Facts

The assessee was engaged in the business of manufacture and sale of ply wood. Some of the products were sold directly from the factory premises in South Andamans to certain buyers. The major portion of products manufactured were sold to other dealers from the assessee’s numerous depots, situated at various places in the country.

The assessee had filed its declaration under section 173C of the Central Excise Rules showing the price of the goods at which they were sold ex-factory and delivery basis. The AO observed that there was a large price difference between   the goods sold at ex-factory basis in comparison with the goods which were sold   to the buyers from their depots.

While investigating this price differential, the statements of two customers were taken and relied on by the revenue to adopt the depot sale price as the value of    the goods for excise purposes. The assessee inter-alia questioned the correctness   of the statements of the aforesaid two witnesses and demanded right to cross- examine them.

The Tribunal rejected the plea of the assessee to cross-examine the dealers whose statements were relied upon by the AO on the basis that cross examination would not help the assessee as it would not bring out any material which would not already be in the possession ofthe appellant themselves.

Issue

Whether an assessee is entitled to cross examine a party whose statement is relied upon by the authorities when the assessee could have relied on alternate evidences.

Views

Not allowing the assessee to cross-examine the witnesses by the AO 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. The Tribunal simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellants themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to guess as to for what purposes the appellant wanted to cross-examine those dealers and what information the appellant wanted to extract from them.

Held

It was not for the authorities or the Tribunal to presuppose as to what could be    the subject matter of the cross-examination. and make the remarks as mentioned above. The assessee was entitled to cross-examine the parties with a view as to discredit them. (CA No. 4228 of 2006 dt. 2-9-2015)

Editorial : In Kishanchand Chellaram v. CIT (1980) 125 ITR 713 (SC) the Court held that the department is  bound to provide an  opportunity to  the  assessee to cross examine the piece of evidence on which it places reliance to draw an adverse inference to make any addition or disallowance.

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a desire, a dream, a vision.”

– Mahatma Gandhi