Rajasthan High Court - Jaipur
M/S Pinkcity Logistics Ltd vs Commissioner Of Customs on 29 November, 2013
Author: Dinesh Maheshwari
Bench: Dinesh Maheshwari
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR :ORDER: (1) D.B.Civil Writ Petition No.7266/2013 M/s Pinkcity Logistics Ltd. Vs. The Commissioner of Customs (2) D.B.Civil Writ Petition No.7896/2013 Sunil Kumar Jain Vs. The Commissioner of Customs (3) D.B.Civil Writ Petition No.7345/2013 Kailash Solanki Vs. Union of India & Ors. DATE OF ORDER : - 29th November 2013 HON'BLE MR.JUSTICE DINESH MAHESHWARI HON'BLE DR. JUSTICE NARENDRA KUMAR JAIN-II Mr.S.S.Hora Mr.Sunil Kumar Singh, for the petitioners Mr.Anil Mehta Mr.Ajay Shukla for the respondents BY THE COURT: (Per Dinesh Maheshwari,J.)
PRELIMINARY:
These three writ petitions, filed on similar nature grievance of the respective petitioners and founded essentially on similar grounds, have been considered together; and are taken up for disposal by this common order.
Put in a nut-shell, the basic common features in these petitions are that the writ-petitioners, or the firm/company represented by them, who had been granted license to function as Customs House Agent ['CHA'], have been prohibited from functioning as such, by way of similar nature orders of prohibition, issued under Regulation 21 of the Customs House Agents Licensing Regulations, 2004 ['the Regulations'/the Regulations of 2004], which have been framed under Section 146(2) of the Customs Act, 1962 ['the Act'/the Act of 1962] . The petitioners submit that such prohibitory orders, which entail civil and evil consequences, have been passed in utter disregard to the principles of natural justice. Though the said Regulation 21 has also been questioned in these petitions as ultra vires but, for the Union of India having not been joined as party, the learned counsel appearing for the petitioners in CWP Nos.7266/2013 and 7896/2013 did not press much on this issue of vires during the course of submissions. However, the learned counsel appearing in CWP No.7345/2013 has pressed on the issue of vires too.
BACKGROUND ASPECTS AND STAND OF THE RESPECTIVE PETITIONER:
Looking to the subject-matter of these writ petitions and the issues raised, dilatation on all the factual aspects does not appear necessary. In brief, the background aspects, so far relevant for the present purpose; and the stand of the respective writ-petitioners could taken note of in relation to each of these petitions as follows:
CWP No.7266/2013:
In this petition, the petitioner-company is aggrieved of the prohibition order dated 25.04.2013 (Annex.7) issued against it in terms of Regulation 21 by the Commissionerate of Customs (Preventive), Jodhpur for the alleged contravention of the provisions of Regulation 13(d), (e) and (o) of the Regulations of 2004 following seizure of 1036 Logs of Red Sanders by the Directorate of Revenue Intelligence, Gandhidham on 01.10.2012.
It has been alleged that as per the investigation revelations, the seized prohibited goods were being exported by one M/s. Ritu Corporation, 33, Gol Building, Jalori Gate, Near Thar Handloom, Jodhpur under the guise of Indian Handicrafts Furniture Items of Marble & Iron; and that two containers (RWAU2404850 & RWAU2404464) stuffed with the prohibited items had been cleared for export as Polished Marble Slabs from ICD, Thar Dry Port, Jodhpur under shipping bill Nos.15885541 & 1585524 both dated 03.09.2012 and had began sailing to the destined port, which were called back to Mundra Port and seized. According to the department, the preliminary inquiry revealed that the said shipping bills were filed by the representative of the petitioner Shri Ajay Vyas on behalf of M/s. Ritu Corporation, the exporter; but then, the PAN card and the IEC of the exporter M/s. Ritu Corporation, had been obtained by providing fictitious names and addresses. It is alleged that per Regulation 13(o) of the Regulations, a Customs House Agent is required to verify the antecedents, correctness of Importer Exporter Code (IEC) Number, identity and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information but the petitioner failed to fulfill its obligation and facilitated unauthorized transport of prohibited goods by replacement of cargo.
The grievance of the petitioner is that without any show cause notice or calling for any explanation, it has directly been prohibited to transact business in the jurisdiction of Commissioner, Customs, Jodhpur by the impugned order dated 25.04.2013; and a copy of intimation of this order has been sent to the Commissioner, Customs of other Regions prompting identical action. According to the petitioner, it could obtain a copy of the order from ICD, Jaipur on 27.04.2013; and on 28.04.2013 and 02.05.2013, representations were submitted to the respondents.
With reference to the provisions contained in Section 146 of the Act of 1962 and Regulations 20 to 22 of the Regulations of 2004, it is, inter alia, contended that the order dated 25.04.2013 has been passed on irrelevant considerations as also without application of mind to the factual aspects available on record, including the fact that Mr.Ajay Vyas, the authorized representative of petitioner, has categorically stated in his various statements recorded under Section 108 of the Act that he had neither filed nor signed the impugned shipping bills and that somebody else had forged his signatures.
