Relevance of Statements under Section 136 of CGST Act, 2017

Background and Introduction

Section 136 of the Central Goods and Services Tax (CGST) Act, 2017 is a specialized provision governing the relavancy of statements, tendered before GST Officers in any inquiry or proceeding, in judicial, more specifically prosecution proceedings launched by GST authorities. This article is written with an objective to provide a detailed analysis of the said Section 136 – to discuss its scope, evidentiary value and procedural aspects and therefore, analyze its impact and influence in prosecution proceedings before Courts.

It is recommended that necessary provisions of The Indian Evidence Act, 1872, an Indian statute of the colonial era which stands recently overhauled by the Bharatiya Sakshya Adhiniyam, 2023 (hereinafter “BSA 2023”) be also referred to, if and when applicable, while reading and applying Section 136 along with Section 70 of the CGST Act.

Text and Scope of Section 136:

In Indirect tax administration, statements recorded by departmental officers have historically been treated with near-sacrosanct status. For decades, officers of Customs and Central Excise had proceeded on the assumption that whatever is recorded during investigation is sufficient “evidence” to prove allegations framed during adjudication or prosecution proceedings. The said assumption and resultant approach often created systemic abuse for dealers, transporters, job-workers, and even employees, who generally signed statements under duress or out of fear or without proper understanding of the consequences, and thereafter, such statements were used against them in adjudication/ appellate/ recovery/ prosecution proceedings. Understanding the fallouts of this kind of impact, Section 136 of CGST Act finds its intent and origin in Section 9D in the Central Excise Act, 1944, which creates mandatory safeguards for the relevancy of statements. The said Section 9D read as under

“SECTION 9D. Relevancy of statements under certain circumstances. — (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, –

(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or

(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.

(2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court.”

With the advent of the Goods and Services Tax (GST), excise has largely receded, but the investigative mindset continues. Section 136 of the CGST Act, 2017 replicates the investigative and evidentiary framework, raising similar concerns. The said Section 136 of the CGST Act 2017 reads as follows:

“SECTION 136. Relevancy of statements under certain circumstances. — A statement made and signed by a person on appearance in response to any summons issued under section 70 during the course of any inquiry or proceedings under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, ––

(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the court considers unreasonable; or

(b) when the person who made the statement is examined as a witness in the case before the court and the court is of the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice.”

The said Section though echoes the intent and purpose like Section 9D of the legacy law of Central Excise, it has a more specifically defined scope. The kind of Statement, the relevance of the Statement and the purpose for which such Statement is applicable is all defined in express words.

Thus, it is understood that the scope of Section 136 extends to only those Statements which are made and signed by a person in response to a summons issued under Section 70 during any inquiry or proceeding. This is a notable distinguishing feature against the earlier Central Excise law.

It further states that such Statements made can be used for proving the truth of the facts in any prosecution for an offence under the CGST Act in certain particular circumstances.

Let us now understand in which circumstances these statements can be used in terms of Section 136:

• If the person who made the Statement is dead and not available to give evidence in proceedings of prosecution for any offence under CGST Act.
• If the person who made the Statement cannot be found or is incapable of giving evidence in proceedings of prosecution for any offence under CGST Act.
• If the person who made the Statement is kept out of the way by the opposing party, or cannot be brought before the court without unreasonable delay/expense for giving evidence in proceedings of prosecution for any offence under CGST Act.

In these specific cases, the said Statement made in response to any summons under Section 70 can be read in evidence much like a deposition of the said person.

Besides, the above, the following circumstance is also covered in Section 136:

• If the person testifies by appearing as witness in the Court, however, the court is of opinion that in view of circumstances of the case, in the interest of justice, the statement should be admitted in evidence. This provision appears to be legislated with the intent to give the judiciary the discretion to admit the earlier statement, especially in cases where confrontation of a hostile witness may be required with their prior sworn statement.

