- 1 - HC-KAR NC: 2025:KHC:31367-DB CSTA No. 2 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13TH DAY OF AUGUST, 2025 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE MR. JUSTICE K. V. ARAVIND CUSTOMS APPEAL No. 2 OF 2023 BETWEEN: 1. THE COMMISSIONER OF CUSTOMS, C.R. BUILDING, QUEENS ROAD, BANGALORE. …APPELLANT (BY SRI JEEVAN J. NEERALGI, SENIOR STANDING COUNSEL) AND: 1. JYOTHI C. JAIN, PROPRIETOR OF M/S SAMAAVESH, No.168 No.9, AROSOJI RAO BUILDING, NEAR MINERVA CIRCLE, R.V. ROAD, V.V. PURAM, BANGALORE-560004. 2. RAKESH, PROPRIETOR OF VAINATHEYA INTERNATIONAL AGENCY, No.241, 5TH CROSS, 9TH MAIN ROAD, 2ND BLOCK, HMT LAYOUT, VIDYARANYAPURA, BANGALORE-560 097. 3. JYOTHI JAIN, CEO OF SAMAAVESH, No.9/1, Digitally signed by VALLI MARIMUTHU Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:31367-DB CSTA No. 2 of 2023 AROSOJI RAO BUILDING, NEAR MINIERVA CIRCE, R.V.ROAD, V.V.PURAM, BANGALORE-560 004. 4. J.V. IMPEX, REP. BY M.JAYANTH, No.253D CROSS, DOMLUR, 2ND STAGE, BANGALORE-560 066. 5. SAMSKRUTHI INTERIORS BY ITS PROPRIETOR, MR. N.ABHISHEK JAIN, FLAT No.3, 13-7, PAMPA MAHAKAVI ROAD, SHANKARPURAM, BANGALORE-560 004. 6. SAMAAVESH HUF, THROUGH ITS KARTA, MR.CHENRAJ JAIN, No.168, OLD No.9, ARASOJI RAO BUILDING, NEAR MINERVA CIRCLE, R.V.ROAD, V.V.PURAM, BANGALORE-560 004. …RESPONDENTS (BY SRI KRISHNA PRATHAP SINGH, ADVOCATE) THIS CSTA / CUSTOMS APPEAL UNDER SECTION 130 OF THE CUSTOMS ACT,1962, PRAYING TO SET ASIDE THE ORDER DATED 01.08.2022, PASSED BY THE CESTAT, BENGALURU IN FINAL ORDER No.A./20261-20266/2022. THIS APPEAL, COMING ON FOR ADMISSION THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: - 3 - HC-KAR NC: 2025:KHC:31367-DB CSTA No. 2 of 2023 CORAM: HON'BLE MR. JUSTICE S.G.PANDIT and HON'BLE MR. JUSTICE K. V. ARAVIND ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE K. V. ARAVIND) Though the appeal is listed for admission, in view of the short question involved and with the consent of the learned counsel on both sides, the appeal is taken up for final hearing and is accordingly disposed of. 2. Heard Sri Jeevan J. Neeralgi, learned Senior Standing Counsel for the appellant-Revenue, and Sri Krishna Prathap Singh, learned counsel for the respondent-assessees. 3. This appeal by the Revenue is directed against Final Order No. A/20261-20266/2022 dated 01.08.2022, passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bengaluru [‘CESTAT’]. 4. The brief facts, in short, are that the respondent- assessees are engaged in the business of trading in imported sanitary ware, furniture, and light fittings through M/s. J.V. Impex, a proprietorship concern of Mr. Jayanth. The Directorate - 4 - HC-KAR NC: 2025:KHC:31367-DB CSTA No. 2 of 2023 of Revenue Intelligence (DRI) conducted a search at the premises of M/s. Samavesh (HUF), which resulted in the recovery of incriminating materials such as actual invoices, list of overseas suppliers, local purchase invoices for imported furniture, sanitary ware, light fittings, sales invoices, and other related documents. 4.1 Upon further investigation, the DRI found that the respondents had mis-declared the value of imports and had undervalued the same. Consequently, a show-cause notice was issued for determination of duty, confiscation, and penalty. By order dated 08.08.2017, the adjudicating authority re- determined the value of goods and imposed differential duty, redemption fine, and penalty under Sections 112(a) and 114AA of the Customs Act, 1962 (for short ‘Act’). 4.2. The appeals filed by the concerned persons were rejected by the Commissioner of Customs (Appeals) by order dated 17.01.2018. Before the Commissioner, the respondent- assessees had sought cross-examination of the panch witnesses, which request came to be rejected. The said contention was re-agitated before the CESTAT. The CESTAT, - 5 - HC-KAR NC: 2025:KHC:31367-DB CSTA No. 2 of 2023 relying on Section 138B of the Act, directed cross-examination of the witnesses. Aggrieved by this direction, the Revenue has preferred the present appeal. 