It is contended that the impugned order has been passed in gross violation of the principles of natural justice; and that no such order, which is of adverse civil consequences for the petitioner could have been passed without issuance of show cause notice and compliance of the principles of natural justice. It is further submitted that even otherwise, the order of prohibition could not have been passed in the fact situation of this case as six months prior to the impugned order, the petitioner had discontinued its work in the State of Rajasthan; and hence, there was no point in passing the impugned order and at least there was no emergency for not complying with the principles of natural justice.
In this matter, by way of an additional affidavit dated 15.07.2013, it has been pointed out on behalf of the petitioner that pursuant to the impugned order dated 25.04.2013, the Commissioner of Customs, Shillong proceeded to suspend its license by the order dated 13.05.2013 but then, after filing of reply, the order of suspension was revoked by the said Commissioner of Customs, Shillong on 17.06.2013. It is submitted that the order dated 25.04.2013 which was an ex parte prohibition order would stand superseded in view of the order dated 17.06.2013 (Annex.12) which has been passed after hearing the parties by the Licensing Authority and the writ petition deserves to be allowed on this count alone.CWP No.7896/2013
In CWP No.7896/2013, the petitioner is another CHA who is aggrieved of another prohibition order dated 11.04.2013 (Annex.20) which came to be passed by the Commissioner of Customs, Jodhpur (Headquarters Jaipur) prohibiting his transacting business in the jurisdiction of Commissionerate of Customs (Preventive), Jodhpur on the allegations that he, acting as CHA under licence No.2/CHA/R/92, failed to comply with Regulation 13(d), (e) and (o) of the Regulations of 2004 while acting on behalf of the importer M/s. Ketki International and while filing the bill of entry No.698 dated 04.05.2011 for 468 Kg of Glass Chatons Grade B. It has been alleged that Glass Chatons Grade B were misdirected as Grade B and the actual value was not reflected in the invoice. According to the department, from the investigation of the DRI, it was found that one Shri Sri Krishna Tambi and his son Shri Sachin Tambi, in active assistance of Shri Anoop Khandelwal and Shri Saurabh Khandelwal, hatched a conspiracy for defrauding the government revenue by floating a fraudulent firm in the name of M/s Ketki International and strategically proceeded by opening a firm in the name M/s Sunshine (in Hong Kong) under proprietorship of Shri Sachin Tambi. It has further been alleged that the said Shri Sri Krishna Tambi, who was earlier working as CHA in Jaipur and whose license was cancelled in a case of fraudulent import, knowingly submitted manipulated invoices mentioning Glass Chatons in a generic manner without complete description.
It has been alleged against the petitioner that he acted in active connivance and facilitated import through M/s Ketki International without complying with KYC norms. It has also been indicated that the petitioner admitted his negligence in accepting the importers documents as such without applying due diligence to verify their correctness; and he did not properly advise the importer for correct declaration of value, unit and quality brand of the consignments.
It is, however, submitted by the petitioner that he is not an expert about valuation or quality of gemstones; and that he was not aware as to who the suppliers of the proprietary firms were. According to the petitioner, the import documents for all the consignments were attested by the proprietors and on basis of the documents received from the parties, he furnished the details to the customs, who, after physical verification and satisfaction, cleared all the consignments on as is basis and did not point out any infirmity. The petitioner has further averred that he fully co-operated with DRI during investigation by producing all KYC related documents and available information.
It is pointed out that DRI, however, issued a show cause notice on 08.05.2012 alleging, inter alia, qua the petitioner that he did not comply with the KYC norms and without checking the authority in favour of Krishna Tambi from the importing firms, facilitated illegal activities undertaken by Tambis by misusing the documents.
According to the petitioner, the said show cause notice dated 08.05.2012 is pending adjudication and its relied upon documents have been supplied by the letter dated 19.12.2012. According to the petitioner, without there being any basis, the learned Commissioner, by the impugned order dated 11.04.2013 passed under Regulation 21 of the CHA Licensing Regulations, 2004, has prohibited him from acting as CHA.
Herein too, the petitioner has questioned the order of prohibition largely on the identical grounds that the same has been issued without application of mind and in violation of the principles of natural justice.CWP No.7345/2013
This petition has been filed by Shri Kailash Solanki, said to be the Director of PAP-Fast Movers (I) Ltd., stating grievance against similar nature prohibitory order issued on 17.04.2013 (Annex.1) by the Commissioner of Customs, Jodhpur against the said company, having CHA Licence No.1/CHAL/R/92, for failing to comply with Regulation 13(d), (e) and (o) of the Regulations of 2004 wherefor smuggling of Red Sanders Logs could be attempted by the alleged exporters.
It had been the allegation that under a Shipping Bill No.1293 dated 26.09.2011 declaring description of goods as Indian Wooden Furniture & Goods Hand Painted/Decorated Items and country of destination as Jebel Ali (UAE), the export goods were stuffed in a container No: CLHU 3378378 at ICD RAJSICO Jodhpur. The consignment was called back from Jebel Ali Port on the basis of the information that the same contained prohibited goods viz. Red Sanders Logs. After examination of the said container by DRI, Gandhidham, 606 logs of Red Sanders weighing 15.585 Mts were recovered and seized under the reasonable belief that the same were liable to classification under the provisions of the Customs Act because the export of Red Sander Wood in any form, whether raw, processed or unprocessed, remains prohibited.
