2015 (1) TMI 1176 - HC - Customs

Denial of Permission for re-export of goods - Violation of principle of natural justice - Reason for decision not recorded - Held that - Face of an order passed by a quasi-judicial authority or even an administrative authority affecting the rights of parties, must speak and it must not be like the inscrutable face of a sphinx . Recording of reasons operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power and it re-assures that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations. The authority shall adduce reasons which will be regarded as fair and legitimate by a reasonable man and will discard irrelevant or extraneous considerations. Therefore, the statutory authority, which is a decision maker, by exercising statutory power given under the Act, must assign the reasons while making the decisions and communicate the same to the aggrieved party. As already noted, the impugned communication was served on the petitioner with one sentence mentioning denial of re-exporting the consignment and admittedly, no reasons have been assigned in the impugned proceedings, dated 24.7.2012. It is clear that the re-export of the material can be made based on the declaration of the Director of testing Lab that the said drugs are not of substandard. In the present case, the Deputy Drugs Controller was of the view that the material itself is spurious drugs since it has been imported by the petitioner without adequate registration and import licence and the documents furnished by the petitioner are forged and fake. For the risk of repetition, this Court reiterates that this Court cannot venture upon the issues, viz., whether the petitioner has imported the consignment based on the forged and fake documents from unregistered source contrary to the provisions of the Act and whether the detained material is a spurious , etc., since these are the allegations levelled against the petitioner, are the disputed questions of fact and are subject matter of the prosecution already launched against the petitioner. Therefore, it is not appropriate for the Deputy Drugs Controller to pre-determine that the drugs are spurious now itself in order to reject the claim of the petitioner for re-exporting of the consignment. As regards the contention raised on behalf of the respondents that the material in dispute is the subject matter of the prosecution and it is required for marking during the trial as part of the evidence, is concerned, as rightly pointed out by the learned senior counsel that there is no need to detain the entire material for the purpose of marking as material object during the trial of the prosecution and it may be sufficient that a sample thereof may be retained for that purpose and the consignment can be permitted to re-export since the retention of the same is causing great prejudice to the petitioner since the funds of the petitioner to the extent of the invoice value of the goods has been blocked under the letter of credit. - Decided in favour of assessee.

Issues Involved:
1. Validity of the impugned decision rejecting re-export permission.
2. Compliance with the principles of natural justice.
3. Applicability of Rule 41(1) of the Drugs and Cosmetics Rules, 1945.
4. Requirement of retaining the entire consignment for prosecution purposes.

Issue-wise Detailed Analysis:

1. Validity of the Impugned Decision Rejecting Re-export Permission:
The petitioner challenged the decision of the second respondent, which denied permission for the re-export of the consignment without providing sufficient reasons. The court noted that the impugned decision was arbitrary and lacked a speaking order, thus violating the principles of natural justice. The court emphasized that any order affecting the rights of parties must be reasoned and transparent. The impugned communication merely stated the denial without any explanation, which the court found unacceptable.

2. Compliance with the Principles of Natural Justice:
The petitioner argued that the decision to refuse re-export was made without affording them an opportunity to be heard, thus violating the principles of natural justice. The court agreed, stating that the decision-making process must be fair and transparent, ensuring that the affected party is given a chance to present their case. The lack of reasons in the impugned order further highlighted the arbitrary nature of the decision.

3. Applicability of Rule 41(1) of the Drugs and Cosmetics Rules, 1945:
The petitioner contended that they had a statutory right to re-export under Rule 41(1) of the Drugs and Cosmetics Rules, 1945. The respondents argued that this rule applies only to substandard drugs and not to spurious drugs. The court examined Rule 41(1) and noted that it allows re-export if the drugs are not of standard quality or contravene the provisions of the Act. The court found that the Deputy Drugs Controller's pre-determination of the drugs as spurious was inappropriate, as these issues were subject to the ongoing prosecution.

4. Requirement of Retaining the Entire Consignment for Prosecution Purposes:
The petitioner argued that retaining the entire consignment for marking as a material object during the trial was unnecessary and that retaining a sample would suffice. The court found merit in this argument, stating that retaining the entire consignment caused undue prejudice to the petitioner, whose funds were blocked under the letter of credit. The court directed that appropriate samples be drawn and the consignment be allowed for re-export, subject to conditions.

Conclusion:
The court allowed the writ petition, setting aside the impugned proceedings dated 24.7.2012. The respondents were directed to permit the petitioner to re-export the material, subject to conditions including drawing requisite samples for prosecution purposes, following the procedure in the Act, executing an indemnity bond, and filing an affidavit of undertaking. The court clarified that this order was limited to re-exporting the consignment and would not affect the ongoing criminal proceedings.

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