2011 (4) TMI 614 - HC - Customs

Appointment as custodian - principles of natural justice - It was further submitted that the petitioner company has been holding the custodianship of the Surat Special Economic Zone since the last fifteen years and has never violated any of the provisions of the notification appointing the petitioner company as custodian and has also followed the guidelines scrupulously and diligently without there being any complaints against the petitioner - A perusal of the provisions of the SEZ Act shows that the same does not contain any express provision for appointment of custodian. The power to appoint a custodian can be traced only to Section 45 of the Customs Act, which expressly confers the power of appointment of custodian on the Commissioner of Customs alone the court is of the prima facie view that Section 12 of the SEZ Act does not empower the Development Commissioner to appoint a custodian under Section 45 of the Customs Act, inasmuch as the powers under the Customs Act are required to be expressly assigned to the Development Commissioner under clause (e) of sub-section (2) of Section 12 of the Act - it is a well-settled position of law that acquiescence or waiver would not vest in an authority a power which is otherwise not vested in it. In the circumstances, in view of the findings recorded hereinabove, the said contention also does not merit acceptance - Held that petitioner is entitled to interim relief

Summary

Issues Involved:
1. Validity of the Development Commissioner's authority to appoint a custodian under Section 45 of the Customs Act.
2. Compliance with principles of natural justice in the termination of the petitioner's custodianship.
3. Jurisdiction and administrative control within Special Economic Zones (SEZ) under the SEZ Act and Customs Act.
4. Delay, laches, and acquiescence in challenging the impugned order.

Detailed Analysis:

1. Validity of the Development Commissioner's authority to appoint a custodian under Section 45 of the Customs Act:
The petitioner challenged the order of the Development Commissioner (respondent No. 2) appointing respondent No. 5 as custodian, arguing it was a colorable exercise of power not vested in the Development Commissioner. The petitioner contended that the Commissioner of Customs had the exclusive authority to appoint custodians under Section 45 of the Customs Act, which had been exercised in 1995/1998. The court observed that the SEZ Act does not contain any express provision for appointing a custodian and that the power to appoint a custodian can only be traced to Section 45 of the Customs Act, which confers this power solely on the Commissioner of Customs. The Development Commissioner's actions under Section 12 of the SEZ Act were deemed to exceed his authority, as no specific assignment of such powers by the Central Government was shown.

2. Compliance with principles of natural justice in the termination of the petitioner's custodianship:
The petitioner argued that no notice or opportunity for explanation was provided before terminating its custodianship, which violated principles of natural justice. The court noted that the termination was done without assigning reasons, issuing a notice for review, or calling for an explanation from the petitioner. This lack of procedural fairness and transparency in the termination process was found to be in breach of natural justice principles.

3. Jurisdiction and administrative control within Special Economic Zones (SEZ) under the SEZ Act and Customs Act:
The respondents argued that SEZs are deemed to be outside the customs territory of India for authorized operations, implying that the Development Commissioner had administrative control. However, the court clarified that SEZs are outside the customs territory only for authorized operations, not for all purposes. The court referred to a previous decision (Union of India v. Oswal Agricomm Private Limited) which held that customs authorities retain their powers under the Customs Act even within SEZs. Thus, the Commissioner of Customs retains the authority to appoint custodians under Section 45 of the Customs Act within SEZs.

4. Delay, laches, and acquiescence in challenging the impugned order:
The respondents contended that the petition was barred by delay, laches, and acquiescence, as the petitioner had participated in the process initiated by the Development Commissioner. The court found that the petitioner had been pursuing the matter with the Development Commissioner and had made a representation to reconsider the decision before approaching the court. The court held that acquiescence or waiver does not confer authority on an entity that lacks it and found no substantial delay or laches in the petitioner's actions.

Conclusion:
The court concluded that the Development Commissioner lacked the jurisdiction to appoint a custodian under Section 45 of the Customs Act, and the termination of the petitioner's custodianship violated principles of natural justice. The court stayed the execution, operation, and implementation of the impugned order until the final disposal of the petition, rejecting the request to stay the order for three weeks to allow respondents to seek a higher forum's remedy.