It is alleged that during investigation, one Shri Abdul Jaffer Sattar of Chennai was found to be the master mind of this smuggling of Red Sanders Logs from India, who allegedly manipulated the persons by finding potential exporters for smuggling of Red Sanders Logs and then managed transportation. It has been alleged that the CHA facilitated the unauthorised transport of export cargo with replacement of declared cargo with prohibited goods; and was guilty of abetment of smuggling when it had failed to examine the relevant documents in accordance with the KYC norms and failed to properly advice the party concerned for correct declaration of exported consignments.
It is submitted that the petitioner had always exercised due diligence to ascertain the correctness of information and had verified the antecedents, correctness of the IEC Code, and identity of his client by using reliable, independent, authentic documents data and information. It is further submitted that the charge against the petitioner-company and one of its Directors is that they did not verify the antecedents of the overseas buyer or agents of their clients but such an additional onus of complying with KYC norms for the clients of his client is not envisaged as an obligation of CHA under the Regulations of 2004 or the Act of 1962. It is also submitted that an extraneous reason and circumstance has been taken into consideration about an order No.4/2013 having been passed against the petitioner under Section 114(i) of the Act of 1962 which itself had been passed on mere speculation and conjectures; and had been subjected to appeal which remain pending.
In this petition, the petitioner has, apart from questioning the order of prohibition as being violative of the basic principles of natural justice, has also questioned the validity of Regulation 21 of the Regulations of 2004, essentially with the submissions that the Board has been conferred with powers to make regulations and in particular, such regulations may provide for the matters enumerated in clauses (a) to (f) of Section 146(2) of the Act of 1962; and none of the provisions therein refer to prohibition for transacting the business with immediate effect as provided under Regulation 21 of the CHALR, 2004. Thus, according to the petitioner, the Board has travelled beyond the powers conferred under Section 146(2) in framing Regulation 21 of CHALR, 2004.
RIVAL CONTENTIONS:
Putting a scathing attack on the orders of prohibition passed under Regulation 21 of the Regulations of 2004, the learned counsel appearing for the petitioners have contended that such orders of prohibition, which entail drastic civil and evil consequences for the petitioners, have been passed rather in colourable exercise of powers and deserve to be quashed. It is submitted that in relation to the allegations, which are either of uncertain nature or have been made without proper appreciation of the record, the authorities could not have put a blanket ban on the working of the petitioners in the name of prohibition orders. The learned counsel contended that the orders have, admittedly, been passed without extending any opportunity of hearing to the respective petitioners, and once such an order of prohibition is passed, the suggested opportunity of post-decisional hearing would only be a formality and would not be as effective as a pre-decisional hearing. According to the learned counsel, the basic principles of natural justice require pre-decisional hearing and not the post-decisional one. It is submitted that if at all, the respondents in these cases could have taken action per Regulation 20 which would have required extending an opportunity of hearing but resorted to the step of prohibition so as to avoid the principles of natural justice.
In addition to the above lines of arguments, the learned counsel appearing for the petitioner in CWP No. 7435/2013 has referred to Section 146 (2) of the Act of 1962 to submit that it is only by virtue of these provisions that the Board may make Regulations; and Clauses (a) to (f) thereof nowhere authorise the Board to make any Regulation for any proposition of so-called prohibition. According to the learned counsel, under Clause (e) of Section 146(2), provisions for suspension or revocation of a license may be made but there is no authority in the Board to provide for prohibition and hence, Regulation 21 providing for prohibition remains ultra vires and deserves to be struck down.
Per contra, the learned counsel appearing for the respondents have submitted that Regulation 21 is not beyond the powers of the Board; and is, in the scheme of the Regulations of 2004, a provision made for the purpose of proper and effective implementation of these Regulations and the Act of 1962. The learned counsel further submitted that the action was required to be taken in these cases because the persons dealing with consignment were found indulging in smuggling and for their fundamental faults and flaws, the respective CHAs cannot avoid their responsibility. The learned counsel submitted that post-decisional hearing, in the given circumstances, are acceptable norms for satisfying the principles of natural justice; and that the respondents have never declined post-decisional hearing and would be ready to proceed with the same.
The learned counsel for the parties have relied upon several of the decisions, which shall be referred at the appropriate place/s hereafter.
THE STATUTORY PROVISIONS:
In order to appreciate and consider the rival submissions, appropriate it would be to take note of statutory provisions having a bearing on the issues. The said Customs House Agents Licensing Regulations, 2004 have been made by the Central Board of Excise & Customs ['the Board'] in exercise of the powers conferred by Section 146(2) of the Customs Act, 1962. The provisions of Section 146 read as under:-
146. Customs house agents to be licensed.- (1) No person shall carry on business as an agent relating to the entry or departure of a conveyance or the import or export of goods at any customs station unless such person holds alicencegranted in this behalf in accordance with the regulations.
(2)The Board may make regulations for the purpose of carrying out the provisions of this section and, in particular, such regulation may provide for -
(a) the authority by which a licence may be granted under this section and the period of validity of any such licence;
(b) the form of the licence and the fee payable therefor;
(c) the qualifications of persons who may apply for alicenceand the qualifications of persons to be employed by a licensee to assist him in his work as an agent;
(d) the restrictions and conditions (including the furnishing of security by the licensee) subject to which alicencemay be granted;
(e) the circumstances in which alicencemay be suspended or revoked; and
(f) theappeals, if any, against an order of suspension or revocation of alicence, and the period within which such appeals shall be filed.
