CHAPTER - III

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.

31
 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

32
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

33
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.

34
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

35
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.

36
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

9
officials. The Hon’ble Supreme Court of India 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).

37
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).

38
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.

39
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.

40
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).

41
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.

42
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.

43
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.

44
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.

45
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.

46
 (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

36
section 37C of The Central Excise Act 1944 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.

47
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).

48
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.)

49
 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.

50
 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.

51
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

52
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

53
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.

54
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

55
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.)

56
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).

57
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.).

58
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.

59
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.

60
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

61
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.

62
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.

63
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 Amount of duty up to Rs 5

Commissioner/ Deputy or Cenvat credit and lacs

Commissioner Service Tax

ii. Joint Commissioner Amount of duty from Rs 5

or Cenvat credit and lacs to Rs.20

Service Tax lacs

iii. Additional Amount of duty from Rs 20

Commissioner: or Cenvat credit and lacs to Rs.50

Service Tax lacs

iv. Commissioner Amount of duty No Limit.

or Cenvat credit and

Service Tax

Review/ revision of the No Limit.

orders passed by the

authorities at 1 to 3

68
Id., p 2118.
69
www.taxguru.in visited on 27-8-10.

64
Table II. Powers and jurisdiction of Adjudicating

Authorities in the Customs Act, 1962

S.No. Designation Work Powers

1 2 3 4

i. Assistant SCN with/ without invoking Upto 2 lacs

Commissioner/ extended period value of goods

Deputy

Commissioner

ii. Additional Cases involving collusion, willful Upto 50 lacs

Commissioner/ mis-statement or suppression of

Joint facts etc. duty involved

Commissioner

iii. Additional Other cases, value of goods Upto 50 lacs

Commissioner/

Joint

Commissioner

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.

65
 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

66
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.

67
Table III. Details of Adjudication orders passed by various

Commissioners in Chandigarh Zone during the period 1-1-

07 to 30-6-09

Sr. Name of Total no. of No. of No. of Partial Ratio

no. Commissi adjudication orders in orders orders %age

onerate orders favour of against of 4

passed department the and 5

department 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.

68
 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

69
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

70
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.

71
 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.

72
 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.

73