5. Sri Jeevan J. Neeralgi, learned Senior Standing Counsel for the appellant-Revenue, submits that Section 138B of the Act has no application to adjudication proceedings and is confined only to prosecutions for offences under the Act. It is further submitted that, since the panch witnesses have not given any statement, there is no occasion for their cross- examination. In the absence of any recorded statement, the question of cross-examination does not arise. Learned counsel also contends that the provisions of the Evidence Act are not strictly applicable to proceedings under the Act and, in any event, cross-examination is not a vested right. 6. Sri Krishna Prathap Singh, learned counsel for the respondent-assessees, submits that though cross-examination is not a vested right, once the statement of a witness is relied upon against the assessee, the assessee is entitled to cross- examine such witness. It is further submitted that several variations were noticed between the invoices and the bills of - 6 - HC-KAR NC: 2025:KHC:31367-DB CSTA No. 2 of 2023 entry submitted by the assessees and those seized by the authorities. Learned counsel also contends that the panchanama does not disclose the names of the panchas, thereby rendering it illegal. 7. Heard learned counsel for the parties. 8. The only point that arises for consideration in this appeal is, the correctness of the direction issued by the Tribunal to provide cross-examination of the witnesses. In support of such direction, the Tribunal has placed reliance on Section 138B of the Act. Section 138B is traceable to Chapter XVI of the Act, which deals with ‘Offences and Prosecutions’. A plain reading of Section 138B indicates that the provision contemplates cross- examination in the context of proving the truth of facts in a prosecution for an offence under the Act. The provision, by its very language, is applicable only to proceedings relating to offences and prosecutions under the Act. The Tribunal has, therefore, erred in invoking Section 138B while directing cross- examination of the witnesses in adjudication proceedings. - 7 - HC-KAR NC: 2025:KHC:31367-DB CSTA No. 2 of 2023 9. The direction of the Tribunal is unsustainable for yet another reason. The Hon’ble Supreme Court, in M/s. Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II1, while dealing with the consequences of denial of cross-examination of witnesses, has held as follows: "6. According to us, not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the adjudicating authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the adjudicating authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the 1 (2016) 15 SCC 785 - 8 - HC-KAR NC: 2025:KHC:31367-DB CSTA No. 2 of 2023 said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them." 10. In light of the above judgment, it is only where the statement of a witness has been recorded and such statement is proposed to be relied upon against the assessee that, upon a request made by the assessee, the adjudicating authority is bound to afford an opportunity of cross-examination. In the present case, the Tribunal has erred in issuing a direction for cross-examination without recording any finding as to whether statements of the witnesses were recorded and relied upon against the assessees. The direction to permit cross- examination is, therefore, without any foundation and is unsustainable. Furthermore, since the Tribunal remanded the matter to the adjudicating authority for de novo consideration limited to cross-examination of the panch witnesses, it has failed to examine the other issues raised by the respondent- assessees. - 9 - HC-KAR NC: 2025:KHC:31367-DB CSTA No. 2 of 2023 11. The matter, therefore, requires reconsideration by the Tribunal in the light of the aforesaid observations. Accordingly, the following order is passed: Order (i) The appeal is allowed. (ii) The Final Order No.A/20261-20266/2022, dated 01.08.2022 passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bengaluru, is set aside and remanded to the Tribunal for fresh consideration. (iii) In view of remand, the questions of law raised in the appeal are not answered. (iv) No order as to costs. Sd/- (S.G.PANDIT) JUDGE Sd/- (K. V. ARAVIND) JUDGE MV, List No.: 1 Sl No.: 19