Regulations 20, 21 & 22 of the Customs House Agents Licensing Regulations, 2004 could be taken note of as under:-
20. Suspension or revocation of licence.-
(1) The Commissioner of Customs may, subject to the provisions of regulation 22, revoke the licence of a Customs House Agent and order for forfeiture of part or whole of security, or only order forfeiture of part or whole of security, on any of the following grounds, namely :
(a) failure of the Customs House Agent to comply with any of the conditions of the bond executed by him under regulation 10;
(b) failure of the Customs House Agent to comply with any of the provisions of these regulations, within the jurisdiction of the said Commissioner of Customs or anywhere else;
(c) any misconduct on his part, whether within the jurisdiction of the said Commissioner of Customs or any where else which in the opinion of the Commissioner renders him unfit to transact any business in the Customs Station.
(2) Notwithstanding anything contained in sub-regulation (1), the Commissioner of Customs may, in appropriate cases where immediate action is necessary, suspend the licence of a Customs House Agent where an enquiry against such agent is pending or contemplated.
21. Prohibition.- Notwithstanding anything contained in regulation 22, the Commissioner of Customs may prohibit any Customs House Agent from working in one or more sections of the Customs Station, if he is satisfied that such Customs House Agent has not fulfilled his obligations as laid down under regulation 13 in relation to work in that section or sections.
22. Procedure for suspending or revoking licence under Regulation 20.-
(1) The Commissioner of Customs shall issue a notice in writing to the Customs House Agent stating the grounds on which it is proposed to suspend or revoke the licence and requiring the said Customs House Agent to submit, within such time as may be specified in the notice, not being less than forty-five days to the Deputy Commissioner of Customs or Assistant Commissioner of Customs nominated by him, a written statement of defense and also to specify in the said statement whether the Customs House Agent desires to be heard in person by the said Deputy Commissioner of Customs or Assistant Commissioner of Customs.
(2) The Commissioner of Customs may, on receipt of the written statement from the Customs House Agent, or where no such statement has been received within the time-limit specified in the notice referred to in sub-regulation (1), direct the Deputy Commissioner of Customs or Assistant Commissioner of Customs to inquire into the grounds which are not admitted by the Customs House Agent.
(3) The Deputy Commissioner of Customs or Assistant Commissioner of Customs shall, in the course of inquiry, consider such documentary evidence and take such oral evidence as may be relevant or material to the inquiry in regard to the grounds forming the basis of the proceedings, and he may also put any question to any person tendering evidence for or against the Customs House Agent, for the purpose of ascertaining the correct position.
(4) The Customs House Agent shall be entitled to cross-examine the persons examined in support of the grounds forming the basis of the proceedings, and where the Deputy Commissioner of Customs or Assistant Commissioner of Customs declines to examine any person on the grounds that his evidence is not relevant or material, he shall record his reasons in writing for so doing.
(5) At the conclusion of the inquiry, the Deputy Commissioner of Customs or Assistant Commissioner of Customs shall prepare a report of the inquiry recording his findings.
(6) The Commissioner of Customs shall furnish to the Customs House Agent a copy of the report of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, and shall require the Customs House Agent to submit, within the specified period not being less than sixty days, any representation that he may wish to make against the findings of the Deputy Commissioner of Customs or Assistant Commissioner of Customs.
(7) The Commissioner of Customs shall, after considering the report of the inquiry and the representation thereon, if any, made by the Customs House Agent, pass such orders as he deems fit.
(8) Any Customs House Agent aggrieved by any decision or order passed under regulation 20 or sub-regulation (7) of regulation 22, may prefer an appeal under section 129A of the Act to the Customs, Central Excise and Service Tax Appellate Tribunal established under sub-section (1) of section 129 of the Act.
LEGALITY AND VALIDITY OF REGULATION 21:
It appears expedient to take up at the first the question as to whether Regulation 21 is ultra vires the powers of the Board under Section 146 (2) of the Act of 1962.
With reference to clause (a) to (f) of sub-section (2) of Section 146 ibid., it is contended that the Regulations could provide for the circumstances in which a license may be suspended or revoked; and Regulations 20 and 22 have been framed in that regard but then, no such clause empowering the Board to provide for prohibition is available in Section 146(2). In our view, the argument is more a matter of form rather than of substance.
Section 146 of the Act of 1962 mandates that Customs House Agents are required to be licensed; and no person is entitled to carry on business as an agent relating to the entry or departure of a conveyance; or relating to import or export of goods at any Customs Station unless he holds a license granted in that behalf in accordance with the Regulations. Sub-section (2) of Section 146 empowers the Board to make Regulations for the purpose of grant of such license, which obviously include the matters regarding period of validity of license, its form, fee payable therefor, the qualification of the concerned person, and restrictions & conditions for granting of license. Obviously, when a power to grant license in such a regulatory provision is given, the Board has also been invested with the powers to provide for the circumstances in which the license could be suspended or revoked as also for appeal against such suspension or revocation.
