Customs Act | Gujarat High Court Reiterates Mandatory Cross-Examination Under Section 138B, Quashes Penalty Order

In a judgment delivered on November 25, 2025 Justice A.S. Supehia and Justice Pranav Trivedi quashed the penalty order and culled-out 8 quintessential features of Section 138B of the Customs Act, 1962, particularly, clauses (a ) and (b) that introduces the element of cross-examination of the witness who has given the statement before a Customs Officer. The Gujarat High Court observed that Section 138B requires cross‑examination for admissibility. It was clarified that a Customs Officer cannot rely on bare statement of witnesses recorded during inquiry or proceedings cannot be used against an assessee unless an opportunity to rebut the same had been given to assessee.

“Unless an opportunity of cross-examination is given to the person (assessee) against whom the statement of such witness is proposed to be used, the same is inadmissible in evidence, since the denial or absence of cross-examination of the witness, and the admissibility of such statement in evidence will be in violation of the principles of natural justice and also against fair play and equity.”

Petitioner, a partnership firm manufacturing copper ingots/billets) was served with Show Cause Notice seeking to impose penalties under Sections 112(a) and 114(iii) of the Customs Act, 1962. The Commissioner of Central Excise, Rajkot passed order in 2014 imposing penalties. On appeal to the Customs and Excise, Service Tax Appellate Tribunal (CESTAT) set aside the penalty order and matter was remanded for fresh adjudication with opportunity for cross‑examination of six witnesses. The CESTAT directed adjudicating authority to adjudicate afresh after granting due opportunity for cross-examination.

Post‑Remand, three witnesses appeared who deposed in favour of Petitioners and were cross‑examined. For holding against the Petitioner, the Adjudicating authority relied on statements of witnesses from earlier proceedings and who were absent in remand proceedings, despite repeated opportunities.

On fair consideration of witnesses, the Gujarat High Court outlined the course of action to be adopted under Section 138B while clarifying that both clauses (a) and (b), where the former was akin to Section 32 of the Indian Evidence Act, 1872 (Now Section 26 of Bhartiya Sakshya Adhiniyam, 2023) envisaged that evidence had to pass the test of admissibility. The 8 key features were as follows:

1. A witness statement is relevant only if non‑availability circumstances under clause (a) are established.
2. The authority must record a finding that securing the witness's presence was impossible.
3. While attempting to secure presence, the assessee must be given opportunity to produce the witness at own expense.
4. Efforts to secure the witness should be made within a reasonable time, without undue delay.
5. If all attempts fail, a formal finding must be recorded on the witness's non‑availability.
6. After such finding, the assessee must be confronted with the statement and given full opportunity to respond.
7. A witness statement cannot be used against the assessee without confrontation and opportunity to rebut.
8. Reliance on bare statements without corroboration or fair opportunity violates principles of natural justice.

Case Detail: NBCC (India) Limited vs. Additional Commissioner CGST Delhi South

For Petitioner: Advocates Bhuvnesh Satija, Vibhooti Malhotra, Udit Sharma, Aniket Khanduri

For State: SSC Samiksha Godiyal with Advocates Tenzing N. Bhutia, B.D. Rao Kundan

Click here to read the order.