED 17.12.2024 IN WP(C)
NO.26732 OF 2024 OF HIGH COURT OF KERALA
APPELLANTS/RESPONDENTS 1 TO 4:
1 THE JOINT COMMISSIONER,
CENTRAL TAX AND CENTRAL EXCISE, CGST KOCHI,
COMMISSIONERATE, C.R. BUILDING, I.S. PRESS
ROAD, KOCHI, PIN - 682018
2 THE ADDITIONAL DIRECTOR,
DGGI, KOCHI ZONAL UNIT, CENTRAL EXCISE BHAVAN,
KATHRIKADAVU, KALOOR P.O., KOCHI, PIN - 682017
3 THE ADDITIONAL COMMISSIONER
OF CENTRAL TAX AND CENTRAL EXCISE, C.R.
BUILDING, I.S. PRESS ROAD, COCHIN, PIN -
682017
4 CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS,
REPRESENTED BY THE PRINCIPAL COMMISSIONER
(GST), GST POLICY WING, NORTH BLOCK, NEW
DELHI, PIN - 110001
BY ADV R.HARISHANKAR
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RESPONDENTS/PETITIONER & 5TH RESPONDENT:
1 NISHAD K.U.,
AGED 42 YEARS
PROP. M/S. WOODTUNES ENTERPRISES, KUPPIYAN
HOUSE, OKKAL P.O., CHELAMATTAM, PERUMBAVOOR,
ERNAKULAM, KERALA, PIN - 683550
2 UNION OF INDIA,
REPRESENTED BY THE SECRETARY TO GOVERNMENT,
MINISTRY OF FINANCE(DEPARTMENT OF REVENUE),
NORTH BLOCK, NEW DELHI, PIN - 110001
OTHER PRESENT:
ADV JAIKUMAR SEETHARAMAN
THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON
17.02.2025, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
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"C.R"
JUDGMENT
Easwaran S., J.
To what extent does the Central Goods and Services Tax Act,
2017 permit reading in the principles of natural justice? The intra-
court appeal preferred by respondents 1 to 4 in the writ petition
challenging the judgment dated 17.12.2024 in WP(C)No.26732/2024
raises this seminal question of law.
2. The brief facts necessary for the disposal of the appeal are
as follows:
The 1st respondent was visited with proceedings under Section 74(9)
of the Central Goods and Services Tax Act, 2017 (in short, ‘CGST Act‘].
He was further visited with an order imposing a tax and penalty of
more than Rs.9.40 Crores under the statutory provisions. Despite the
availability of an alternate remedy, the 1st respondent herein
approached the writ court alleging a serious infraction of the
principles of natural justice, insofar as there was a failure to accede
to his request for cross-examination of persons, whose statements
were obtained during the enquiry and which were relied upon by the
authority while passing the order of penalty.
3. The appellants contended before the learned Single Judge
that under the scheme of the CGST Act, there is no mandate for
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granting permission to cross-examine the witnesses whose statements
were obtained by the proper officer in a proceedings for imposition of
tax. However, the learned Single Judge, who considered the writ
petition, took the view that the principles of natural justice had been
violated since the authorities had denied the right to cross-examine
the persons, who had given statements against the writ petitioner.
While doing so, the learned Single Judge relied on the decision of the
Hon’ble Supreme Court in Andaman Timber Industries v.
Commissioner of Central Excise, Kolkata-II [(2016) 15 SCC 785].
4. In the appeal before us, the appellants would contend that
the learned Single Judge went wrong in placing reliance on the
decision of the Supreme Court in Andaman Timber Industries (supra),
especially since the decision referred to above did not take into
consideration a binding Three Judge Bench decision of the Supreme
Court in Kanungo & Co. v. Collector of Customs, Calcutta and Others
[1983 (13) ELT 1486 (SC)] and in Surjeet Singh Chhabra v. Union of
India [1997 (89) ELT 646 (SC)]. It is the specific case of the appellants
that there is no requirement in law to grant an opportunity to cross-
examine witnesses.
5. Heard Sri.R.Harishankar, the learned counsel appearing
for the appellants, and Sri.S.Jaikumar, the learned counsel appearing
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for the 1st respondent/writ petitioner.
6. Sri.R.Harishankar, the learned counsel appearing for the
appellants, vehemently pointed out that there is no requirement to
follow the principles of natural justice in an adjudication proceedings,
especially when the Act does not contemplate such an opportunity.