A glance at the Regulations of 2004 gives out that elaborate provisions have been made for the purpose of grant and regulation of such licenses to the Customs House Agents. Amongst others, Regulation 13 therein specifically spells out the obligations of the Customs House Agents, which are essentially the conditions subject to which a licence is granted, per clause (d) of sub-section (2) of Section 146 of the Act. Under Regulation 20(1), the Commissioner of Customs has been authorized, subject to Regulation 22, to revoke the license of a CHA on any of the grounds stated therein, viz., failure of CHA to comply with the conditions of bond; failure of CHA to comply with any of the provisions of the Regulations; or any misconduct on his part, which in the opinion of the Commissioner renders him unfit to transact any business in the Customs Station. Sub-clause (2) of Regulation 20 empowers the Commissioner, notwithstanding anything contained in sub-clause (1), to suspend the license of a CHA where an inquiry is pending or even contemplated, but only in appropriate case where immediate action is considered necessary. Regulation 22 provides for the procedure for suspending or revoking a license under Regulation 20, which include issuance of notices, affording opportunity of defence to the CHA sought to be proceeded against, and taking evidence with opportunity to the CHA to cross-examine the witnesses and even for appeal.
However, apart from Regulation 20 and 22, the Regulation in question, i.e., Regulation 21 has been framed separately, giving the powers to the Commissioner to prohibit any CHA of working in any section or sections of the Customs Station on being satisfied that such CHA has not fulfilled his obligations laid down under Regulation 13 in relation to the work in that section or sections.
Apparent it is that the powers in case of fault, default, failure, misconduct and non-fulfillment of obligations have been provided in different manner with reference to different eventualities. In the matters covered under Regulation 20, the procedure per Regulation 22 is followed, which is akin to a departmental inquiry. Such inquiry is contemplated in the cases where license is proposed to be revoked or even suspended. However, in case where immediate action is considered necessary, the license could be suspended, per Regulation 20(2), even in the cases where an inquiry against agent in contemplation.
Regulation 21, making the provisions for prohibition of CHA from working in one or more sections of the stations on his failure to fulfill obligations laid down in Regulation 13, in manner and effect, appears to be taking care of another emergent situation where because of CHAs failure to fulfill his obligations, working of one or more of the sections of the Customs Station is jeopardized. This power of prohibition appears to be essentially that of a preventive measure rather than a punitive one. In our view, the powers of such a preventive measure are rather inherent in the larger powers of punitive as also preventive suspension and then, the extreme punitive measure of revocation, as are available with the Commissioner of Customs, in order to achieve the object for which the Regulations have been framed.
Noticeable it is that even the preventive measures powers appear to be of 2 modes; one as seen in Regulation 20(2), of immediate suspension of license even in cases where inquiry is contemplated; and the other one in Regulation 21, which is obviously of a degree lesser than that of Regulation 20(2). In Regulation 21, the Commissioner of Customs is empowered to order prohibition of working of CHA only in one or more sections of the Customs Station, upon his satisfaction that CHA has not fulfilled his obligations under Regulation 13 in relation to the work in that section or sections.
On the basic principles dealing with the law of Statutes, the presumption is always in favour of validity and legality of a statute or its provisions. Then, interpretation of a provision or statute is not a mere exercise in semantics but is an attempt to find out the meaning from the words used and to understand the context and the purpose of the expression used; and ultimately to construe the expression sensibly [Vide the principles in Ajay Kumar Benarji : (1984) 3 SCC 127].
Proceeding on the guiding principles and in an overall comprehension of the scheme of the Act of 1962 and the Regulations of 2004, we are clearly of the view that Regulation 21 cannot be said to be invalid and ultra vires when the Board has been invested with the powers to make regulations generally for the purpose of regulating the license of CHA; and in particular to provide for the circumstances in which preventive so also punitive measures could be taken qua a licensee. The arguments against the legality and validity of Regulation 21 are required to be and are hereby rejected.
REQUIREMENTS OF ADHERENCE TO THE PRINCIPLES OF NATURAL JUSTICE:
Even when we hold that Regulation 21 is within the powers of the Board and is not ultra vires, the questions still remain as to how and in what manner the same is to be employed; and as to how the principles of natural justice are to operate?
The import, scope, purport and operation of the principles of natural justice in administrative processes have been explained by the Hon'ble Supreme Court in several of the decisions referred by the learned counsel for the petitioners. For the present, suffice would be to notice the following passage from the decision of the Hon'ble Supreme Court in Swdeshi Cotton Mill Vs. UOI (1981) 1 SCC 664 as follows: -
Rules of natural justice are not embodied rules. Being means to an end and not an end in themselves, it is not possible to make an exhaustive catalogue of such rules. But there are two fundamental maxims of natural justice viz. (i) audi alteram partem, and (ii) nemo judex in re sua. The audi alteram partem rule has many facets, two of them being (a) notice of the case to be met; and (b) opportunity to explain. This rule cannot be sacrificed at the altar of administrative convenience or celerity. The general principle-as distinguished from an absolute rule of uniform application-seems to be that where a statute does not, in terms, exclude this rule of prior hearing but contemplates a post-decisional hearing amounting to a full review of the original order on merits, then such a statute would be construed as excluding the audi alteram partem rule at the pre-decisional stage. Conversely if the statute conferring the power is silent with regard to the giving of a pre-decisional hearing to the person affected and the administrative decision taken by the authority involves civil consequences of a grave nature, and no full review or appeal on merits against that decision is provided, courts will be extremely reluctant to construe such a statute as excluding the duty of affording even a minimal hearing, shorn of all its formal trappings and dilatory features at the pre-decisional stage, unless, viewed pragmatically, it would paralyse the administrative process or frustrate the need for utmost promptitude. In short, this rule of fair play must not be jettisoned save in very exceptional circumstances where compulsive necessity so demands. The court must make every effort to salvage this cardinal rule to the maximum extent possible, with situational modifications. But, the core of it must, however, remain, namely, that the person affected must have reasonable opportunity of being heard and the hearing must be a genuine hearing and not an empty public relations exercise.
