The Delhi High Court, in a significant ruling under the Central Goods and Services Tax (CGST) Act, 2017, has clarified that the right to cross-examine during Show Cause Notice (SCN) proceedings is not an unrestricted right. Instead, a party must clearly state the reasons why cross-examination is necessary.
In the case involving M/s. Vallabh Textiles, a division bench comprising Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta addressed a petition challenging orders issued by the Adjudicating Authority under the CGST Act. The textile company sought to overturn the orders that confirmed a GST liability of ₹7,13,05,165 along with an equivalent penalty.
The High Court noted:
"The rationale behind setting aside an order/judgment on the grounds of non-provision of the right to cross-examine is to safeguard the affected party from being prejudiced due to non-providing of cross-examination."
The case arose after the Directorate General of Goods and Services Tax Intelligence (DGGI) found that Vallabh Textiles was selling third-party goods through a kaccha ledger, allegedly evading GST payments. Upon issuance of an SCN consolidating multiple financial years, Vallabh Textiles requested cross-examination of five individuals whose statements were part of the evidence. This request was denied, as the statements were found to only support undisputed documentary evidence.
Quoting the Adjudicating Authority:
"The evidence relied upon is documentary in nature and does not require corroboration through oral testimony. The requested cross-examination is irrelevant to the issue under adjudication."
The Authority relied on prior judgments, including the Telangana High Court's decision in Mohammed Muzzamil and Another vs. The CBIC, emphasizing that cross-examination is not a matter of right if it does not make a material difference.
The Delhi High Court referred to its earlier ruling in Sushil Aggarwal v. Principal Commissioner of Customs, where it was established that cross-examination under Section 138B of the Customs Act is not an unfettered right. The Court also cited the Supreme Court's view in M/s. Telestar Travels Pvt. Ltd. v. Special Director of Enforcement:
"It is only when a deposition goes through the fire of cross-examination that a court or statutory authority may be able to determine and assess its probative value."
However, the Supreme Court further clarified that unless prejudice is demonstrated, mere denial of cross-examination does not justify setting aside an order.
The Delhi High Court emphasized:
"Parties cannot, by praying for cross-examination, convert Show Cause Notice proceedings into mini-trials."
Thus, a party must explain specifically why cross-examination of a particular witness is crucial. Blanket requests to cross-examine all individuals whose statements are recorded by the Department cannot be allowed. If the Authority finds justification, it may allow cross-examination; otherwise, it must record reasons for denial.
Ultimately, the Court advised Vallabh Textiles to pursue its remedy through an appeal under Section 107 of the CGST Act. It granted the petitioner the liberty to file an appeal within 30 days, ensuring it would not be rejected on the ground of limitation.
Appearance: Mr. Vivek Sarin, Mr. Akash Gupta, Ms. Divyanshi Singh, Mr. Dhruv Dev Gupta & Mr. Satish C. Kaushik, Advocates for Petitioner; Ms. Anushree Narain, Sr. Standing Counsel with Mr. Ankit Kumar, Adv for Respondents
Case title: M/S. Vallabh Textiles v. Additional Commissioner Central Tax GST, Delhi East And Ors
Case no.: W.P.(C) 4576/2025