The writ petitioner cannot insist, as a matter of right, that he should
be granted an opportunity to cross-examine the witnesses, whose
statements were obtained by the proper officer. He reiterated that
although the learned Single Judge placed reliance on the decision of
the Supreme Court in Andaman Timber Industries (supra), the
Supreme Court had rendered the said judgment without referring to
the binding three Judge Bench decision in Kanungo & Co (supra).
7. On the other hand, Sri.S.Jaikumar, the learned counsel
appearing for the 1st respondent/writ petitioner, would contend that
even if there is no provision under the CGST Act that permits the
cross-examination of persons, whose statements were relied on by the
proper officer, the principles of natural justice have to be read into the
said provision. Infraction of the said principle would vitiate the
proceedings and, therefore, the writ petitioner was perfectly justified
in approaching the writ court.
8. We have considered the rival submissions raised across
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the bar.
9. The question of maintainability of the writ petition, despite
the existence of an alternate remedy, is no longer res integra. The
Supreme Court in Commissioner of Income Tax & Ors v. Chhabil Dass
Agarwal [2014 (1) SCC 603], formulated four exceptional cases
wherein a writ court can entertain a writ petition, despite the
availability of an alternate remedy. Paragraph 15 of the said decision
is extracted as under:
“15. Thus, while it can be said that this Court has
recognised some exceptions to the rule of alternative
remedy i.e. where the statutory authority has not acted in
accordance with the provisions of the enactment in
question, or in defiance of the fundamental principles of
judicial procedure, or has resorted to invoke the
provisions which are repealed, or when an order has been
passed in total violation of the principles of natural
justice, the proposition laid down in Thansingh Nathmal
case,22 Titaghur Paper Mills case3 and other similar
judgments that the High Court will not entertain a
petition under Article 226 of the Constitution if an
effective alternative remedy is available to the aggrieved
person or the statute under which the action complained
of has been taken itself contains a mechanism for
redressal of grievance still holds the field. Therefore,
when a statutory forum is created by law for redressal of
grievances, a writ petition should not be entertained
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7ignoring the statutory dispensation.”
22
Thansingh Nathmal v. Supt. Of Taxes, AIR 1964 SC 1419
3
Titaghur Paper Mills Co. Ltd. v. State of Orissa (1983) 2 SCC 433
10. In the present case, the writ petition was preferred
alleging that while passing the impugned order, Ext.P8, the proper
officer did not grant an opportunity to the petitioner to cross-examine
the witnesses, whose statements were relied on by him. Therefore, we
find that the writ petition was perfectly maintainable despite the
existence of an alternative remedy.
11. The appellants, however, maintain that it is not the
requirement of law to provide an opportunity to cross-examine the
witnesses, whose statements were recorded by the proper officer
under Section 74 of the CGST Act. We thus are called upon to judge
whether it is a requirement of law that in proceedings under Section
74 of the CGST Act, the proper officer has to grant an opportunity of
cross-examination to the assessee, if requested.
12. Section 74 of the CGST Act prescribes the procedure for
determination of tax not paid or short paid or erroneously refunded or
input tax credit wrongly availed or utilised by reason of fraud or any
wilful misstatement or suppression of facts. Once the proper officer
forms an opinion that a notice has to be issued to the assessee, he
must serve a notice under sub-Section (3) of Section 74 of the CGST
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Act containing the details of tax not paid or short paid or erroneously
refunded or input tax credit wrongly availed or utilised. Once the said
notice is given, then, the proper officer is required under sub-Section
(9) of Section 74 to consider the representation, if any, made by the
person chargeable with tax, determine the amount of tax, interest and
penalty due from such person and issue an order. There is no express
provision for permitting a cross-examination of witnesses in the
statute. It is therefore that the appellants contend that so long as the
Act does not envisage such an opportunity, the proper officer is not
required to extend such a benefit to the assessee. In support of the
aforesaid contention, the learned Counsel placed extensive reliance
on the decision of the Supreme Court in Kanungo & Co. v. Collector
of Customs, Calcutta and Others [1983 (13) ELT 1486 (SC)].
