Right to Cross Examination under GST is integral part of section 74- Held Kerala High Court
Right to Cross-Examine in Section 74 Proceedings – Natural Justice Read Into CGST Act
Date & Year of Judgment
17 February 2025
The Kerala High Court has categorically held that in appropriate cases, cross-examination is an integral part of natural justice in Section 74 proceedings.
Case Reference
The Joint Commissioner, Central Tax & Ors. vs. Nishad K.U.Writ Appeal No. 303 of 2025Neutral Citation: 2025:KER:13589Before the High Court of Kerala at ErnakulamCoram: Dr. Justice A.K. Jayasankaran Nambiar & Justice Easwaran S.
1. Main Issue Involved
Whether in proceedings under Section 74(9) of the CGST Act, the proper officer is required to grant an opportunity of cross-examination when third-party statements form the basis of the demand.
The case addresses whether principles of natural justice must be read into Section 74 despite absence of express statutory provision.
2. Sections and Rules Discussed
Section 74(3) & 74(9) – CGST Act
Article 14 – Constitution of India
Article 226 – Constitution of India
Principles of Natural Justice (Audi Alteram Partem)
The Court examines whether statutory silence excludes natural justice.
3. Facts of the Case
Proceedings initiated under Section 74(9) of CGST Act.
Tax and penalty exceeding ₹9.40 Crores imposed.
Statements of third parties were recorded and relied upon.
Assessee requested cross-examination.
Proper officer denied the request.
Learned Single Judge set aside order.
Department filed intra-court appeal.
The entire demand was substantially founded on third-party statements.
4. Appellant (Department)’s Submissions
CGST Act does not mandate cross-examination.
No express provision providing such opportunity.
Reliance placed on Kanungo & Co. (SC).
Revenue argued statutory silence equals exclusion of cross-examination.
5. Respondent (Assessee)’s Submissions
Even if statute is silent, principles of natural justice must be read into it.
Denial of cross-examination vitiates adjudication.
Relied on Andaman Timber Industries (SC).
Assessee invoked constitutional and natural justice principles.
6. Analysis and Findings of the Court
A. Maintainability of Writ Despite Alternate Remedy
The Court held that writ is maintainable where there is violation of natural justice (Para 10).
Natural justice violation is a recognised exception to alternate remedy rule.
B. Whether Cross-Examination is Mandatory
The Court examined Section 74 and observed there is no express provision permitting cross-examination (Para 12), but statutory silence does not exclude natural justice.
Absence of express provision does not mean exclusion of procedural fairness.
C. Basis of Demand – Third Party Statements
The Court found that:
Entire basis for formation of opinion was third-party statements.
If petitioner was to effectively defend, he had to test such evidence.
When statements form the foundation of demand, cross-examination becomes indispensable.
D. Natural Justice Read Into CGST Act
The Court extensively relied upon:
Aureliano Fernandes (SC)
Tulsiram Patel (Constitution Bench)
Krishnadatt Awasthy (3-Judge Bench)
Ayaaubkhan Noorkhan Pathan
It held that natural justice is embedded in Article 14 and cannot be excluded by silence of statute.
Natural justice is constitutionally anchored and cannot be legislatively ignored unless expressly excluded.
Most Important Observations of the Court
(Para 14)
“Thus, the entire basis for the formation of an opinion of guilt against the petitioner was the statements of third parties recorded by the proper officer. If the writ petitioner was to prefer an effective representation against the proposals in the notice, he had to know the basis of the allegations against him and test the evidence used against him. It was therefore imperative for the proper officer to have granted the opportunity of cross-examination to the petitioner.”
(Para 15)
“It is now settled law that in every quasi-judicial proceedings, the rule of natural justice has to be followed. The rule of natural justice is the tenet of every adjudication proceedings, a violation of which renders the proceedings void.”
(Para 25)
“In the light of the principles expounded by the Supreme Court in Tulsiram Patel (supra) and Krishnadatt Awasthy (supra), we hold that in appropriate cases, extending an opportunity of cross-examination in a proceedings under Section 74(9) of the CGST Act 2017 is an integral part of the principles of natural justice, a violation of which will render the proceedings void.”
The Court clearly declares cross-examination to be integral to natural justice in appropriate Section 74 proceedings.
7. Final Judgment
Appeal dismissed.
Single Judge order upheld.
Proceedings vitiated due to denial of cross-examination.
Denial of cross-examination rendered the entire Section 74 adjudication void.
8. Similar / Related Judgments
Supreme Court – Andaman Timber Industries
Supreme Court – Ayaaubkhan Noorkhan Pathan
Supreme Court – Aureliano Fernandes
Allahabad HC – Cross-examination jurisprudence
Gujarat HC – Section 74 fraud limitation cases
Kerala High Court strengthens the procedural defence framework under GST.
9. CA BTA Insights
This is a landmark ruling for litigation strategy under Section 74.
Key Takeaways:
Cross-examination must be granted where statements form foundation.
Natural justice is read into CGST Act.
Denial renders proceedings void.
Writ maintainable despite alternate remedy.
Cross-examination does not extend to co-noticees (Para 24 clarification).
Litigation Strategy:
Always request cross-examination in reply to SCN.
Record objection if denied.
Cite Para 14 & 25 of this judgment.
Argue violation of Article 14.
This judgment constitutionally elevates cross-examination from procedural courtesy to mandatory safeguard in Section 74 proceedings where third-party statements are relied upon.