Telangana High Court
Mr Mohammed Muzzamil And Another vs The Central Board Of Indirect Taxes And ... on 6 November, 2020
Author: M.S. Ramachandra Rao
Bench: M.S.Ramachandra Rao
HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO
AND
HONOURABLE SRI JUSTICE T.AMARNATH GOUD
WP.No.18081 of 2020
O R D E R:(Per Hon'ble Sri Justice M.S. Ramachandra Rao)
1. This Writ Petition is filed by the petitioner challenging the final order dt.04.09.2020 passed by the 2nd respondent in Order in Original No.HYD-CUS-010-COM-20-21 in File No.DRI/HZU/48E/ ENQ-8(INT-15)/2015 relating to DIN No.20200956MD00002F6D7F. Case of the petitioners:
2. The 1st petitioner herein was working as an Assistant Manager (Operation) till 2015 in M/s SRP Logistics (P) Ltd., Begumpet, Hyderabad, having a customs G-Card. The 1st petitioner had been working there for the previous 15 years in the said Company and his job was to facilitate clearances of cargoes, goods imported from foreign countries to India by their customers. He alleges that he resigned his job on 31.08.2015 and though it was to take effect on 30.10.2015, it was kept pending as his accounts were not settled by his employer. He contends that he was attending the work at Air Cargo Complex, Rajiv Gandhi International Airport, Shamshabad, Hyderabad(for short 'ACC').
3. The 2nd petitioner is an employee of M/s East West Freight Carriers Pvt. Ltd., Begumpet, Hyderabad as Operational Executive.
4. The Officers of the Directorate of Revenue Intelligence, Hyderabad(DRI), upon intelligence gathered by them which indicated that one consignment containing imported cigarettes would be taken out of ACC on 08.10.2015 in the guise of engineering products, computer parts etc., without paying customs duty, intercepted Auto Trolley bearing No.AP 13 Y 1205 carrying cargo consisting of 2 skids/pallets at the exit gate of ACC complex on that day.
5. The said Auto Trolley was escorted by one Mohammed Nimatullah Shareef, who informed the intercepting officer that the cargo was handed over by the 1st petitioner and the documents would be available with the 1st petitioner. Later, the said individual stated that another set of documents would be available with Mr.Syed Irfan Mohammed, as the 1st petitioner could not be located in the ACC.
6. The Officers of the DRI conducted enquiry with the custodian of ACC, Hyderabad i.e., M/s Hyderabad Menzies Air Cargo Pvt. Ltd., RGIA, Shamshabad, and recovered certain documents such as Release Note, Copy of Manual Bill of Entry, Airway Bill, Application for delivering import cargo dt.7.10.2015 and Copy of Delivery order connected with the imported cargo.
7. The documents disclosed that description of the goods therein was mentioned as 'molding accessories', the total weight was shown as 530 kgs, and the consignee name was M/s Sri Tirumala Engineering Co., (P) Ltd., Balanagar, Hyderabad.
8. During the course of investigation, statements were recorded from Mohammed Nimatullah Shareef, Mohd.Azher Khan, Alluri Nagesh Kumar, Shaik Javeed, Syed Mohammed Irfan and Mohammed Anwarullah, and the 1st petitioner underSec.108 of the Customs Act,1962 for the offence of smuggling imported cigarettes.
9. According to the 1st petitioner, due to enmity, certain persons, he was falsely implicated by his enemies.
10. The case of the DRI Officials was that the Cargo received under Airway Bill No.176-18681924 of Emirates Airlines at ACC, Shamshabad, by its custodian M/s Hyderabad Menzies Air Cargo Pvt Ltd. was released by such custodian on production of manual bill of entry No.000490 dt.08.10.2015, which was submitted by the 1st petitioner, to get the cargo released and that though the documents relating to the goods which were imported mentioned goods as 'molding accessories', on checking the same, they turned out to be imported cigarettes.
11. The consignment of cigarettes was detained under detention memo dt.08.10.2015.
12. Thereafter, a show cause notice dt.04.04.2016 was issued to the 1st petitioner, to show cause as to why penalty should not be imposed upon the 1st petitioner under Sections 112(a)/(b), 114AA and 117 of the Customs Act, 1962.
