Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7307 OF 2008
(Arising out of SLP (C) No.5092 of 2007)
Kothari Filaments & Anr. ... Appellant
Versus
Commissioner of Customs (Port) Kolkata & Ors. … Respondents
J U D G M E N T
S.B. Sinha, J.
1. Leave granted.
2. Appellant No.2 is a proprietory concern of the First Appellant which
is importer of various items of goods including Lithopone. Appellant No.1
placed an order for import of 21.5 MT of Lithopone 28-30% (pigment), with
Texpo International, Hong Kong. The said item is used in manufacture of
paint. It is a freely importable item. When the goods arrived at the port, a
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bill of entry for 21.5 MT of Lithopone was filed. The requisite custom duty
after assessment was paid. However, on physical verification, out of the
imported items 400 bags of 25 kg. each contained in a yellow coloured
substance suspected to be ‘Tetracycline HCL BP 93’, a chemical used for
making medicines was found wherefor an import licence was required to
obtained.
3. A search and seizure was carried out and on examination, it was
found that 189 poly bags out of 860 poly bags contained a white coloured
chemical and the remaining 671 poly bags contained a yellow coloured
chemical. The estimated value of the mis-declared item was estimated at
Rs.1,02,97,166/-.
4. A notice under Section 124 of the Customs Act, 1962 (for short, ‘the
Act’) was issued on appellants on 8.3.2000 asking them to show cause as to
why the consignment said to be valued at Rs.63,32,018.60 CIF should not
be confiscated under Section 111(d) and 111(m) of the Act, 1962 and as to
why the importers and their agents should not be punished in terms of
Section 112(a) and (b) thereof. Cause was further directed to be shown as
to why the appellants attempted evasion of custom duty amounting to
Rs.38,16,729.40 resulting from mis-declaration of the imported goods
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should not be directed to be paid and as to why the said amount shall not be
recovered along with interest.
5. Appellants in their cause shown pursuant thereto contended that their
foreign supplier had sent 10 MT of Tetracycline by mistake. The mistake
was accepted by the exporter M/s Texpo International in a letter dated
25.10.2000. The correspondences between the parties were placed before
the authority to show that no penal action, as was proposed, should be taken
against them.
6. By reason of an order dated 29.12.2000, however, the goods were not
only directed to be confiscated but also a penalty of Rs.5,00,000/- was
imposed on the company. A personal penalty of Rs.1,00,000/- was imposed
on Appellant No.2.
7. An appeal preferred thereagainst before the Customs, Excise and
Gold Control Appellate Tribunal, Calcutta was dismissed by an order dated
19.4.2002. A writ petition was filed thereagainst which by reason of the
impugned judgment has been dismissed.
8. Mr. J.K. Srivastava, learned counsel appearing on behalf of the
appellant, submitted that before the impugned order was passed by the
authorities of the Customs Department, admittedly an enquiry was
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conducted at various places. However, the documents collected during the
said enquiry were not supplied to them although reliance was placed
thereupon and, thus, the principles of natural justice have been violated.
9. Mr. P.V. Shetty, learned senior counsel appearing on behalf of the
respondent, on the other hand, urged that in the peculiar facts and
circumstances of this case, it was not necessary to comply with the
principles of natural justice as the mistake on the part of the exporter was
accepted.
10. Indisputably declaration was made in regard to the import of
Lithopone. It is also not disputed that a part of the imported items contained
Tetracycline HCL.
11. We may furthermore place on record that the consignment has since
been sent back to the exporter. Despite the same, as noticed hereinbefore,
redemption fine as also other penalties have been imposed. The show cause
notice is a detailed one. It is stated therein that through departmental
source, overseas enquiries had been carried out.
