COST ON ADJUDICATING AUTHORITY?

[Mr. M. GOVINDARAJAN]

The assessee, in taxation laws, is liable for punishment in contravention of any of the provisions of the Act or the rules made there under.  The Adjudicating Authority, while adjudicating a case, is to adopt the procedure laid down in the provisions of the Act or the rules made there under for this purpose.  Further he is to follow the principles of natural justice.  If any person aggrieved by the order of Adjudicating Authority, he can file appeal before the Appellate Authority.   If the order of Adjudicating Authority is found error, the Appellate Authority may set aside the order or modify the order.  In some cases strictures are passed against the Adjudicating Authority.  But there is no event of imposing cost on the Adjudicating Authority.

In ‘IPC Packaging Company Private Limited V. Additional Commissioner of Customs, ICD, Bangalore’ – 2017 (10) TMI 988 - KARNATAKA HIGH COURT the Superintendent of Customs, ICD, Bangalore vide his letter dated 29.09.2015 indicated that the personal hearings were fixed for the show cause notice dated 10.08.2015 on 06.10.2015, 07.10.2015 and 08.10.2015 at 11.45 hours on all the three consecutive days.  The said letter was handed over to the watchman of the Bank which took over the possession of the petitioner’s factory under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 on 15.04.2015.

The petitioner received the letter of the Superintendent from the watchman of the bank and filed reply to the show cause on 13.11.2015 contending that the export obligations in pursuance of the import made by the petitioner company exempting them from Customs duty had already been complied with by the petitioner company and the relevant evidence on that was also produced.  The Adjudicating Authority had already passed the ex-parte order on 29.10.2015 without considering the defence of the petitioner assessee.

The assessee filed a writ petition before the High Court, Karnataka, against the order passed by the Respondent Additional Commissioner of Customs Inland Container Depot, Bangalore on 29.10.2015 raising a demand of ₹ 1,02,92,549/-- of customs duty and confiscation of goods valued at ₹ 4,79,34,475/-.

The only ground for assailing the said order before the High Court is the breach of principles of natural justice by the Respondent, a quasi judicial authority.

The High Court is satisfied that the principles of natural justice have not been followed in the present case.  The Respondent Authority appears to have passed the said order in a hot haste without giving a reasonable and breathing time to the petitioner company for taking its defence before the said Authority and verify the relevant evidence produced by him.  The High Court held that the order, therefore, cannot be sustained and deserved to be set aside.

The High Court further considered observing that the quasi judicial Revenue Authorities while assigned the job of collection of Revenue in accordance with the law need not act in rash manner and through the principles of natural justice to winds like it has been done in the present case.  The High Court did not find any justification for fixing three consecutive dates for personal hearings on 06.10.2015, 07.10.2015 and 08.10.2015 and then closing the opportunity for the petitioner company to defence its case and passing an ex-parte order.  The ends of justice cannot be met merely because an order raising a demand of tax or duty is passed by the Authority concerned but such orders also have to show that not only the adequate opportunity has been given to the assessee concerned but also there has been due and reasonable application of mind on the part of the Authority concerned before raising such demand.

The High Court further observed that such Authorities who pass such kind of orders only add to the volume of litigation for the Constitutional Courts or higher Appellate Authorities rather than genuinely serving the cause of the Revenue or the Government.  The High Court did not want to encourage such kind of attitude of the quasi judicial authorities.  The powers of Adjudicating Authority to pass orders within the framework of law is understood and appreciated, but exceptionally when the Courts take up such cases for scrutiny under extraordinary jurisdiction, if the breach of principles of natural justice is glaring, the Courts cannot shut its eyes and leave the parties to fend for themselves in the long channels of appellate litigation under the Act.

The High Court was of the opinion that the present case is a glaring example of misuse of powers by the Respondent Authority.  The High Court allowed the petition with costs of ₹ 20,000/- to be personally borne and paid by the said Authority.  The High Court set aside the order of the Adjudicating Authority and allowed to pass fresh orders after giving a reasonable opportunity of hearing to the petitioner assessee and after considering the relevant experience produced by the assessee company and pass a speaking order.