13. On receipt of the said show cause notice, 1st petitioner filed his reply denying all the allegations leveled against him with respect to his involvement in smuggling of the imported cigarettes.
14. On 04.09.2020 the impugned order was passed by the 2nd respondent levying penalty of Rs.5,00,000/- each on both petitioners under Section 112(a)(i)/112(b)(i) of the Customs Act, 1962 and also a penalty of Rs.5,00,000/- each on the petitioners under Section 114AA of the Customs Act, 1962.
Contentions of the petitioners:
15. At the stage of admission of the Writ Petition, it was pointed out to the counsel for petitioners that they have a remedy of appeal against the impugned order under Section 129A of the Act to the Customs, Excise, Service Tax Appellate Tribunal(CESTAT), but the counsel for petitioner insisted that when there is a violation of principles of natural justice, petitioners need not avail alternative remedy of appeal to the Appellate Tribunal and that they can maintain this Writ Petition.
16. According to the 1st petitioner, the entire allegations leveled against him were based upon the statements rendered by natural persons, that he had specifically sought for cross-examination of the said individuals by making requests on 02.03.2017 and 07.10.2019, and that without offering the 1st petitioner an opportunity to cross-examine the said persons and without offering him an opportunity to verify the original record, the impugned final order was passed on 04.09.2020 running into 129 pages levying penalty under the Customs Act, 1962.
17. The main contention of the petitioners is that there has been a violation of principles of natural justice by the 2nd respondent by relying on the statements made under Sections 108 of the Customs Act, 1962 without permitting the petitioners to cross-examine them.
18. Reliance is also placed on Section 122A of the Customs Act, 1962 inserted by Act 23 of 2004 w.e.f. 10.09.2004 making applicable principles of natural justice to proceedings under the Customs Act.
19. Reliance is also placed by the petitioners on the decisions of the Supreme Court in Lakshman Exports Ltd. v. Collector of Central Excise1, Andaman timber Industries v. Commissioner of Central Excise, Kolkata-II2 and New India assurance Company v. Nusli Neville Wadia3.
20. Contentions on merits of the order insofar as the said order affects the petitioners are also raised.
Contentions of the respondents
21. Sri B.Narasimha Sharma, Senior counsel for Central Taxes, appearing for respondents refuted the above contentions and submitted that the impugned order cannot be said to be solely based on the statements of third parties implicating the petitioners made under Section 108 of the Customs Act, 1962, who were not allowed to be cross-examined by the petitioners in paragraphs 13 to 18 of the impugned order. Reference has been made by the 2nd respondent to certain admissions/confessions made by the petitioners themselves indicating their role in the smuggling of 1 2005(10) SCC 634 2 2016(15) SCC 785 3 2008 (3) SCC 279 imported cigarettes and therefore, they cannot contend that they had suffered any prejudice on account of denial of opportunity to cross-examine the individuals, who had implicated the petitioners in the activity of smuggling of the imported cigarettes. He also pointed out that even according to the petitioner, a show cause notice had been given to the petitioner, which was received by the petitioner, personal hearing was conducted on 02.03.2017 and 09.10.2019 wherein, counsel for the petitioner was heard and further submissions had been made by counsel for petitioner on 07.10.2019 in addition to the written reply given by the petitioners on 02.03.2017, and the petitioners cannot therefore plead about denial of principles of natural justice.
22. He relied on the decisions of the Supreme Court in Romesh Chandra Mehta v. State of West Bengal4, M/s Surjeet Singh Chhabra v. Union of India5 and Telstar Travels (p) Ltd v. Enforcement Directorate6.
The issues for consideration by the Court
23. So the issues to be considered are:
"(a) Whether it is always incumbent on the part of an adjudicating authority under the Customs Act,1962 to give opportunity to cross examine persons whose statements had been recorded under sec.108 of the said Act?
And
(b) Are there any exceptions to the said rule?"
