BE YOU EVER SO HIGH THE LAWS ARE ABOVE YOU

[Mr. M. GOVINDARAJAN]

The administration of a country is carried out, in a democratic country, by the Government selected by the people by election. The Government run the administration through the Houses established under the Constitution, for example, in India Parliament has been established. In Parliament laws are being enacted for the purpose of the administration and for other things. Likewise in States the Legislative bodies enacted laws on the subject enumerated in the State List. The laws enacted are binding on all irrespective of the status of the individual. Nobody or no entity is above the law. Law is considered as supreme to every one.

This has been discussed by the Bombay High Court in dealing with the case 'Biharilal Singhal V. Union of India' - 2010 -TMI - 76304 - BOMBAY HIGH COURT. The petitioner, in this writ petition is proprietor of M/s Hi-Tech Corporation carrying business inter alia as importers of Printed Thermal Paper roll ('PTPR' for short) having their office at Navi Mumbai. The petitioner has regularly importing from Sri Lanka PTPR through Nhava Sheva Port and dealing in such imported PTPR in India.

The present dispute relates to PTPR imported by the petitioner from Sri Lanka covered under the bills of entry Nos. 649199 dated 26.08.2009 and 650812 dated 27.08.2009. After filing the bills of entry the goods were withheld and were not released by the Department in spite of the requests made by the petitioner.

Summons was issued to the petitioner on 14.09.2009. The statement of the Manager of the petitioner was recorded under Sec. 108 of the Customs Act. Thereafter the petitioner was asked to deposit an amount equivalent to CVD on the said PTPR. The petitioner deposited the required amount towards CVA payable on the said imported goods under protest and without admitting the classification thereof. The petitioner informed the department about the payment and requested to allow clearance of the imported consignments. In response to his request the Department called upon the petitioner to submit bank guarantee equivalent to the amount of customs duty for the said two bills of entry and for the past 28 bills of entry filed in the year 2009 with further direction to submit a bond for the amount in respect of CVD for the past 28 bills of entry and BCD.

The petitioner informed the Department that past 28 bills of entries have no connection whatsoever to the present consignments and in any case, if the Department feels that in respect of the past bills of entry the petitioner is liable to pay duty on the imported goods, a proper show cause notice in that behalf may be issued to enable the petitioner to justify his stand. The petitioner further requested to allow to clear the imported consignments. The Department allowed to release the goods provisionally subject to the conditions:

On payment of differential amount of duty in respect of CVD of past imports;

On execution of bond being assessable value for the said two bill of entries and past 28 bills of entries filed during the year 2009;

On furnishing and execution of bank guarantee equivalent to the amount in respect of BCD for the above said two bill of entries and for the past 28 bill of entries filed during the year 2009.

Not accepting to the above said conditions the petitioner filed this writ petition.

            The petitioner submitted the following before the High Court:

The Department has no power, authority and/or jurisdiction to refuse to allow clearance of goods covered by the aforesaid two bill of entries;

The Department is withholding the clearance of goods covered by the aforesaid two bill of entries until the petitioner makes payment of duty and give security for the consignment which were already assessed and allowed to be cleared is nothing but an act of twisting the arms of the petitioner to pressurize him to succumb to their pressure tactics;

The petitioner has already deposited CVD under protest although not payable;

Instead of issuing show cause notice in accordance with the provisions of Sec. 27 of the Act, the Department is seeking to recovery duty by not allowing the clearance of the goods covered by the two bills of entry to hereinabove only to compel the petitioner to make payment of duty which is not due and payable;

The action of the department in demanding duty allegedly short paid with bank guarantee and bond in respect of basic customs duty in respect of two disputed bills of entry clubbing in with the past imports is clearly bad in law and untenable.