12. The information which was gathered during the said overseas enquiry
through departmental source, however, was not final and conclusive. Be
that as it may, concededly, no document pertaining thereto was supplied or
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was shown to the appellant. Commissioner of Customs, however, in its
order dated 29.12.2000 made liberal use of the said information, stating :
“In the meantime, through departmental source the
overseas enquiry was carried and it was partly
ascertained that the exporting company Texpo
th
International of 57 Wyndham St. 5 Floor, Hong
Kong does exist which is registered with the
business register Hong Kong. This is a
partnership concern. However, the relationship
between Indian Importers M/s. Kothari Filaments
and the Belgiam company Lok Hauk Food and
Texpo International Hong Kong could not be
verified. Regarding verification of genuineness of
documents produced by Texpo International Hong
Kong and attested by Indian Chambers of
Commerce revealed that the attestation of
documents by them was made in normal course
they neither verified the contents of the documents
nor undertake any responsibility for the contents
of the documents attested. Evidences to this effect
cannot be disclosed at this juncture since the
enquiry is yet to be completed.”
Inter alia, relying on or on the basis of the result of the said purported
enquiry, it was held :
“On overseas enquiry, as is evident from paras 27
and 28 of the show cause notice that there exists a
firm in the name and style of M/s. Lok Hauw Fook
in Belgium. But this firm is not engaged in the
business of Tetracycline. It is only a restaurant.
The proprietor of the firm also stated that some
mischievious elements have made use of their
letter heads to wrongly implicate them. This
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overseas enquiry at least establishes the fact that
the goods were in fact not meant for the Belgium
importer. Moreover, the matter of stacking of
Tetracycline along with Lithopone also would lead
anybody to conclude that Tetracycline was mixed
up with Lithopone in such an intermingled fashion
that it would be evident to conclude that
Tetracycline is meant for concealment.”
13. The question which arises for consideration is as to whether the
impugned order was passed in violation of the principles of natural justice.
Before, however, we advert to the said question, we may notice the stand
taken by the respondents herein in their counter affidavit before this Court,
which is in the following terms :
“In the paragraphs 27 and 28 of the Show Cause
Notice, sufficient indications have been given as
regards the outcome of the overseas enquiry.
Although the documents were not given to them,
the initial burden was upon the appellants to show
their bona fide mistake. Unless sufficient
materials are placed by the appellants showing that
it was a mistake on the part of the foreign exporter
to send wrong items and the conclusion of the
overseas enquiry was wrong, the Customs
authority has no liability to disclose their
materials. The position would have been different
if the initial onus was upon the customs authority
to prove mala fide intention of the appellants and
in such case, it could be legitimately argued by the
appellants that in absence of disclosure of
documents they were unable to controvert the
veracity of such documents.”
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14. Does the show cause notice make enough indication in regard to the
nature of enquiry as also the conclusions thereof is the question?
In our opinion, it does not. Paragraph 27 of the show cause notice
clearly demonstrates that the contents of the document were not verified. It
had categorically been stated that as the enquiry was yet to be completed,
disclosure of the evidences was not permissible. Despite the fact that the
result of such overseas enquiry was not conclusive, as noticed hereinbefore,
liberal use thereof was made by the Commissioner of Customs in his order.
The Commissioner of Customs was conscious of the fact that the result of
the enquiry was not conclusive one way or the other. It is one thing to say
that denial to supply the documents collected in the said enquiry has a
statutory backing but it is another thing to say that use thereof was to be
made without supplying the copies thereof.
15. The statutory authorities under the Act exercise quasi-judicial
function. By reason of the impugned order, the properties could be
confiscated, redemption fine and personal fine could be imposed and in the
event an importer was found guilty of violation of the provisions of the Act.
In the event, a finding as regards violation of the provisions of the Act is
arrived at, several steps resulting in civil or evil consequences may be taken.
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The principles of natural justice, therefore, were required to be complied
with.
16. The Act does not prohibit application of the principles of natural
justice. The Commissioner of Customs either could not have passed the
order on the basis of the materials which were known only to them, copies
whereof were not supplied or inspection thereto had not been given. He,
thus, could not have adverted to the report of the overseas enquiries. A
person charged with mis-declaration is entitled to know the ground on the
basis whereof he would be penalized. He may have an answer to the
charges or may not have. But there cannot be any doubt whatsoever that in
law he is entitled to a proper hearing which would include supply of the
documents. Only on knowing the contents of the documents, he could
furnish an effective reply.