The learned counsel for the petitioners have forcefully argued that it is the pre-decisional hearing that conforms to the requirements of principles of natural justice and the post-decisional one, if suggested, remains rather a formality and in any case, is not effective. In this regard, the learned counsel for the petitioners have referred to the decisions of the Hon'ble Supreme Court in Institute of Chartered Accountants of India Vs. L.K. Ratna & Ors: (1986) 4 SCC 537, H.L. Trehan & Ors. Vs. Union of India & Ors: (1989) 1 SCC 764 and Shanker Ghosh Vs. Union of India & Anr.: (2007) 1 SCC 331.
The learned counsel for the respondents on the other hand have referred to the decisions in Liberty Oil Mills & Ors. Vs. Union of India & Ors.: (1984) 3 SCC 465 and Union of India & Anr. Vs. Tulsiram Patel: (1985) 3 SCC 398 to submit that in a given case, principles of natural justice could even be excluded.
There is no and there cannot be any quarrel with the principles laid down in the decisions referred by the learned counsel for the parties. The ordinary rule is that of necessity of affording pre-decisional hearing but like any other, this rule has not been laid down in absolute terms and there are well-defined exceptions to this rule too [as held in paragraph 101 in Tulshiram Patels case (supra)]. In essence, whether a right to pre-decisional hearing could be excluded would depend on the nature of action to be taken, its object and purpose.
As noticed and observed hereinabove, Regulation 21 is essentially that of a preventive measure. However, even this preventive measure entails civil and evil consequences on the concerned CHA, who would be prohibited from working in one or more sections of the Custom Stations. Such prohibition, for all practical purposes, would ordinarily lead to his being unable to function as CHA at the concerned station. The question as to how this one and akin provisions could be operated upon has acquired attention of the other Hon'ble High Courts in the decisions referred by the learned counsel for the parties.
We have been referred to a short order passed by a learned Single Judge of the Honble Madras High Court in A.M.Ahamed and Co. Vs. Commissioner of Customs, Tuticorin: 2013 (288) ELT 497 (Mad.) wherein prohibitory order under Regulation 21, having been passed without opportunity of hearing, was set aside while giving liberty to the respondents to pass a fresh order in accordance with law. The order in its entirety reads as under:-
The petitioner prays for issuance of a Writ in the nature of Certiorari to quash the order No. C.No.VIII/13/18/2001-CHAL, dated 6.9.2012 passed by the Commissioner of Customs, Customs House, Tuticorin.
2. The Regulation 21 of the Customs House Licence reads as under:
Regulation 21. Prohibition.-- Notwithstanding anything contained in regulation 22, the Commissioner of Customs may prohibit any customs House Agent from working in one or more Sections of the Customs Station, if he is satisfied that such Customs House Agent has not fulfilled his obligations as laid down under regulation 13 in relation to work in that Section or Sections.
3. The impugned order is challenged only on the ground that before passing the prohibitory order against the petitioner, an opportunity of hearing was not given to the petitioner.
4. On notice, the Writ Petition is opposed by the learned counsel for the respondent on the ground that the order under Regulation 21 is in the nature of interlocutory order for want of jurisdiction of the authorities to pass order of revocation or suspension, therefore no show-cause notice is required to be issued.
5. On consideration, I find that the impugned order cannot be sustained. The order of prohibition is a final order passed by the authority not vested any power to exercise of jurisdiction under Regulation 22.
6. It is now well-settled law that even administrative orders which affects the rights of a party can be passed only by following the principles of natural justice. That Order under Regulation 21 was passed in violation of principles of natural justice on the face of it is arbitrary and thus not sustainable in law.
7. The Writ Petition accordingly is allowed. The impugned order is set aside. However, liberty is granted to the respondent to pass fresh order in accordance with law, after giving opportunity of hearing to the petitioner.
