2025 (4) TMI 1249 - HC - Customs

Imposition of cost of INR 50, 000/- on the DRI officials - Seeking leave to produce additional documents - Jurisdiction of DRI officers had jurisdiction to issue show cause notices under the Customs Act 1962 - HELD THAT - For the period subsequent to the amendment this Court in Mangali Impex Limited v. Union of India 2016 (5) TMI 225 - DELHI HIGH COURT held that even the newly inserted Section 28(11) of the Customs Act does not empower either the officers of DRI to issue the SCN for the period prior to 8th April 2011. Since the same issue was pending before the High Court of Bombay and High Court for the State of Telangana the matter reached the Supreme Court and the decision in Mangali Impex Limited was stayed. Having regard to the factual and procedural history outlined above this Court is satisfied that the delay in the initiation of prosecution arose not from any wilful default or administrative indifference but from complex legal and jurisdictional questions that were the subject of extended litigation and legislative intervention. The scope of authority exercised by DRI officers remained unsettled until clarified through multiple judgments and statutory amendments. In this background the procedural delays including the timing of the sanction and the belated filing of complaint are not without explanation. However the Department cannot be absolved of responsibility altogether - The failure to place relevant documents on record in a timely manner has undoubtedly impeded the progress of proceedings. In this context the imposition of costs by the Trial Court does not warrant interference. It operates as a measured judicial response to procedural lapses which while understandable cannot be left entirely unaddressed. While the Trial Court was correct in viewing the Department as collectively responsible for the procedural lapse the mode of enforcing that responsibility is not be warranted. Conclusion - The imposition of costs by the Trial Court does not warrant interference. It operates as a measured judicial response to procedural lapses which while understandable cannot be left entirely unaddressed. The cost imposed as a measure of institutional accountability by the Trial Court is upheld. However the directions contained in paragraphs No. 18 to 20 of the impugned order insofar as they mandate recovery of the said cost from specific officers or from the Principal Additional Director General DRI are hereby set aside - Petition allowed in part.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court were:

- Whether the imposition of a cost of INR 50,000/- by the Trial Court under Section 311 Cr.P.C., conditioned upon the production of additional documents by the Directorate of Revenue Intelligence (DRI), was justified and proportionate.

- Whether the directions in the impugned order to recover the cost from specific officers, including the 'responsible officer' and ultimately from the salary of the Principal Additional Director General (ADG), DRI, were legally sustainable.

- Whether the delay in initiating prosecution and the belated production of documents was attributable to wilful default, negligence, or systemic issues within the Department.

- The extent to which the Department and its officers could be held individually accountable for procedural lapses occurring over an extended period marked by complex jurisdictional and legislative developments.

- The appropriate institutional response to procedural delays and lapses in prosecution-related documentation and compliance.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification and proportionality of the imposition of cost under Section 311 Cr.P.C.

Relevant legal framework and precedents: Section 311 Cr.P.C. empowers a court to summon additional evidence or documents if deemed necessary for just decision-making. Courts have discretion to impose costs as a judicial response to procedural lapses or delays to ensure accountability and fairness.

Court's interpretation and reasoning: The Trial Court allowed the DRI's application for producing additional documents but conditioned it on payment of costs, citing the Department's failure to locate documents already seized and the prolonged delay of 17 years before initiating prosecution. The Court noted the "health of prosecution" was adversely affected by these delays and procedural inertia.

Key evidence and findings: The documents sought to be produced were relevant and material to the case, particularly concerning the input thickness of an item. The Department admitted possession of physical copies seized earlier but failed to produce them timely, necessitating the production of computer copies later.

Application of law to facts: The Court found that while the documents were relevant, the delay and lack of due diligence by the Department justified the imposition of costs as a deterrent and to uphold procedural discipline.

Treatment of competing arguments: The DRI argued that the delay was due to complex legal and jurisdictional challenges rather than negligence. The Trial Court acknowledged the delay but attributed it to lack of vigilance and diligence in document management.

Conclusion: The imposition of costs was a justified judicial measure to address procedural lapses and ensure accountability, given the Department's failure to produce documents despite their availability.

Issue 2: Legality of directions to recover costs from specific officers including the Principal ADG, DRI

Relevant legal framework and precedents: Principles of administrative and institutional accountability require that costs imposed on a State or Department should not be automatically or presumptively recovered from individual officers unless clear evidence of personal fault or negligence exists.