17. This aspect of the matter has been considered in Rajesh Kumar &
Ors. v. Dy. CIT & Ors. [(2007) 2 SCC 181], wherein this Court held :
“In any event, when civil consequences ensue,
there is hardly any distinction between an
administrative order and a quasi judicial order.
There might have been difference of opinions at
one point of time, but it is now well-settled that a
thin demarcated line between an administrative
order and quasi-judicial order now stands
obliterated {See A.K. Kraipak and Ors. v. Union
9
of India and Ors. [(1969) SCC 262] and Chandra
Bhawan Boarding and Lodging, Bangalore v.
State of Mysore and Anr. [AIR 1970 SC 2042] and
S.L. Kapoor v. Jagmohan and Ors. [(1980 4 SCC
379]}.
Recently, in V.C. Banaras Hindu University v.
Shrikant [2006 (6) SCALE 66], this Court stated
the law, thus:
‘An order passed by a statutory authority,
particularly when by reason whereof a
citizen of India would be visited with civil
or evil consequences must meet the test of
reasonableness’.”
It was observed :
“Justice, as is well known, is not only be done but
manifestly seem to be done. If the assessee is put
to notice, he could show that the nature of
accounts is not such which would require
appointment of special auditors. He could further
show that what the assessing officer considers to
be complex is in fact not so. It was also open to
him to show that the same would not be in the
interest of the Revenue.
In this case itself the appellants were not
made known as to what led the Deputy
Commissioner to form an opinion that all relevant
factors including the ones mentioned in Section
142(2A) of the Act are satisfied. If even one of
them was not satisfied, no order could be passed.
If the attention of the Commissioner could be
drawn to the fact that the underlined purpose for
appointment of the special auditor is not bona fide
it might not have approved the same. “
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In S.L. Kapoor v. Jagmohan & Ors. [(1980 (4) SCC 379], this Court
observed :
“18. In Ridge v. Baldwin and Ors. [1964] AC 40
@ 68, one of the arguments was that even if the
appellant had been heard by the watch committee
nothing that he could have said could have made
any difference. The House of Lords observed (at p.
68) :
‘It may be convenient at this point to deal
with an argument that, even if as a general
rule a watch committee must hear a
constable in his own defence before
dismissing him, this case was so clear that
nothing that the appellant could have said
could have made any difference. It is at least
very doubtful whether that could be
accepted as an excuse. But, even if it could,
the respondents would, in my view, fail on
the facts. It may well be that no reasonable
body of men could have reinstated the
appellant. But as between the other two
courses open to the watch committee the
case is not so clear. Certainly on the facts,
as we know them, the watch committee
could reasonably have decided to forfeit the
appellant's pension rights, but I could not
hold that they would have acted wrongly or
wholly unreasonably if they had in the
exercise of their discretion decided to take a
more lenient course.’”
{See also M/s. Kishinchand Chellaram v. The Commissioner of
Income-tax, Bombay City II, Bombay [AIR 1980 SC 2117]}
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18. In view of the aforementioned settled legal principles, there cannot be
any doubt whatsoever that the principles of natural justice have been
violated in this case.
19. For the views we have taken, the impugned judgment cannot be
sustained. It is set aside accordingly. The matter is remitted to the
Commissioner of Customs for consideration of the matter afresh. The
Commissioner, in the event, intends to rely on the said documents, may
supply the relevant copies thereof or at least allow the appellant to inspect
the same.
20. Appeal is allowed with the aforementioned directions with costs.
Counsel’s fee assessed to Rs.25,000/-.
……………………………….J.
[S.B. Sinha]
..…………………………..…J.
[Cyriac Joseph]
New Delhi;
December 16, 2008