In effect, it can thus be said that this Section 136 carves out an exception to the normal layman or revenue’s understanding that any statement made at any point of time by any person can invariably be used as substantive evidence in proceedings under other applicable laws or even in criminal trials or other proceedings of law also.

In other words, it can also be said that this provision provides the lawful basis to take such statements for serving as substantive evidence of guilt in a GST offence related prosecution, even if the person who made the Statement remains absent in proceedings or turns hostile, if the Statement was given in response to summons under Section 70.

Section 136 thus statutorily imbues investigative statements with a probative value similar to testimony, provided the statutory conditions are satisfied. However, notably and interestingly, the language confines/ restricts this use to “prosecution for an offence under this Act” – meaning that such statements are meant to be relied upon in prosecution trial for GST offences alone, and not for any departmental adjudication or civil assessment proceedings under any other applicable law. In fact, courts and tribunals have held that Section 136 cannot be invoked to bootstrap evidence for purposes like tax adjudication or penalty orders, which must be based on duly proven documentary evidence and shall also be subject to cross-examination in those proceedings.

• A finer comparative analysis of Section 136 of the CGST Act, 2017 and the provision in legacy law, i.e. Section 9D of the Central Excise Act, 1944, clearly establishes that statements recorded under Section 70 of the CGST Act, 2017 are not relevant for the purpose of adjudication and other proceedings under the CGST Act, 2017, because there is no corresponding provision in Section 136 of the CGST Act, 2017, like that existed under sub-section (2) of the Section 9D of the Central Excise Act, 1944 stipulating that the statements recorded under Section 14 of the Central Excise Act, 1944, would be applicable even in departmental proceedings like adjudication and other quasi judicial proceedings other than court proceedings. This distinction between Section 9D of legacy law appears to have been consciously excluded in the GST law.

Detailed Discussion on procedural and evidentiary aspects:

The primary condition for applying Section 136 is that the concerned statement must have been recorded in response to a summons issued by a proper officer under Section 70 of the CGST Act.

Section 70 empowers GST officers to summon any person to give evidence or produce documents, and it declares that any such inquiry “shall be deemed to be a judicial proceeding” in terms of section 193 and section 228 of the Indian Penal Code, which has been recently replaced by the Bharatiya Nyaya Sanhita (BNS), 2023 (hereinafter “BNS 2023”).

The relevant Section 70 of CGST Act, 2017 in this regard reads as follows:

“SECTION 70. Power to summon persons to give evidence and produce documents. — (1) The proper officer under this Act shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure, 1908 (5 of 1908).

(2) Every such inquiry referred to in sub-section (1) shall be deemed to be a “judicial proceedings” within the meaning of section 193 and section 228 of the Indian Penal Code (45 of 1860).”

To simplify, a ‘judicial proceeding’ for the purposes of Section 193 can cover/ include the following:

• Trials: A trial before any court, including a Court-martial.
• Preliminary investigation: An investigation that is directed by law to precede a court proceeding.
• Legal inquiry: An inquiry conducted by a Magistrate or equivalent authority to determine if someone should be committed for trial.

It needs to be clearly understood that any person giving a statement before a GST officer is under a legal duty to speak the truth, akin to an oath in a court proceeding. the statements are usually recorded in writing by the officer who takes the statement, and the person tendering it is asked to read and sign the statement, affirming its accuracy and voluntary nature.

Now, if a statement given by a taxpayer is later retracted by the person who made it, claiming that it was made under duress or was not voluntary or is not true, the burden lies on that person to prove the vitiating circumstances that undermine its voluntariness or reliability or truth. As a process, the judiciary will presume that the statement was made voluntarily and is reliable and true, unless otherwise proved by the person who made it. The person who made the statement is bound to discharge the burden of proof that it was under duress or out of fear and not voluntary and thus, not true. Extra-judicial confessions/ admissions before GST officers can be the basis of conviction, unless it is proven that they are involuntary or untrue or rendered in an unstable state of mind.