The Department submitted the follows:

Ø      The provisions of Section 18 of the Customs Act deals with the provisional assessment of duty leviable on goods pending production of documents when any further information is necessary for assessment of duty or the goods are pending chemical or the other test for the purpose of determination of proper duty;

Ø      Section 28 empowers the competent officer to levy duty if the same has not been levied or has been short levied;

Ø      Section 18 and 28 operate in different sphere., i.e., when there is no allegation of evasion of duty intentionally but there is bona fide dispute in respect of quantum of levy of customs duty;

Ø      Under section 111(m) if the goods do not correspond in respect of value or any other particulars disclosed in the bills of entry under the Act, then such goods are liable to be confiscated though the proper duty is to be quantified under Section 28 of the Act;

Ø      The penalty for short levy or non levy of duty in terms of Section 114A includes penalty equal to the duty or interest;

Ø      The imported goods are liable to be adjudicated by invoking Section 111 of the Customs Act, which may result into confiscation and redemption fine with further penalty under Section 112 of the Customs Act;

Ø      To safeguard the Government revenue the condition of execution of bond and bank guarantee with undertaking has been imposed;

Ø      Provisions release of such goods is dealt with under Section 110A of the Act and not under Section 18 of the Act;

Ø      As per Section 17(4) of the Customs Act, 1962 which states that notwithstanding anything contained in this Section, imported goods or export goods may, prior to examination or testing thereof, be permitted by the proper officer to be assessed to duty on the basis of the statements made in the entry relating thereto and the documents produced and the information furnished under sub-section (3); but if it is found subsequently on examination or testing of the goods or otherwise that any statement or any manner relevant to the assessment, the goods may, without prejudice to any other action which may be taken under this Act, be reassessed to duty;

Ø      The bills of entry were found mis-declared at the time of examination, the department is thus empowered to stop the consignment for clearance for home consumption and investigate the matter;

In regard to non issue of show cause notice the Department sought for time to issue show cause notice.

In regard to seeking time to issue show cause notice the High Court held that every time, this court was told that show cause notice is being issued. However in spite of more than three and half a month after admission of the petition, no steps were taken by the Revenue to issue show cause notice. More than six months have passed after the date of communication of the order. Consignment is suffering detention and demurrage charge. The inaction on the part of the Revenue cannot be allowed to yield further premium. The request made by the Department is not bona fide.

The High Court further held that the Revenue cannot demand the amount of duty in respect of past CVD on the imports covered under 28 bills of entry which have already assessed and cleared during the year 2009, in the absence of any positive action by issuing show cause notice to set up demand in this regard. No law permits the Revenue to twist the arms of the importer in the manner in which it is being done through the communication dated 01.10.2009. The action of the Revenue to the extent of their duty demand in respect of CVD for the past import covered under 28 bills of entry during the year 2009 is clearly bad and illegal and unsustainable in law besides being in breach of principles of natural justice.

The High Court reminds the Officers of the Department that every holder of a statutory office is a trustee to whom statutory powers are entrusted. His highest duty is to follow mandate of the statute. Therefore, every holder of a statutory office must discharge his duty without bias and ill will. In modern society, no authority can arrogate to itself the power to act in a manner which is arbitrary. Every state action or action of the statutory authority, in order to survive, must not be susceptible to the vice of arbitrariness which is the crux of Article 14 and basic to the rule of law the system which governs us. Arbitrariness is the very negation of the rule of law. Satisfaction of this basic test in every State or Statutory action is sine qua non to its validity and in this respect the statutory authority cannot claim comparison with a private individual even in the field of exercising judicial or quasi judicial powers.

Conferment of the statutory power together with the discretion which goes with it to enable proper exercise of the power is coupled with the duty to shun arbitrariness in his exercise and to promote the object for which the power is conferred, which undoubtedly is not for individual or private gain, whim or caprice of any individual. All persons entrusted with any such power have to bear in mind its necessary concomitant which alone justifies conferment of power under the rule of law.

The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following that procedure, performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every statutory order must be informed by reason and it follows that an act uniformed by reason is arbitrary. Rule of law contemplates the government is entrusted for the time being. It is trite that 'be you ever so high' the laws are above you' as held in Kumari Shrilekha Vidyarthi and others V. State of UP & others - (1991) 1 SCC 212.