4 AIR 1970 SC 940 5 1997 (1) SCC 508 6 2013 (9) SCC 549 The discussion on the issues by the Court
24. First we shall deal with the nature of enquiry under the Customs Act,1962.
25. A Constitution Bench of the Supreme Court in Ramesh Chandra Mehta ( 4 supra) held that the Customs Officer even under the Act of 1962 continues to remain a revenue officer primarily concerned with the detection of smuggling and enforcement and levy of proper duties and prevention of entry into India of dutiable goods without payment of duty and of goods of which the entry is prohibited. He does not on that account become either a police officer, nor does the information conveyed by him, when the person guilty of an infraction of the law is arrested, amount to making of an accusation of an offence against the person so guilty of infraction. Even under the Act of 1962 formal accusation can only be deemed to be made when a complaint is made before a Magistrate competent to try the person guilty of the infraction under Sections 132, 133, 134 and 135 of the Act. Any statement made under Sections 107 and 108 of the Customs Act by a person against whom an enquiry is made by a Customs Officer is not a statement made by a person accused of an offence.
26. Next we shall deal with the cases cited by the learned counsel for the petitioner.
27. In Lakshman Exports Ltd's case (1 supra) cited by the Counsel for the petitioners, there was a point urged that opportunity for cross examination though sought had been denied, but there was a difference of opinion between two members of the Tribunal hearing appeals under the Central Excise Act,1944. The Vice President of the Tribunal held that such opportunity was denied and prejudice was caused thereby. The Supreme Court, noted that in the reply to the show cause notice, a request had been made for such opportunity; and since a remand sought on that ground was not opposed, it allowed the Appeal and remanded the matter to the Tribunal. There was no discussion in the short judgment of the Supreme Court in this case on the necessity to give opportunity to cross examine.
28. In Andaman Timber Industries' (2 supra) cited by the Counsel for the petitioners, the Supreme Court did held that if an assessee is not allowed to cross-examine the witnesses by an adjudicating authority, there is a serious flaw and it would amount to violation of principles of natural justice. The impugned order of the CESTAT was set aside in those cases, and the matter was remanded back for fresh consideration. The court observed:
" 6. According to us, not allowing the assessee to cross- examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross- examine, the adjudicating authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the adjudicating authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the adjudicating authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.
7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the adjudicating authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject-matter of cross-examination. Therefore, it was not for the adjudicating authority to presuppose as to what could be the subject- matter of the cross-examination and make the remarks as mentioned above."
29. In New India Assurance Co. Ltd. ( 3 supra) cited by the Counsel for the petitioners, a case arising under the Public Premises (Eviction of Unauthorized Occupants) Act, 1971, the Supreme Court held that in certain circumstances an opportunity to cross examine ought to be given. It stated:
"45. If some facts are to be proved by the landlord, indisputably the occupant should get an opportunity to cross- examine. The witness who intends to prove the said fact has the right to cross-examine the witness. This may not be provided by under the statute, but it being a part of the principle of natural justice should be held to be indefeasible right. (See K.L. Tripathi v. SBI7 and Lakshman Exports Ltd. v. CCE8.)
46. We may also take note of the fact that this Court in Bareilly Electricity Supply Co. Ltd. v. Workmen9 this Court held as under: (SCC p. 629, para 14) "14. ... the application of principle of natural justice does not imply that what is not evidence can be acted upon. On the other hand what it means is that no materials can be relied upon to establish a contested fact which are not spoken to by persons who are competent to speak about them and are subjected to cross-examination by the party against whom they are sought to be used.""
30. The issue of prejudice to the affected party on account of denial of natural justice by way of cross-examination was not considered in Andaman Timber Industries' (2 supra) and also in New India Assurance Co. Ltd. ( 3 supra) and such prejudice appears to have been presumed in favour of the affected party in the above decision.
31. We are not inclined to consider the decisions of the other High Courts cited by the petitioner.
32. In Surjeet Singh Chhabra ( 3 supra) cited by the Counsel for the respondents, it was contended by the learned counsel for the petitioner that the petitioner is entitled to cross-examine the panch witnesses and the Seizing Officer for the goods seized in 7 (1984) 1 SCC 43 8 (2005) 10 SCC 634 9 (1971) 2 SCC 617 contravention of the FERA and Customs Duty Act and that the opportunity has not been given and therefore, it is violative of natural justice. The Supreme Court held that since petitioner therein had confessed to the offence of smuggling, failure to provide to him an opportunity to him to cross examine the witnesses, is not violative of principles of natural justice.