8. Consequently, connected Miscellaneous Petition is closed. No costs.
In the case of International Cargo Services Vs. Union of India: 120 (2005) DLT 195 the Hon'ble Delhi High Court, while essentially considering a case where an order passed under Regulation 20(2) of the Regulations of 2004 was in question observed as under: -
7. The principles of natural justice have twin ingredients. Firstly, the person likely to be adversely effected by the action of the authorities should be given notice to show cause or granted reasonable opportunity of being heard in consonance with the maxim audi alteram partem. Secondly, the order so passed by the authorities should give reasons for arriving at any conclusion showing proper application of mind. Violation of either of these principles normally would render an order particularly quasi-judicial in nature invalid. Violation of principles of natural justice is violation of basic rule of law and would invite judicial chasticism. However, this rule is not without exceptions. Of course, the exception to such a rule are rare. Where the legislative scheme of provisions of a statute suggest that intent of the legislature is to take emergent action, in that event and subject to fulfillment of ingredients of the provisions, an order could be passed without affording pre-decisional hearing and an expeditious post-decisional hearing may amount to substantial compliance with the basic rule of law. Regulation 20 (1) empowers the Commissioner of Customs to revoke the license of an agent and even order forfeiture of part or whole security. This action could be taken restricted to the grounds spelled out in the regulation itself. This power can hardly be invoked by the authorities for instantly revoking a license while under 20 (2) of the regulations the same authority may in appropriate cases where immediate action is necessary suspend the license of the agent where enquiry against such agent is pending or contemplated. The emphasis is on the expression 'immediate action is necessary' and 'enquiry against such agent is pending or contemplated'. Furthermore, this regulation opens with non-obstante expression 'notwithstanding anything contained in sub-regulation (1)'. Thus, provisions of sub-regulation (2) would take precedence and recourse thereto can be taken despite the pendency of proceedings for revocation of license. In normal course, the procedure prescribed under Regulation 22 has to be followed by the authorities. In a case where immediate or emergent circumstances do not exist, notice should be issued to the agent, before authorities could pass an order in exercise of their powers under Rule 20 (1) or 21. However, this may not be quite true in an emergent situation. Where the authorities are of the considered view that the facts and circumstances disclose sufficient grounds for invoking emergent provisions and it is absolutely essential to suspend the license of the agent, in public interest, there the authorities may do so without serving a notice on the agent, but at the same time ensuring that post-decisional hearing is granted to the agent and the matter is considered with utmost expeditiousness. The rules of natural justice would have to be read into regulation 20 (2) but with the proviso that post-decisional hearing in emergent situation and subject to the satisfaction of the competent authority would be granted at the very first possible opportunity. Wherever a license is suspended without hearing, the authorities would be under obligation to grant post-decisional hearing to the agent immediately thereafter and ensure that the authorities after hearing the concerned party and upon due application of mind consider the matter whether the order of suspension should continue during the period of enquiry or otherwise. Such an approach would be just, fair and would further the object sought to be achieved by these provisions. The expression 'immediate' has to be harmoniously read and construed with other provisions including the provisions of regulations 20 and 22. The period specified in regulation 22 would have the effect of rendering the expression 'immediate' ineffective and meaningless. Therefore, applying the principle of harmonious construction, the provisions will have to be given their true and correct meaning and they should be permitted to operate in the field in which they are intended to operate by the legislature, so as to avoid any conflict between the language of these two provisions. An order of suspension is bound to have serious consequences upon the business of the agent and tantamounts to practically closing the business of the agent. As such to permit an order of suspension, even passed in emergent situations, to continue for indefinite period without hearing the agent would definitely be infringement of the principles of natural justice and basic rule of law as well. The only way in which both these provisions can operate without conflict is to hold that an order of suspension in 'emergent' situation can be passed for recorded reasons without hearing the agent at the first instance but should be granted opportunity of showing cause immediately thereafter and the authorities are expected to apply their mind whether the order of suspension so passed should be permitted to continue or not..
The Hon'ble Court further observed.
11. The exclusion of principles of natural justice by specific legislative provision is not unknown to law. Such exclusion would either be specifically provided or would be imperative consequence of language of the provision. Instead of making a final order without hearing, a temporary action may be necessary without a full hearing. In such cases, 'due process' is specified by offering a full hearing before the final order is made. Of course, such legislation may be struck down as offending due process, if no safeguard is provided against arbitrary action. It is equally settled principle that in cases of urgency, a post-decisional hearing would satisfy the principles of natural justice. Reference can be made to the case of Maneka v. Union of India (1978)1 SCC 248 and State of Punjab v. Gurdayal AIR 1980 SC 319..
In S.R. Sale & Co. Vs. Union of India & Ors : Writ Petition (L) No.1102/2013 decided on 09.05.2013, the Hon'ble Bombay High Court has specifically considered the question in relation to an order passed under Regulation 21 and has observed as under:
3. Regulation 21 does not exclude the requirement of complying with the principles of natural justice. As a matter of first principle, even when a statute or statutory regulation is silent in regard to compliance with the principles of natural justice, natural justice is to be read into the provision. However, it is equally well settled that in a case where urgent action is required, particularly in public interest, it may not always be appropriate or efficacious to furnish a pre-decisional hearing. Where immediate action is required, the authority can be directed to give an opportunity to the person who is affected by the order an opportunity of a hearing after passing a pro-tem order for a limited period. In the case of a suspension, Regulation 20(2) contemplates immediate action being taken, where it is required, after which an opportunity has to be given to the agent whose licence is suspended within fifteen days from the date of the suspension. In our view, Regulation 21 has to be so interpreted so as to balance the requirement of fairness to the Customs House Agent on the one hand, which would warrant compliance with the principles of natural justice together with the need, on the other hand to protect the public interest essentially where immediate action is warranted. Hence, where immediate action is warranted, to prevent a customs house agent from carrying out activities which are prejudicial, a prohibitory order can be passed under Regulation 21 for a limited period. During that period an opportunity of a hearing can be afforded in compliance with the principles of natural justice. Where immediate action is necessary, a pre decisional hearing can be dispensed with if such a hearing will defeat the requirement of public interest in the orderly and proper functioning of the Customs Station. On the other hand, where immediate action is not required, a prohibitory order can await compliance with the requirements of natural justice. Ordinarily, a pre decisional hearing must be the rule. Dispensation is to be an exception.