It is well known that retractions ought to be made at the earliest opportunity and need to be proven as well. Any confession recorded by tax authorities is generally admissible, unless it is retracted sooner or later. Scrutiny for delay in retraction and/ or corroboration by independent evidence as a matter of prudence would lie in such cases and prayer may be made to the judiciary when such instances come to light.

Evidentiary value of admissions before GST officers is subject to the general safeguards of voluntariness and it is well known that any confession obtained by inducement, threat or promise having reference to the charge, by a person in authority, is irrelevant in criminal proceedings. BSA 2023 has widened the language by explicitly including “coercion” as a factor that vitiates a confession. Thus, if a GST officer’s methods violate free will – e.g. having put undue pressure during interrogation – the statement can be challenged as involuntary and challenged to be inadmissible. However, the burden would lie on the maker of the Statement to prove it was given under coercion. Section 136 (b) of CGST Act itself implicitly safeguards this by requiring the court to use the statement only “in the interest of justice,” which implies that if a statement appears untrustworthy or extracted by coercion, the court is not bound to admit it.

There is one more aspect to deliberate upon that statements to GST officers do not meet the conditions of BSA 2023 or erstwhile IEA since these statements are ex parte statements, and are not subject to cross-examination when they are made or when they are used later. Section 136 CGST Act therefore fills this gap by creating a bespoke exception for GST investigations allowing those statements to be treated akin to former testimony or depositions for the purpose of the GST criminal trial. In case of non-retraction, reliability and admissibility may be presumed or need corroboration is the question that we are trying to brainstorm.

Second aspect comes in when any proceeding is based on third party statements. What is their relevance, admissibility and standing in GST proceedings. It has been settled n many cases of the legacy law in Central Excise and Customs that principles of natural justice are not considered to be violated for not summoning third party/ co-noticee for cross-examination. It has been held many a times that the principles of natural justice do not require that persons who have given information should be examined in the presence of the assessee/ appellant or should be allowed to be cross-examined by them on the statements made before the tax authorities. Rather it has even been held that in a quasi-judicial proceeding, strict rules of evidence need not to be followed. Cross examination cannot be claimed as a matter of right. But then there are many precedents where Honorable Courts have held that adjudicating authorities should not reach conclusions merely only on the basis of the statements of the concerned third persons but also serious delve into the incriminating records and evidence before them. seized. Corroboration by the records seized or produced at any stage of proceedings shall carry immense value, and in deserving cases, where corroboration itself indicates that the statement relied upon for framing charges is not reliable, there cannot be any presumption and cross examination of third persons ought not be allowed. If it be so, then the not allowing of cross examination of third party becomes primary reason to challenge in judicial proceedings.

Interestingly, in a recent judgement in the case of Vallabh Textiles v. Additional Commissioner [W.P.(C) NO. 4576 OF 2025, dated 9th April 2025], Hon’ble High Court of Delhi took a restrictive approach toward the requirement of cross examination. The Court observed that “…while cross-examination would be required in certain cases, it need not be given as a matter of right in all cases. The provision of the opportunity to cross-examine depends on the facts and circumstances of each case and is warranted only when the party seeking such an opportunity is able to demonstrate that prejudice would be caused in the absence thereof. ………Persons seeking cross-examination ought to give specific reasons why cross-examination is needed in a particular situation and that too of specific witnesses..” The Hon’ble Apex Court later affirmed the views of Delhi Court by dismissing the SLP in [SLP(C) No. 013670. The said judgment has made things quite clear and puts light on 138 of the Indian Evidence Act which is now re-enacted under Section 143 of the Bharatiya Sakshya Adhiniyam (BSA) and sets the framework with regard to relevancy and examination of statements and witness thereagainst.

Similarly, when it comes to corroboration of denial of charges admitted or affirmed by witness in statements during investigation, claiming that statements were not free and under duress or coercion, in such situation also cross examination of witness becomes a vital need, even if it is not a fundamental right for asserting in adjudication or other quasi judicial proceedings. Meaning thereby, if any statement is relied upon for framing charges of recovery or prosecution, but it is not corroborated, whether or not statements stand retracted, and where evidence proving the statement to be false/ presumptive/ untrue can be produced even in later proceedings, the statement will lose relevance and becomes vulnerable to be questioned/ ignored in adjudicating or deciding the case finally according to the evidence produced.

