2019 (1) TMI 12 - HC - Customs

Maintainability of petition - suspension of Company s operations-at the special warehouse - it was alleged that the Company has violated the Special Warehousing License conditions and it has suppressed or manipulated the sales data - Should the warehouse and the duty-free shops in the International Airport remain closed until the departmental investigation or inquiry concludes? - Held that - Indeed investigation is a matter of integrity and it must inspire confidence even in the one subjected to that investigation. Here that is lacking. I entirely leave aside the Company s version. Even going by the Airport Authority s version the allegations of bias predetermination and prejudice are writ large. When a person alleges bad faith he must implead the persons facing that allegation as a party to the proceedings. It is to enable him to answer the charge. Courts have to be slow in drawing conclusions for upholding the allegations of bad faith. Only where the facts lead to inevitable inferences supporting the charge of bad faith should the courts record a finding on that count. But before that it must also hear the affected person. The investigation that has so far taken place need not be scuttled. But from now on wards until the inquiry or investigation concludes the Chief Commissioner of Customs will entrust the matter to some other official than Mr. Sumit Kumar the Commissioner of Customs. The Customs Department is directed to allow forthwith the Company to carry on its business operations of course under the strict supervision of the departmental officials as the Chief Commissioner of Customs deems proper - Then in the interest of investigative fairness the Chief Commissioner of Customs will entrust to some other officer than the 10th respondent the task of completing the investigation and taking all other consequential measures but by using the same material so far the Department has gathered. Petition disposed off.

Issues Involved:
1. Balanced between the departmental necessity and public interest, is the business banishment the only just measure available pending the investigation?
2. Have the officials been biased-acting in bad faith?
3. In an administrative setup, can an official in the lower rung ignore a directive from the higher rung, on any assumed notion-say, that he acted quasi-judicially but the directive is administrative?

Issue-wise Detailed Analysis:

1. Balanced between the departmental necessity and public interest, is the business banishment the only just measure available pending the investigation?

The Company, operating duty-free shops at an international airport, faced suspension of its warehouse license by the Customs Department under Section 58B(2) of the Customs Act, 1962, due to alleged irregularities. The Customs Department justified the suspension citing violations such as storing goods outside the licensed warehouse, failure to submit mandatory documents, tampering with records, and alleged duty evasion amounting to ?6 crores. The Department argued that the suspension was necessary to prevent further manipulation and protect government revenue.

However, the Court noted that the suspension, which began in April 2018, seemed avoidable and that the Customs Department had mechanisms to impose checks on the Company without halting operations. The Airport Authority lamented the loss of revenue and inconvenience to passengers due to the closure of the duty-free shops. The Court concluded that public interest, including customer convenience and revenue generation, should prevail over the suspension. Thus, the Court set aside the suspension orders (Exts.P18 and P19) and directed the Customs Department to allow the Company to resume operations under strict supervision.

2. Have the officials been biased-acting in bad faith?

The Company accused the Customs officials, particularly the Commissioner of Customs (Preventive), of bias, harassment, and spreading misinformation through press briefings. The Company cited incidents of alleged assault on its employees and the officials' refusal to comply with a higher authority's directive to reopen the duty-free shops. The Airport Authority supported the Company's claims, alleging high-handedness and harassment by the Customs officials.

The Court observed that the allegations of bias and predetermination were not entirely baseless, supported by the Airport Authority's affidavit detailing instances of harassment. The Court noted that the Customs officials' actions, including frequent press briefings and complaints to various investigative agencies, indicated a lack of impartiality. The Court concluded that while the officials might not have acted in bad faith, their actions were biased and predetermined. Consequently, the Court directed the Chief Commissioner of Customs to entrust the investigation to a different officer to ensure fairness.

3. In an administrative setup, can an official in the lower rung ignore a directive from the higher rung, on any assumed notion-say, that he acted quasi-judicially but the directive is administrative?

The Customs officials ignored the Chief Commissioner of Customs' directive (Ext.P21) to reopen the duty-free shops, arguing that the suspension order was quasi-judicial and could only be challenged through an appeal. The Court disagreed, stating that the Principal Chief Commissioner had not interdicted the suspension order (Ext.P18) but had interfered with the follow-up notice (Ext.P19), which was administrative. The Court emphasized that a void order compels no compliance and that subordinates must adhere to directives from higher authorities to avoid administrative chaos.

The Court concluded that the Customs officials' refusal to comply with the Chief Commissioner's directive was unjustified and reiterated the need for adherence to the rule of law. The Court directed the Customs Department to allow the Company to resume operations and instructed the Chief Commissioner to assign the investigation to a different officer.

Conclusion:

The Court set aside the suspension orders (Exts.P18 and P19) and directed the Customs Department to allow the Company to resume its business operations under strict supervision. The Chief Commissioner of Customs was instructed to assign the investigation to a different officer to ensure fairness and impartiality. The judgment emphasized the importance of balancing departmental necessity with public interest, adherence to directives from higher authorities, and avoiding bias in administrative actions.

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