Introduction:

The case titled M/S Mitesh Impex & Ors. vs. Union of India & Anr. before the Gujarat High Court revolved around a critical question concerning the evidentiary value of witness statements recorded under Section 138B of the Customs Act, 1962. The petitioners—M/S Mitesh Impex and others—challenged the adjudicating authority’s order that upheld findings against them based on statements of three witnesses who were never subjected to cross-examination. The Tribunal had earlier remanded the matter, directing the authority to provide the petitioners an opportunity to cross-examine all six witnesses whose statements were used against them. While three witnesses did appear and were duly cross-examined, three others repeatedly failed to present themselves despite four opportunities, yet their statements were relied upon in the final order, leading to the present writ petition before the High Court.

Petitioner’s Arguments:

The petitioners forcefully argued that the authority had violated both procedural fairness and the Tribunal’s mandate by selectively relying on the untested statements of three witnesses while sidelining the testimony of witnesses who were cross-examined and deposed in their favour. They submitted that Section 138B(1)(b) clearly envisages that statements of witnesses are admissible only when cross-examination is offered, as this requirement embodies the principles of natural justice. The petitioners emphasized that the denial of cross-examination renders any such statement inadmissible and void in law. They relied on the Tribunal’s specific directive that all witnesses must either be examined afresh or their evidence be tested through cross-examination, underscoring that the adjudicating authority could not ignore binding procedural safeguards merely because witnesses were absent. The petitioners asserted that the authority selectively used the statements of non-present witnesses while ignoring the depositions of witnesses who supported their case, demonstrating a prejudiced and biased adjudication. They submitted that the absence of corroborative material, coupled with reliance on statements never confronted with the assessee, violated not only statutory mandates but also constitutional guarantees of fairness and equity.

Respondent’s Arguments:

The respondent authorities, represented through standing counsel, justified their actions by invoking Section 138B, claiming that statements of witnesses could still be relied upon even if they remained absent for cross-examination, particularly where opportunities were given but witnesses failed to appear. They maintained that procedural requirements were satisfied since repeated opportunities were granted, and that mere absence of witnesses could not automatically nullify their statements. They argued that the adjudicating authority possessed discretion to evaluate the evidentiary value of such statements, especially since the statutory framework recognized circumstances where witnesses become unavailable. The respondents sought to portray the absence of witnesses as wilful, justifying reliance on their prior statements to ensure justice and avoid endless delays. However, when confronted by the Court, the respondent’s counsel could not dispute the fact that no cross-examination of those three witnesses had ever taken place. This inability significantly weakened the respondent’s defence, exposing procedural lapses and lack of compliance with statutory expectations.

Court’s Judgment:

The Division Bench of Justice AS Supehia and Justice Pranav Trivedi delivered a landmark ruling that clarified the scope and application of Section 138B of the Customs Act while reinforcing foundational principles of natural justice. The Court held that Section 138B(1)(b) unequivocally mandates cross-examination of any witness whose statement is intended to be used against the assessee, and such statements cannot be admitted unless an opportunity to confront the witness is provided. The Bench elaborated that sub-clause (a) of Section 138B permits admissibility of statements of unavailable witnesses only in exceptional situations where the impossibility of securing their presence is established by recorded findings—akin to the reasoning under Section 32 of the Indian Evidence Act. The Court stressed that the adjudicating authority must demonstrate efforts to trace and produce the witness, must give the assessee a chance to secure the witness at their expense, and must show that further delay would compromise the inquiry. Only after such procedural rigor can the statement of an unavailable witness be considered relevant. The Bench admonished the authority for relying selectively on statements of witnesses who avoided cross-examination while disregarding cross-examined testimonies favouring the petitioners. It ruled that the adjudicating authority had failed to adopt the correct course prescribed under Section 138B, rendering its findings legally unsustainable. Accordingly, the Court quashed the impugned order and remanded the matter for fresh adjudication, directing the authority to evaluate evidence in accordance with law by ensuring cross-examination rights or by recording mandatory findings regarding the unavailability of witnesses. The Court reiterated that mere convenience or procedural laxity cannot dilute statutory safeguards designed to prevent arbitrary exercise of power. The Bench concluded that evidentiary fairness is indispensable to adjudication, and failure to adhere to these requirements strikes at the root of justice. Thus, the writ petition was allowed, restoring procedural sanctity and reinforcing the inviolability of cross-examination as a tool for ensuring truth and accountability in customs adjudication.