13. On a close reading of the aforesaid decision, we are of the
considered view that the decision may not apply to the facts of the
present case. A reading of the judgment shows that it was rendered
in the context of provisions of the Sea Customs Act, 1878. When
strong reliance is placed on the said decision, the appellants
conveniently omitted to notice the fact that the Sea Customs Act, 1878
stood repealed on promulgation of Customs Act, 1962, where the
provision governing procedure for adjudication is Section 122 which
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provides for an opportunity for hearing and therefore does not exclude
the principles of natural justice. Therefore, we are of the view that the
decision rendered by the Supreme Court in Kanungo & Co has to be
understood as one rendered in the facts of that case and cannot have
universal application in view of the subsequent enactment. Moreover,
the extent of the application of principles of natural justice has to be
construed in the context of a procedure prescribed under a particular
enactment.
14. Turning to facts, it can be seen that the proper officer
recorded the statements of the persons who had deposed against the
assessee and their statements were relied on by the proper officer in
arriving at a tentative finding against the petitioner. Thus, the entire
basis for the formation of an opinion of guilt against the petitioner was
the statements of third parties recorded by the proper officer. If the
writ petitioner was to prefer an effective representation against the
proposals in the notice, he had to know the basis of the allegations
against him and test the evidence used against him. It was therefore
imperative for the proper officer to have granted the opportunity of
cross-examination to the petitioner.
15. As regards the contention of the appellants that it is not
the requirement of law to provide an opportunity to cross-examine the
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witnesses since it is not an integral part of the principles of natural
justice, we cannot but disagree with the stand of the appellants. It is
now settled law that in every quasi-judicial proceedings, the rule of
natural justice has to be followed. The rule of natural justice is the
tenet of every adjudication proceedings, a violation of which renders
the proceedings void. When courts are called upon to decide the
validity of quasi-judicial proceedings on the ground of violation of
principles of natural justice, it cannot shut its eyes and adopt a
pedantic approach and hold that unless the said principle is
specifically extended under plenary legislation or the rules framed
under it, the insistence of the principles is not mandatory.
16. In Krishnadatt Awasthy v. State of M.P. and Others [2025
SCC Online 179], a three Judge Bench of the Supreme Court
considered the question as to whether in the absence of any rule which
mandates grant of an opportunity of hearing or extending the
principles of natural justice, a violation of the latter would render the
entire proceedings void? On an extensive analysis, the Court held that
a breach of the principles of natural justice strikes at the fundamental
core of procedural fairness, rendering the decision invalid unless
exceptional circumstances justify such deviation. The Court went on
to hold further that the denial of natural justice at the initial stage can
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not be cured at the appellate stage. On an extensive consideration of
the various precedents, the Court also held that the principles of
natural justice are the cornerstone of justice, ensuring that no person
is condemned unheard.
17. In Ayaaubkhan Noorkhan Pathan v. State of Maharashtra
[(2013) 4 SCC 465], the Supreme Court considered the question as to
whether a request for cross-examination of the witnesses would form
part of the principles of natural justice. The Court was considering
the question in the context of verification of a caste certificate by the
scrutiny committee constituted under the State law to go into the
caste status of a particular employee. The Court held that non-
extension of an opportunity to cross-examine the witnesses would
vitiate the decision of the scrutiny committee, since the same was
violative of the principles of natural justice.
18. A Division Bench of the Calcutta High Court in Ajay
Saraogi v. Union of India [2024 (136) GSTR 330], while considering
the question as to whether the right of cross-examination is imbibed
under the provisions of the Customs Act, 1962 held that the Customs
Act, 1962 does not prohibit the application of the principles of natural
justice.
19. In Union of India & Another v. Tulsiram Patel [1985 (3)
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SCC 398] a Constitution Bench of the Supreme Court considered the
scope of the principles of natural justice and held that a Rule framed
under Article 309 cannot altogether exclude the principles of natural
justice and if it does, then it is ultra vires.
20. We must note that the Supreme Court held as above
despite the second proviso to Article 311(2) being deleted by the
Constitution (Forty Second Amendment) Act, 1976. Thus, even if the
plenary legislation or the subordinate legislation does not provide for
the extension of the principles of natural justice, the same has to be
read into the provisions.
21. In Kothari Filaments and another Vs Commissioner of
Customs (Port) Kolkata and others [(2009) 2 SCC 192], the Supreme
Court held that the provisions of the Customs Act, 1962 do not
specifically exclude the principles of natural justice and the denial of
opportunity to cross-examine the witnesses whose statements were
relied on by the authorities while passing the order of confiscation,
renders the proceedings invalid.
