2018 (3) TMI 291 - HC - Customs

Writ in the nature of mandamus - Penalty - Search and Seizure of various documents - Principle of natural justice - the show cause notice alleges that the petitioner s company have been habitually indulged in diversion of the imported goods, imported by them on payment of duty and Imported duty free against Advance Authorization / Licences. It was alleged that in order to fulfill export obligation, they are showing fake clearance / deemed exports under CT 3 to M/s. Tara Holdings Ltd. (100% EOU), West Bengal - For effective adjudication of the controversy in hand and to determine as to whether the petitioners ought to be permitted to avail the opportunity of cross examination, as prayed by them, it would be necessary to dwell upon the statutory scheme under which such a right is claimed. The Adjudication procedure contemplated in Chapter 14, thus mandates the adjudicating authority to follow the principles of natural justice before issuing an order of confiscation of any goods or imposition of any penalty on any person and it mandates issuance of notice in writing, informing the owner of the goods or such person of the grounds on which it has proposed to confiscate the goods or to impose the penalty and on affording an opportunity to make a representation in writing within such reasonable time, as may be specified and also offer the reasonable opportunity of being heard in the matter. Section 124 of the Customs Act, 1962 under which show cause notice has been issued to the petitioner contemplates a notice in writing informing the grounds on which it has proposed to confiscate the goods or impose a penalty and giving an opportunity of making representation in writing within a reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty - Further every departure from principles of natural justice may not result in miscarriage of justice and the Hon ble Apex Court has at times refused to strikeout an action, not being in conformity with the principles of natural justice, unless the prejudice caused is demonstrated. In the words of the Hon ble Apex Court, it will be useless formality , if the resultant situation would be the same even after due adherence to the principles of natural justice. The question as to what extent the principles of natural justice need to be stretched as they cannot be moulded and are not to be construed with stringent strictness but needs to be dealtwith the flexibility. In order to effectively defend itself the petitioner is entitled to cross examine the said transporters as that would offer the petitioner a reasonable opportunity as contemplated under section 124 (c) of the Customs Act, 1962. The Petitioner company is entitled for the said opportunity since the Revenue Authority specifically relied on the statements of the transporters in support of the show cause notice, proposing confiscation of the goods and levying of penalty and foisting the liability on the petitioner company under the said Act - Petition allowed.

Issues Involved:
1. Denial of the right to cross-examine witnesses.
2. Principles of natural justice.
3. Adjudication procedure under the Customs Act, 1962.
4. Reliance on statements of transporters by the Revenue Authorities.
5. Legal precedents regarding cross-examination in quasi-judicial proceedings.

Detailed Analysis:

1. Denial of the Right to Cross-Examine Witnesses:
The petitioner company sought a writ of mandamus to direct the respondent to permit cross-examination of 11 truck owners whose statements were relied upon in the show cause notice. The petitioners argued that the denial of this right was a violation of the principles of natural justice. The Assistant Commissioner of Customs denied the request for cross-examination, stating that it was not supported by valid reasons and that all the relied-upon documents, including statements, had already been provided to the petitioner. The denial was based on the premise that the request was an attempt to delay the proceedings.

2. Principles of Natural Justice:
The petitioner contended that the denial of cross-examination was a grave injustice and contrary to the binding principles of law. The principles of natural justice, particularly the right to a fair hearing, were emphasized. The petitioner relied on the judgment of the Hon'ble Gujarat High Court in the case of Mahek Glazes Pvt. Ltd., which held that a party has a right to know whether their application for cross-examination is granted or refused before a final order is passed. The petitioner also cited the judgment of the Hon'ble Supreme Court in Ayaab Khan Noor Khan Pathan vs. State of Maharashtra, which underscored that cross-examination is an integral part of the principles of natural justice.

3. Adjudication Procedure under the Customs Act, 1962:
The Customs Act, 1962, mandates the adjudicating authority to follow the principles of natural justice before issuing an order of confiscation or penalty. Section 124 of the Act requires a notice in writing, informing the grounds for confiscation or penalty, and an opportunity for the person to make a representation and be heard. The petitioner argued that this reasonable opportunity includes the right to cross-examine witnesses whose statements are relied upon.

4. Reliance on Statements of Transporters by the Revenue Authorities:
The show cause notice issued to the petitioner was based on the statements of transporters, alleging that the petitioner company had indulged in the diversion of imported goods and evasion of customs duty. The petitioner argued that the statements of the truck owners were heavily relied upon to arrive at a prima facie opinion, leading to the issuance of the show cause notice. The petitioner sought to cross-examine these transporters to defend itself effectively.

5. Legal Precedents Regarding Cross-Examination in Quasi-Judicial Proceedings:
Various judgments were cited by both parties. The Revenue relied on judgments such as Telestar Travels Pvt. Ltd. vs. Special Director of Enforcement, Union of India vs. Rajendra Bajaj, and Kanungo & Co. vs. Collector of Customs, which suggested that the right of cross-examination is not absolute in quasi-judicial proceedings. The petitioner, on the other hand, relied on judgments like Khemchand vs. Union of India, State of Kerala vs. K. T. Shaduli Grocery Dealer, and Ayaaub Khan Noorkhan Pathan vs. State of Maharashtra, which emphasized the importance of cross-examination as part of the principles of natural justice.

Conclusion:
The High Court allowed the writ petition, quashing the impugned order dated 14.09.2016, which denied the opportunity for cross-examination. The court directed the respondent authorities to permit the petitioner to cross-examine the truck owners as requested in the applications dated 15.01.2016 and 19.01.2016. The entire exercise of conducting the cross-examination was to be completed within six weeks from the date of receipt of the order, after which the show cause notice would be adjudicated by the respondent authority. The court's decision underscored that the right to cross-examine is an integral part of the principles of natural justice, especially when the statements of witnesses are heavily relied upon to support allegations in a show cause notice.

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