The failure to provide cross-examination in adjudication proceedings under Section 138-B of the Customs Act violates natural justice unless a request for cross-examination was explicitly made by the noticee.

JUDGMENT :

SHEKHAR B. SARAF, J.

1. Heard Shri Dheeraj Srivastava, learned counsel appearing for the appellants and Shri Jameel Ahmad, learned counsel appearing for the respondents.

2. The present custom appeals under Section 130 of the Customs Act, 1962 [hereinafter referred to as 'the Act, 1962'] arises out of a common order dated April 24, 2025 passed by the Customs, Excise & Service Appellate Tribunal, Allahabad, Regional Bench - Court No. 1. Since the issues involved in all these appeals are similar in nature and the decision in Custom Appeal No. 19 of 2025 would have a bearing upon all the appeals, we are deciding the specific questions of law in C.U.S.A. No. 19 of 2025.

3. In Custom Appeal No. 19 of 2025, the following substantial questions of law have been raised by the Revenue department:-

"(1) Whether the CESTAT was justified in applying the provisions of Section 138B of the Customs Act to the 'adjudication proceedings', so as to hold that statements of co-accused cannot be relied upon and thus the proceedings are vitiated for not following the procedure specified under Section 138B of the Customs Act, 1962?

(2) Whether the findings of the CESTAT that the statement recorded under Section 108 and retracted later on by the maker cannot be relied upon (without bringing any evidence as to threat, inducement or promise on record) contradicts the law laid down by the Hon'ble Supreme Court in Union of India v. Padam Narain Agarwal, (2008) 231 E.L.T. 397 (SC), Surjeet Singh Chhabra v. Union of India, (1997) 89 E.L.T. 646 (SC) and KTMS Mohammed v. UOI, AIR 1992 SC 1831 and thus violates the principle of judicial discipline?

(3) Whether the CESTAT was justified in holding that the goods is not of foreign origin & not smuggled in absence of foreign markings, difference in purity of gold and the fact that seizure has taken place away from area specified under Section 6 of the Customs Act by believing on the uncorroborated and unsubstantiated claim/ story of the Respondent?

(4) Whether the CESTAT was justified in setting aside (a) the absolute confiscation of gold bars under Section 111 (b), (1) and (m) and (b) the penalty of Rs 50,00,000/- under Section 112(b) and Section 114AA of the Customs Act imposed upon the Respondent by the adjudicating authority under the present facts and circumstances of the case?"

4. Upon perusal of the Tribunal order, the issue that arises before us is as to whether the finding of the Tribunal at Paragraph 22 of the said order is based on material evidence that was available before the Tribunal. The Tribunal has held that the procedure prescribed under Section 138-B of the Act, 1962 was not followed, as the respondents were not granted an opportunity to cross-examine the witnesses that had been examined by the adjudicating authority. Learned counsel appearing on behalf of the Revenue department has categorically submitted and placed on record documents to indicate that at no point of time did the appellants sought cross-examination of the two persons who were found carrying gold. The Tribunal has come to a finding that Section 138-B mandatorily requires that cross-examination be provided to the noticees in the show cause notice and non-providing of such cross-examination would amount to vitiating the procedure under Section 138-B of the Act, 1962.

5. Learned counsel appearing on behalf of the appellants has relied on the CBIC M