22. In Aureliano Fernandes v. State of Goa and Others [(2024)
1 SCC 632], the Supreme Court held that extension of the principles
of natural justice is not an empty incantation. It forms the very
bedrock of Article 14 and any violation of these principles tantamounts
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to violation of Article 14 of the Constitution. Paragraph Nos.35, 36, 37
and 38 are extracted hereunder:
“G. Article 14: Bedrock of the principles of natural justice
35. Principles of natural justice that are reflected in
Article 311, are not an empty incantation. They form the
very bedrock of Article 14 and any violation of these
principles tantamounts to a violation of Article 14 of the
Constitution. Denial of the principles of natural justice to
a public servant can invalidate a decision taken on the
ground that it is hit by the vice of arbitrariness and would
result in depriving a public servant of equal protection of
law.
36. Article 14, often described as the “Constitutional
Guardian” of the principles of natural justice, expressly
forbids the State, as defined in Article 12, from denying to
any person, equality before the law or equal protection of
the laws. Article 14 provides an express guarantee of
equality before the law to all persons and extends a
protection to them against discrimination by any law.
Article 13(3)(a) defines “law” to include any ordinance,
order, bye-law, rule, Regulation, notification, custom or
usages having in the territory of India, the force of law.
Thus, principles of natural justice guaranteed under
Article 14, prohibit a decision-making adjudicatory
authority from taking any arbitrary action, be it
substantive or procedural in nature. These principles of
natural justice, that are a natural law, have evolved over a
period of time and been continuously refined through the
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14process of expansive judicial interpretation.
H. THE TWIN ANCHORS: NEMO JUDEX IN CAUSA SUA
AND AUDI ALTERAM PARTEM
37. The twin anchors on which the principles of
natural justice rest in the judicial process, whether quasi-
judicial or administrative in nature, are Nemo Judex In
Causa Sua, i.e., no person shall be a judge in his own cause
as justice should not only be done, but should manifestly
be seen to be done and Audi Alteram Partem, i.e. a person
affected by a judicial, quasi-judicial or administrative
action must be afforded an opportunity of hearing before
any decision is taken.
38. How deeply have Courts internalised and
incorporated the principles of natural justice into the
Constitution can be perceived from the seven Judge Bench
decision in Maneka Gandhi v. Union of India (1978) 1 SCC
248. In this case, where a challenge was laid to the order
of impounding the passport of the Appellant, which was
silent on the reasons for such an action and the
Respondent-State had declined to furnish the reason
therefor, it was held that life and liberty of a person cannot
be restricted by any procedure that is established by law,
but only by procedure that is just, fair and reasonable.”
23. We must bear in mind that when judicial review of the
order of a quasi-judicial authority is sought for, the court cannot turn
a blind eye toward the civil consequences arising out of those orders
impugned. Therefore, the assessee was fully justified in making a
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request for cross-examination of the witnesses whose statement
formed the basis of the impugned order and non extension of such an
opportunity erodes the efficacy of the order and thus renders it
nugatory.
24. Having said so, we must hasten to add that the right to
cross-examine does not extend in respect of all witnesses. During the
consideration of the appeal, we found that while issuing notices and
passing final orders under Section 74 of the CGST Act, certain persons
were arrayed as co-noticees. The plea of the writ petitioner to seek
cross-examination of the co-noticees cannot be accepted as such. At
best, the writ petitioner can only request the proper officer to serve
copies of the replies submitted by the co-noticees to the notices
received by them.
25. In conclusion, we find that the stand of the appellants that
the principles of natural justice need not be followed during an
adjudication under the provisions of the CGST Act is clearly untenable.
In the light of the principles expounded by the Supreme Court in
Tulsiram Patel (supra) and Krishnadatt Awasthy (supra), we hold that
in appropriate cases, extending an opportunity of cross-examination
in a proceedings under Section 74(9) of the CGST Act 2017 is an
integral part of the principles of natural justice, a violation of which
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will render the proceedings void.
Therefore, we decline to interfere with the judgment of the
learned Single Judge setting aside the impugned order and for the
reasons stated therein as supplemented by the reasons in this
judgment, we dismiss this writ appeal. No costs.
Sd/-
DR.A.K.JAYASANKARAN NAMBIAR,
JUDGE
Sd/-
EASWARAN S.,
JUDGE
jg
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