Cross-Examination Rights in GST Proceedings: Madras High Court Rules Documentary Evidence Sufficient to Rebut Fraudulent ITC Allegations
Overview of the Judgment
The Madras High Court recently rendered a significant decision in M/s Noordeen Enterprises v. Additional Commissioner of GST and Central Excise, dismissing writ petitions that challenged adjudication orders passed under GST law in connection with allegedly fraudulent availment of Input Tax Credit (ITC). The Court ruled that the right to cross-examine a witness in quasi-judicial proceedings under GST law is not an absolute entitlement and must be evaluated in light of the specific factual circumstances of each case.
The central question before the Court was whether the denial of an opportunity to cross-examine a witness — whose recorded statement had been relied upon by the adjudicating authority — constituted a violation of natural justice sufficient to invalidate the proceedings. The Court answered this in the negative, taking the view that since the allegations pertained to fraudulent ITC availment, the assessees had adequate means to independently rebut those allegations through documentary evidence. Accordingly, the Court declined to exercise its extraordinary writ jurisdiction under Article 226 of the Constitution of India, while simultaneously preserving the assessees' right to pursue statutory appellate remedies.
Background Facts
M/s Noordeen Enterprises, M/s MNS Enterprises, and Shri Sheik Dawood (collectively referred to as "the Petitioners") were subjected to a common adjudication order — Order-in-Original No. 53/20203(DGGI) dated March 28, 2023 — passed by the Additional Commissioner of GST and Central Excise, Chennai South Commissionerate. The said order fastened tax liability upon the Petitioners on the basis that they had fraudulently availed ITC without genuine underlying supplies.
A critical aspect of the matter was that the impugned order placed significant reliance on the statement of one Mr. Joseph Selvaraj, which had been recorded during investigation by the GST Department. What made the situation particularly contentious was that the order-in-original itself acknowledged observations made by the Additional Chief Metropolitan Magistrate, E.O.II, Egmore, to the effect that visible bruises and injuries were found on the body of Mr. Joseph Selvaraj at the time of his appearance before the Magistrate, and that he had stated he was subjected to ill-treatment by departmental officials.
Aggrieved by the adverse order and the refusal to permit cross-examination of Mr. Joseph Selvaraj, the Petitioners approached the Madras High Court by way of writ petitions under Article 226 of the Constitution of India, seeking a writ of Certiorarified Mandamus to quash the order and directing the Respondent to allow cross-examination of the relevant persons.
Arguments Advanced by the Parties
Petitioners' Contentions
The Petitioners argued that since the adjudicating authority had placed direct reliance on Mr. Joseph Selvaraj's statement to establish the allegation of fraudulent ITC availment, fairness and the principles of natural justice required that they be afforded an opportunity to test that statement through cross-examination. Their case was particularly strengthened, they argued, by the fact that the very order under challenge recorded the Magistrate's observations regarding injuries on the witness — strongly suggestive of coercive circumstances under which the statement had been obtained. Denial of cross-examination in such a scenario, the Petitioners contended, was not merely a procedural lapse but a substantive violation of natural justice that rendered the entire proceedings unsustainable.