Court's interpretation and reasoning: The Trial Court directed that the cost be recovered from the 'responsible officer' within the Department, and in case of failure to identify such officer, deducted from the salary of the Principal ADG, DRI. The Court deprecated the Department's "audacity" in moving a second application and the failure to locate documents despite their seizure.

Key evidence and findings: The Court noted that the delay was not attributable to any overt act of omission by any individual officer but was more reflective of systemic inertia and complex legal circumstances spanning over 17 years.

Application of law to facts: The High Court held that retrospective individual financial liability without clear proof of personal negligence or wilful default was unwarranted. The delay was systemic rather than attributable to any particular officer.

Treatment of competing arguments: The Department contended that the delay was due to prolonged litigation and legislative changes affecting jurisdiction and was not due to negligence. The Trial Court's approach was found to be overly harsh in attributing individual liability.

Conclusion: The directions to recover costs from specific officers or the Principal ADG were set aside as legally unsustainable. Institutional accountability should be addressed internally rather than by imposing presumptive financial liability on individuals.

Issue 3: Attribution of delay in prosecution initiation and document production

Relevant legal framework and precedents: Delay in prosecution can be excused if caused by valid legal impediments or jurisdictional uncertainty. However, procedural diligence is expected in managing evidence and documents.

Court's interpretation and reasoning: The Court reviewed the extensive litigation and legislative history relating to the jurisdiction of DRI officers to issue show cause notices under the Customs Act. The Supreme Court's rulings and subsequent amendments, including retrospective validation of DRI actions, explained the delayed prosecution sanction and complaint filing.

Key evidence and findings: The delay spanned from initial show cause notices in 2005, adjudication orders in 2007, appeals and litigation till 2022, and sanction for prosecution granted only in May 2023. The documents were seized but not produced timely, raising questions about procedural diligence.

Application of law to facts: The Court found that the delay in prosecution initiation was not due to wilful default but complex jurisdictional uncertainty and legislative developments. However, the failure to produce seized documents in a timely manner was a procedural lapse.

Treatment of competing arguments: The Department's explanation of legal complexities was accepted for the delay in prosecution but not as a justification for failure to produce documents promptly.

Conclusion: The delay in prosecution initiation was excusable under the circumstances, but the Department's procedural lapses in document management warranted judicial censure and cost imposition.

Issue 4: Appropriate institutional response to procedural lapses

Relevant legal framework and precedents: Institutional accountability mechanisms should address systemic lapses, while individual liability requires clear evidence of personal negligence or misconduct.

Court's interpretation and reasoning: The Court emphasized that internal accountability and inquiries are the appropriate means to address procedural lapses rather than imposing financial liability on officers without clear proof.

Key evidence and findings: The Trial Court's directive for internal inquiry to identify responsible officers was appropriate but the subsequent order to recover costs from individuals was excessive.

Application of law to facts: The Court balanced the need for accountability with fairness to individual officers, recognizing the complexity of administrative operations and the absence of overt negligence.

Treatment of competing arguments: The Department's plea for recognition of systemic causes was accepted, while the Court rejected the Trial Court's approach of presumptive individual liability.

Conclusion: Institutional accountability should be pursued through internal mechanisms, and cost imposition should remain a collective responsibility of the Department rather than individual officers.

3. SIGNIFICANT HOLDINGS

"The imposition of costs by the Trial Court does not warrant interference. It operates as a measured judicial response to procedural lapses which, while understandable, cannot be left entirely unaddressed."

"The delay is more plausibly attributable to systemic inertia than to any singular act of negligence. To proceed on the assumption that one or more officers can now, with retrospective precision, be held individually liable for that delay is to overlook the complexity of the administrative environment in which they were operating."

"While the Trial Court was correct in viewing the Department as collectively responsible for the procedural lapse, the mode of enforcing that responsibility is not be warranted."

Core principles established include:

- Judicial discretion to impose costs as a response to procedural delays and lapses is valid but must be proportionate and fair.

- Institutional responsibility for procedural lapses is distinct from individual liability, which requires clear proof of personal fault.

- Complex legal and jurisdictional developments can justify delays in prosecution initiation.

- Internal accountability mechanisms are the appropriate forum for addressing systemic procedural failures.

Final determinations:

- The cost of INR 50,000/- imposed on the Department was upheld as a fair measure of institutional accountability.

- The directions to recover the cost from specific officers or the Principal ADG, DRI, were set aside.

- The delay in prosecution initiation was excused due to complex legal circumstances, but procedural lapses in document production were rightly censured.