The Hon’ble Karnataka High Court in the case of JSW Steel Limited v. Joint Commissioner of Central Tax & Ors. [W.P. No. 12061 of 2025, order dated August 13, 2025] held that denial of opportunity to cross-examine third-party witnesses, whose statements were relied upon to confirm GST demand against the petitioner amounted to violation of principles of natural justice and rendered the adjudication order null and void.
Facts:
JSW Steel Limited (“the Petitioner”) entered into a Memorandum of Understanding with Larsen & Toubro Ltd. (“L&T”) for supply of steel products, which involved certain turnover discounts (TOD) and credit period terms.
The Joint Commissioner of Central Tax and Directorate General of GST Intelligence (“the Respondents”) initiated an investigation alleging GST evasion by the Petitioner, relying partially on statements recorded from representatives of L&T.
The Petitioner contended that TOD amount was neither payable nor paid and no interest was received, submitting evidence and repeatedly requesting opportunity to cross-examine L&T representatives whose statements were recorded and relied upon.
The Respondent contended that cross-examination was unnecessary as statements were voluntarily given and maintained that denial of cross-examination did not cause prejudice, relying on Supreme Court precedents such as Surjeet Singh Chhabra and Telangana High Court decisions.
The Petitioner’s grievance was that denial of cross-examination violated natural justice principles; hence, it approached the High Court by a writ petition under Articles 226 and 227 of the Constitution, challenging the order dated February 01, 2025, confirming demand and penalty.
Issue:
Whether denial of an opportunity to cross-examine third-party witnesses, whose statements were relied upon in GST adjudication proceedings violates the principles of natural justice and warrants setting aside of the adjudication order?
Held:
The Hon’ble Karnataka High Court in W.P. No. 12061 of 2025 held as under:
- Observed that, relying on statements of third parties without granting an opportunity of cross-examination contravenes the principles of natural justice and deprives the petitioner of a valuable right to test evidence against it.
- Noted that, the adjudicating authority’s presumption that cross-examination was unnecessary as statements were voluntary is legally impermissible and predetermines the outcome.
- Held that, denial to cross-examine L&T representatives, whose statements formed the basis for confirming GST demand causes irretrievable prejudice and renders the impugned order legally unsustainable.
- Clarified that, the ratio in Surjeet Singh Chhabra Union of India & Ors. [1997 1 SCC 508] and similar precedents relied by Respondents, which concern confessional statements of the assessee, are distinguished as the present case involves third-party statements.
- Held that, adherence to Section 9D of the Central Excise Act, 1944 (applicable pari materia to GST) which mandates that statements recorded during investigation cannot be relied upon unless and until such statements are admitted as evidence after examination and opportunity for cross-examination and set aside the impugned order and remitted the matter for fresh adjudication after affording an opportunity for cross-examination of L&T representatives.
Our Comments:
The judgment reinforces the procedural fairness safeguards mandated by the principles of natural justice, notably the audi alteram partem rule, in GST adjudication proceedings. It aligns with the Supreme Court’s binding precedent in Andaman Timber Industries v. Commissioner of Central Excise, [2015 (324) ELT 641 (SC)], where denial of cross-examination opportunity when relied upon by the adjudicator was held to invalidate the order. The Karnataka High Court distinguished cases like Surjeet Singh Chhabra vs. Union of India & Ors. [1997 1 SCC 508] where denial was justified on the basis of confession by the assessed party, from the present scenario involving third-party statements where cross-examination is crucial for fairness.
The ruling also accords with the evidentiary procedural requirement under Section 9D of the Central Excise Act, 1944, which has been applied by courts to GST adjudications due to the similarity in procedural framework. The Calcutta High Court in Roshan Sharma v. Assistant Commissioner of Revenue, State Tax, West Bengal and Others [M.A.T. No.854 of 2024] had also mandated the opportunity for cross-examination when third-party statements form a basis for adverse adjudication.
Relevant Provisions:
Section 9D of the Central Excise Act, 1944 :
“9D. Relevancy of statements under certain circumstances. –
(1) A statement made and signed by a person before any Central Excise Officer of Gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains—
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which the Court considers unreasonable.
(b) when the statement is made by a person who is examined as a witness and the Commissioner admits the statement in evidence after examining such person as witness and giving the person an opportunity to cross-examine…”
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