2021 (2) TMI 369 - HC - Customs

Extension of period of seizure beyond 6 months - Principles of Natural Justice - Jurisdiction - whether power under the first proviso under Section 110(2) of the Act of 1962 is quasi-judicial in nature and requires a judicial approach? - HELD THAT - The customs authorities on receipt of specific intelligence from the Directorate of Revenue Intelligence, Kolkata Zonal Unit, that the writ petitioners were attempting exports of very inferior quality tobacco products by highly inflating their value with an intent to illegally claim IGST and Tobacco Cess, etc. initiated an investigation. The customs authorities seized the alleged offending goods. In the process of investigation, the impugned order dated June 24, 2020 was passed by the respondent No. 2. The order is an exercise of powers under Section 110(2) of the Act of 1962. The provision of Section 110(2) of the Act of 1962 was considered by the Supreme Court in Charan Das Malhotra 1971 (2) TMI 41 - SUPREME COURT where the Supreme Court laid down that, the power under the proviso of Section 110(2) of the Act of 1962 is quasi-judicial and at any rate one requiring a judicial approach. It laid down that extension order is not required to be passed mechanically. Moreover, the power under sub-section (1) cannot be equated with the power under the proviso to sub-section (2) of Section 110 of the Act of 1962 - In Bibhuti Bhushan Bagh 1989 (5) TMI 60 - SUPREME COURT , the Supreme Court held that notice was required to be issued to the person from whom goods were seized before expiry of six months. An adjudicating authority is required to adhere to the principles of natural justice in any adjudicating proceedings, unless permitted by the statute not to do so. Provisions of Section 110(2) of the Act of 1962, prior to the amendment of the first proviso were interpreted by the Supreme Court in Charan Das Malhotra to mean that the authorities were exercising quasi-judicial powers. Therefore, essentially the authorities were required to adhere to the principles of natural justice while exercising powers under Section 110(2) of the Act of 1962. The amendment introduced to the first proviso incorporates two additional burdens on the authorities. One of such additional burden is that the authorities are required to record reasons for the extension of time and the other burden is to inform the person from whom the goods were seized before the expiry of the period specified. The amendment does not obviate the requirement of adherence to the principles of natural justice while powers under Section 110(2) of the Act of 1962 are exercised. The amendment introduced also does not take away the character of quasi-judicial powers exercised and the requirement to take judicial approach while exercising powers under Section 110(2) of the Act of 1962. Thus, no doubt the authorities complied with the first proviso to Section 110(2) of the Act of 1962. However, in exercise of powers under Section 110(2) of the Act of 1962 as amended the authorities overlooked the fact that they were acting in a quasi-judicial manner and they were required to take a judicial approach and not otherwise. The authorities were required to give an opportunity of hearing to the person from whom the goods were seized before exercising power under Section 110(2) of the Act of 1962 which they did not do while issuing the impugned order - Simply on the ground of breach of principles of natural justice, the impugned order is set aside. No observation made by the Court in this order is to be considered as a decision of the merits of the rival claims before the authority. The authorities are at liberty to take steps in accordance with law. In the event the authorities issue notice in exercising powers under Section 110(2) of the Act of 1962 to the writ petitioners in addition to the notice issued to the writ petitioners, a notice to the electronic mail identity of the Learned Advocate appearing for the writ petitioner provided to the High Court Administration for the purpose of filing of the writ petition will be considered as sufficient notice upon the writ petitioners herein - petition disposed off.

Summary

Issues:
Challenge to order under Customs Act, breach of principles of natural justice, quasi-judicial nature of power under Section 110(2), amendment to first proviso in 2018, compliance with principles of natural justice, requirement of judicial approach, setting aside impugned order.

Analysis:
The writ petitioners challenged an order issued by the Additional Director General, Directorate of Revenue Intelligence, exercising powers under Section 110 read with Section 124 of the Customs Act, 1962. The petitioners contended that the impugned notice violated principles of natural justice, citing Supreme Court decisions emphasizing the quasi-judicial nature of power under the first proviso of Section 110(2) and the requirement of a judicial approach. The respondents argued that the amendment to the first proviso in 2018 altered the principles laid down in previous judgments, asserting that the adjudicating authority acted in accordance with the law by providing reasons for the extension and informing the writ petitioner, thus justifying their actions.

The customs authorities initiated an investigation based on specific intelligence regarding alleged attempts to export inferior quality tobacco products at inflated values to claim illegal benefits. The impugned order was passed under Section 110(2) of the Act of 1962 during the investigation. The Supreme Court decisions in Charan Das Malhotra and Bibhuti Bhushan Bagh were referenced to highlight the quasi-judicial nature of powers under Section 110(2) and the requirement for issuing notice before the expiry of a specified period.

The amendment to the first proviso of Section 110(2) in 2018 introduced additional requirements for the authorities, including the obligation to record reasons for extension and inform the person from whom goods were seized. Despite compliance with these requirements, the authorities failed to adopt a judicial approach and provide an opportunity for a hearing to the writ petitioners before issuing the impugned order. Consequently, the court set aside the order on grounds of breach of natural justice, clarifying that the decision did not determine the merits of the claims and allowing the authorities to take further steps in accordance with the law.

In conclusion, the court emphasized the importance of adhering to principles of natural justice and maintaining a judicial approach when exercising powers under Section 110(2) of the Act of 1962, irrespective of the amendments to the first proviso. The judgment highlighted the necessity of providing a hearing to affected parties and ensuring procedural fairness in quasi-judicial proceedings under the Customs Act.