1979 (7) TMI 166 - HC - Central Excise

Issues Involved:
1. Detention of imported consignments by Customs Authorities.
2. Validity of Actual User Licences.
3. Cancellation of items in the registration certificate.
4. Issuance of show-cause notices under the Imports (Control) Order, 1955.
5. Alleged breach of principles of natural justice.

Detailed Analysis:

1. Detention of Imported Consignments by Customs Authorities:
The petitioners, a Private Limited Company manufacturing automobile parts, imported consignments of thin-walled bearings, fuel injection equipment, and seamless pipes. These consignments were detained by Customs Authorities pending investigation into the validity of the Actual User Licence issued to the petitioners. The first detention occurred in July 1975, and subsequent detentions followed in January and February 1976.

2. Validity of Actual User Licences:
The petitioners' Actual User Licence was retrospectively amended on 26-8-1975 to include "and spares" for internal combustion engines. Despite this amendment, Customs continued to detain the consignments, questioning the validity of the licence. The petitioners argued that their registration certificate, which was amended on 28-4-1970, entitled them to manufacture all types of diesel engines and internal combustion engines with their spares.

3. Cancellation of Items in the Registration Certificate:
On 28-2-1976, the Joint Director of Industries issued a letter cancelling certain items in the petitioners' registration certificate and including new items such as "Precision machine turned parts on automats and lathes for automobiles, bicycles, and internal combustion engines." This change was part of the ongoing scrutiny of the petitioners' manufacturing capabilities and compliance with the registration requirements.

4. Issuance of Show-Cause Notices under the Imports (Control) Order, 1955:
On 5-7-1976, the Joint Chief Controller of Imports and Exports issued three show-cause notices under clauses 8, 9, and 10(c) of the Imports (Control) Order, 1955. The petitioners were asked to explain why their licences should not be cancelled. The petitioners, through their attorneys, requested copies of the adverse reports that formed the basis of the show-cause notices. Despite reminders, the petitioners did not receive the requested documents before the hearing on 23-7-1976.

5. Alleged Breach of Principles of Natural Justice:
The petitioners contended that the entire proceedings were vitiated due to the lack of reasonable opportunity to meet the case against them. They relied on the Supreme Court decision in Sinha Govindji v. the Deputy Chief Controller of Imports and Exports, which emphasized the necessity of providing the grounds for proposed actions to ensure compliance with natural justice principles. The petitioners argued that they were not provided with the inquiry reports or summaries relied upon by the respondents, thus violating natural justice.

In response, the respondents argued that the petitioners had the opportunity to attend the hearing and present their case. They cited various judgments to support their claim that the principles of natural justice do not require a fixed formula and that the non-disclosure of documents must be assessed based on the facts of each case.

The court found that the show-cause notice issued to the petitioners was based on inquiries by the Director of Industries and the Assistant Collector of Customs. The petitioners were not provided with these inquiry reports or summaries, which were crucial for them to refute the charges. The court held that the failure to provide these documents constituted a breach of natural justice, as the petitioners were not given a reasonable opportunity to meet the charges against them.

Conclusion:
The court struck down the two impugned orders dated 17-9-1976, as they were passed without giving the petitioners a reasonable opportunity to respond. The court allowed the petition and made the rule absolute, emphasizing that any future inquiry must follow the principles of natural justice. The interim order preventing the disposal of the goods would continue for four weeks. The petitioners' challenge was confined to the impugned orders and did not extend to the proceedings adopted by the Customs authorities, which were pending before the proper authorities.

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