(emphasis supplied) The Bombay High Court has also referred to a report of the Committee on Subordinate Legislation dated 08.03.2007 in the Rajya Sabha, which had, after considering the provisions of Regulation 21 taken note of the fact that the general principles of natural justice have to be observed and any curtailment or suspension of rights of any person can be done only after offering the person to present his case and after passing a reasoned order; and made the recommendation that the provisions be made more explicit in the Regulation itself. The Bombay High Court noted that Regulation 21 has, however, not been amended thereafter. Taking all the internal and external aids for the purpose of interpretation, the Honble Bombay High Court has said,-
.......... As a matter of first principle, where as in the present case, the subordinate legislation is silent in regard to compliance with the principles of natural justice, the requirement of compliance with those principles has to be read into the provision. However, in a situation where urgent or immediate action is necessary, and waiting for the outcome of a pre-decisional hearing will defeat the public interest and obstruct or impede the proper functioning of a Customs Station, it would be open to the Commissioner under Regulation 21 to pass an immediate prohibitory order for a limited period and to afford to the CHA, in the meantime, an opportunity of being heard. Pursuant to that opportunity, it is open to the CHA to place facts on record in support of the plea that the prohibitory order ought not to have been passed. This would balance both the need to observe the principles of natural justice on the one hand and the necessity of protecting the public interest in appropriate cases where immediate action is warranted and where delay would be prejudicial to the public interest.
(emphasis supplied) In the given case, the Honble Court noticed the fact that a representation had already been submitted for lifting of prohibition. Hence, the Commissioner of Customs (General) was directed to pass orders on the representation after furnishing to the petitioner an opportunity of being heard.
Benefited by the above pronouncement of law by the Hon'ble Supreme Court and other Hon'ble High Courts, we may proceed to consider as to whether the orders in question are vitiated and/or the course to be adopted hereafter.
With respect, we are unable to endorse the view in the order passed by the learned Single Judge of the Hon'ble Madras High Court that the prohibitory order under Regulation 21 be considered to be a final order and is to be set aside only on the ground that before passing the same, an opportunity of hearing was not given to the CHA.
As observed hereinabove, the powers under Regulation 21 are required to be seen essentially as those of a preventive measure; and hence, it cannot be said that in no case such powers could be exercised without previous notice to the person concerned. True it is that generally and ordinarily, the principles of natural justice warrant pre-decisional hearing but there could be justified cases where in place of pre-decisional hearing, the post-decisional one would be permissible. In the scheme of the Act of 1962 and the Regulations of 2004, where the activity directly relates to export and import of goods, having far reaching fiscal overtones, in the appropriate case, passing of order without pre-decisional hearing cannot be considered illegal or bad on that count alone; and in such a case, post-decisional hearing remains a valid method to ensure adherence to the requirements of extending opportunity of hearing to the person adversely affected.
Hence, we are inclined to respectfully agree with the observations made and the course adopted by the Hon'ble Bombay High Court in S.R. Sales case (supra) that in case where pre-decisional hearing is considered defeating public interest or impede the proper function of the Customs Station, it would be open for the Commissioner to pass an immediate prohibitory order for a limited period and to afford the CHA an opportunity of being heard, which would obviously be in the balance of the principles of natural justice and necessity of protecting public interest in appropriate cases.
In the present matters, it is not in dispute that the orders of prohibition have been passed without extending opportunity of hearing to the petitioners. Having regard to the circumstances, we are not dealing with and pronouncing on the merits of these cases but then, the petitioners have indicated several aspects on merits which do require consideration by the authorities concerned so as to decide as to whether the order of prohibition ought be continued or not. Therefore, it does appear in the interest of justice that while limiting the operation of the order of prohibition, if continuing yet, to a period of four weeks from the date of this order, the Commissioner concerned be directed to pass an appropriate speaking order in these matters after extending an adequate opportunity of hearing to the respective parties including that of personal hearing, if so desired.
Accordingly, and in view of the above, these petitions are allowed in part, to the extent and in the manner indicated. The questioned orders of prohibition i.e., order dated 25.04.2013 (Annex.7) in CWP No.7266/2013, order dated 11.04.2013 (Annex.20) in CWP No.7896/2013; and order dated 17.04.2013 (Annex.1) in CWP No.7345/2013 are now ordered to remain operative until four weeks from the date of this order. Within this period of four weeks, it shall be required of the Commissioner concerned to extend an adequate opportunity of hearing to each of the writ-petitioners, which could include personal hearing, if so desired and then, to pass appropriate speaking order in accordance with law.
Needless to observe that in case of any grievance remaining yet, or arising hereafter, it shall be permissible for the petitioners to take recourse to appropriate remedies in accordance with law. No costs.
(NARENDRA KUMAR JAIN-II),J. (DINESH MAHESHWARI),J. MK
CERTIFIED THAT ALL CORRECTIONS MADE IN THE JUDGMENT / ORDER HAVE BEEN INCORPORATED IN THE JUDGMENT / ORDER BEING EMAILED MANOJ KUMAR P