SERVICE OF NOTICE IN ONE CASE CANNOT BE ASSUMED TO BE SERVED IN ANOTHER CASE.

[Mr. M. GOVINDARAJAN]

                        Before imposing any penalty under tax laws, administrative laws etc., show cause notice will be issued to the concerned person for giving reply to the show cause notice.   After giving reasonable opportunities, according to the principles of natural justice, penalty may be imposed or may not be imposed.    For that purpose show cause notice should be served on the person concerned.   The receipt of the notice is to be confirmed by the authority.   In some laws the mode of service is clearly provided for and in some other laws it will not be there.   In such cases the provisions of General Clauses Act, 1897 will apply for the procedure of service of notice.

                        Section 153 of the Customs Act and Section 37C of the Central Excise Act, 1944 provides for service of notice by Registered post with acknowledgement due.  In Foreign Trade (Development and Regulation) Act, 1992 there is no such provision.   Section 14 of the said provides for giving of opportunity to the owner of the goods etc.,   In provides that no order imposing a penalty or of adjudication of confiscation shall be made unless the owner of the goods or conveyance, or other person concerned, has been given a notice in writing-

(a)    informing him of the grounds on which it is proposed to impose a penalty or to confiscate such goods or conveyance; and

(b)    to make a representation in writing within such reasonable time as may be specified in the notice against the imposition of penalty or confiscation mentioned therein, and, if he so desires, of being heard in the matter.

Besides Section 14, there is no provision under the said Act, showing the manner in which the service of notice on the person concerned should be made.

                        In respect of Foreign Trade (Development and Regulation) Act, 1992 for service of notice Section 27 of the General Clauses Act, 1897 will apply.   The said section provides the meaning of service by post.   It provides that where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression ‘serve’ or either of the expressions ‘give’ or ‘send’ or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.

                        In ‘Arunsaran Textiles Private Limited V. Director General of Foreign Trade’ – 2011 (270) ELT 220 (Mad) a different situation of service of notice is met.  In this case the petitioner was granted Export Promotion Capital Goods Licence.  The petitioner is entitled to import capital goods on concessional rate of duty on the basis of the licence.  Petitioner has to export goods for certain value in compliance of EPCG licence within particular period.  The petitioner imported shuttleless looms on 5.11.1998.   On 1.10.2004 the petitioner submitted statement of export done by him to the Department.  On 22.2.2005 the Director General of Foreign Trade called up on the petitioner to submit records to show fulfillment of export obligation.    The petitioner submitted some documents.  Again the petitioner was sought for copies of shipping bills to show proof of export.   On 27.2.2005 the period of export obligation was extended.   The petitioner made further requests for extension of time by subsequent correspondence.

                        On 31.7.2006 the DGFT issued demand-cum-show cause notice in terms of Section 14 of Foreign Trade (Development and Regulation)Act, 1992 (‘Act’ for short) for action under Section 11(2) of the Act stating that the petitioner did not fulfill the export obligation under EPCG Licence.  The petitioner did not reply to the show cause notice and also appeared for personal hearing.   The Authority passed an order holding that the petitioner violated the conditions of EPCG Licence and liable for penalty under Section 11(2) of the Act.  Thereafter a communication was sent and delivered to the District Collector for recovery under the provisions of Revenue Recovery Act.    Based on this the Tahsildar initiated recovery proceedings.   The recovered order issued by the Tahsildar was served to the petitioner in person.  At that time only the petitioner came to know that a show cause notice had been issued to him and penalty was imposed.  The petitioner, therefore, filed a writ petition before the High Court challenging the recovery order.

                        The petitioner put forth the following submissions before the High Court:

• The order of the Department has not been communicated to the petitioner in the manner known to law;
• Under the provisions of Sec. 14 of the Act opportunity should be given by notice in writing stating the grounds on which it is proposed to impose penalty or confiscate such goods or the like;
• Since there is no provision for procedure for issue of notice the Department should follow the procedure prescribed in Section 27 of the General Clauses Act.  The failure to do so vitiates the order imposing penalty as it is violation of principles of Natural Justice;
• The petitioner had no knowledge of the proceedings of the Department and thereby his valuable rights have been affected;
• Non service of the original order of adjudication, imposing penalty ex-parte, is good enough  reason to set aside the impugned proceedings;
• The order for recovery is causing great prejudice due to infraction of law as above.

The Department submitted the following:

• The Act or the Rules do not provide any particular mode of service, the Department has been following the practice of dispatch by ordinary post;
• The demand-cum-show cause notice and the adjudication order passed by the Department had been dispatched on the dates by ordinary post;
• The Revenue authorities are also dispatching the covers by ordinary post.   Therefore the petitioner cannot take the plea that the demand-cum-show cause notice and original order imposing penalty was not served.

The High Court held that the provision which relates to imposition of penalty for violation of the Foreign Trade (Development and Regulation) Act, 1992, should ensure that the party is given proper notice before passing the order imposing penalty.  The provision clearly shows that an opportunity should be given to the person concerned including personal hearing, if requested, before the authority adjudicates the matter.  In this case though the Department tried to explain the service of notice through ordinary post, the fact remains that the proof of actual service of the petitioner has not been established.   The High Court further held that the service in one case cannot be assumed to be service in another person.  Under the Foreign Trade (Development and Regulation) Act, 1992 Section 14 prescribes notice in writing to be given to the person concerned.   The reading of Section 27 of General Clauses Act, 1897 and the Foreign Trade (Development and Regulation) Act, 1992, it is clear that the notice in the normal circumstances should have been sent by Registered Post in order to avoid the plea of non service and consequent plea of violation of principles of natural justice.  The order of the Department has not been served on the petitioner so far in the manner prescribed by law, it will be deemed to be non service of the original order.   There is no order in the eye of law insofar as petitioner is concerned.