Thus, we can summate that statements are good enough to be considered relevant to hold that the accused/ alleged taxpayer is guilty unless otherwise proved. Mere denial of statement does not aid relief/ defence unless burden to prove otherwise is discharged. Even under the classical rule, the prosecution in a criminal case must prove the accused’s guilt beyond reasonable doubt, and there is a presumption of innocence. However, special statutes governing economic and tax offences often contain provisions reversing or modifying the usual burden for certain facts (especially the accused’s mental state). The CGST Act is no exception: Section 135 of the CGST Act enacts a “presumption of culpable mental state” for offences under the Act. It provides that in any prosecution which requires a culpable mental state (e.g. intent to evade tax), the court shall presume the existence of such mental state, but the accused may rebut it by proof to the contrary. The term “culpable mental state” is defined to include intent, motive, knowledge of facts, and belief. This presumption is rebuttable – the accused needs to show that he had no such mental state in committing the act (typically, the standard of proof for rebuttal is on a “preponderance of probabilities”).

Few pointers that may seem important are:

• Even if any search/ inspection proceedings wherein statement was made is held to be illegal due to technical reasons, evidence gathered thereunder, if remained unrebutted, is subject to use in trial.
• General corroboration before convicting on a retracted statement may theoretically lie, but absence of corroboration can be fatal.
• Prompt and reasoned retraction (e.g., first available opportunity) carries greater credibility. Bare allegations of coercion, without medical/legal contemporaneous proof, seldom succeed. However, proof like medical situation/ CCTV footage, if kept and referred may go a long way in spite of delay in retraction.
• Prosecution Counsel may prove voluntariness/ no threat/ Inducement, by producing copy of mere statement and may lead independent corroboration (documents, chats, transporters, bank trails) while also explaining delay between statement and retraction. However, defence may need to work hard to prove earliest possible opportunity to retract based on medical/ legal record (injuries, detention), expose inconsistencies, and also seek cross‑examination of recording officer and panch witnesses.

Keeping all the above in mind, it may be summated that unless in specified circumstances, statements made in proceedings in general, may require corroboration and cannot be invariably used for proving guilt and framing charges in trial. Nevertheless, strong defence is to be used. Non co-operation in proceedings may empower judiciary to presume statements as true without any further corroboration. However, evidence gathered in statements in response to summons or otherwise cannot be used against the person who tendered the statement in other matters of GST like adjudication/ appellate/ recovery or any other proceedings under any other law unless the burden of framing and proving the charges is discharged by the alleging officer/ authority. Section 135 and Section 136 are with regard to functions of judiciary and not the administrative or quasi-judicial authorities of GST or other laws. The issue that finally remains is that the powers of the legislated GST law shall still remain subject to the powers and wisdom of the judiciary depending on the circumstances of each case. The judiciary can invalidate laws passed by the legislature if they are found to be arbitrary or unconstitutional. The relationship between the judiciary and legislature is a core part of the separation of powers doctrine, where each branch has its own distinct functions. While the legislature makes laws, the judiciary interprets them. The judiciary interprets and defends the Constitution, ensuring that legislative acts comply with its principles. The judiciary’s power ensures that laws do not violate the rights guaranteed to citizens. Section 136 is an important provision in this regard when it comes to statements and their relevancy in GST related trials.

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By: CA. Raginee Goyal, FCA, DISA (ICAI)

Email: raginee@gmail.com

The above views are of the author herself and academic views/ opinion of learned members on the subject, even if in the contrary are welcome. AIFTP does not own any responsibility towards any views expressed in the article and any reader following the opinions/ views in the article shall do so at his own risk or after proper professional advisory in any matter of business impact/ statutory compliance on issues covered in the article above.