"3. It is true that the petitioner had confessed that he purchased the gold and had brought it. He admitted that he purchased the gold and converted it as a kara. In this situation, bringing the gold without permission of the authority is in contravention of the Customs Duty Act and also FERA. When the petitioner seeks for cross-examination of the witnesses who have said that the recovery was made from the petitioner, necessarily an opportunity requires to be given for the cross-examination of the witnesses as regards the place at which recovery was made. Since the dispute concerns the confiscation of the jewellery, whether at conveyor belt or at the green channel, perhaps the witnesses were required to be called. But in view of confession made by him, it binds him and, therefore, in the facts and circumstances of this case the failure to give him the opportunity to cross-examine the witnesses is not violative of principle of natural justice. It is contended that the petitioner had retracted within six days from the confession. Therefore, he is entitled to cross-examine the panch witnesses before the authority takes a decision on proof of the offence. We find no force in this contention. The customs officials are not police officers. The confession, though retracted, is an admission and binds the petitioner. So there is no need to call panch witnesses for examination and cross-examination by the petitioner." (emphasis supplied)
33. Thus the Supreme Court in Surjeet Singh Chhabra ( 3 supra) indicated that it is also necessary to consider the question of prejudice to the party who complains of denial of right to cross examine the witnesses, and in cases where there is a confession, such denial is justified and no prejudice can be pleaded by such party.
34. This was reiterated by the Supreme Court in M/S. Telestar Travels Pvt. Ltd. v Special Director Of Enforcement10 which observed that cross-examination of witnesses would make no material difference and failure to permit the party to cross-examine cannot be said to have caused any prejudice calling for reversal of the orders impugned by directing a denovo enquiry into the matter.
"23. That brings us to the third limb of the attack mounted by the appellants against the impugned orders. It was argued by Mr Divan that while holding that Bountiful Ltd. was a paper company and was being controlled and operated from India by the appellants through Shri Sirish Shah, the adjudicating authority had relied upon the statements of Miss Anita Chotrani and Mr Deepak Raut, and a communication received from the Indian High Commission in London. These statements and the report were, according to Mr Divan, inadmissible in evidence as the appellant's request for an opportunity to cross-examine these witnesses had been unfairly declined, thereby violating the principles of natural justice that must be complied with no matter the strict rules of the Evidence Act had been excluded from its application. ... ...10
2013(9) SCC 549
24. Mr Malhotra, on the other hand, argued that the right of cross-examination was available to a party under the Evidence Act which had no application to the adjudication proceedings under FERA. ... ...He also placed reliance upon a decision of this Court in Surjeet Singh Chhabra v. Union of India(1997(1) SCC 508=1997 SCC (Cri) 272) to argue that cross-examination was unnecessary in certain circumstances such as the one at hand where all material facts were admitted by the appellants in their statements before the authority concerned.
25. There is, in our opinion, no merit even in that submission of the learned counsel. It is evident from Rule 3 of the Adjudication Rules framed under Section 79 of FERA that the rules of procedure do not apply to adjudication proceedings. That does not, however, mean that in a given situation, cross- examination may not be permitted to test the veracity of a deposition sought to be issued against a party against whom action is proposed to be taken. It is only when a deposition goes through the fire of cross-examination that a court or statutory authority may be able to determine and assess its probative value. Using a deposition that is not so tested, may therefore amount to using evidence, which the party concerned has had no opportunity to question. Such refusal may in turn amount to violation of the rule of a fair hearing and opportunity implicit in any adjudicatory process, affecting the right of the citizen. The question, however, is whether failure to permit the party to cross-examine has resulted in any prejudice so as to call for reversal of the orders and a de novo enquiry into the matter. The answer to that question would depend upon the facts and circumstances of each case. ... ...
26. We may also refer to the decision of this Court in Kanungo & Co. v. Collector of Customs(1973(2) SCC 438 = 1973 SCC (Cri) 846). The appellant in that case was carrying on business as a dealer, importer and repairer of watches in Calcutta. In the course of a search conducted by the Customs Authorities on the appellant's premises, 280 wristwatches of foreign make were confiscated. When asked to show cause against the seizure of these wristwatches, the appellant produced vouchers to prove that the watches had been lawfully purchased by them between 1956 and 1957. However, upon certain enquiries, the Customs Authorities found the vouchers produced to be false and fictitious. The results of these enquiries were made known to the appellant, after which they were given a personal hearing before the adjudicating officer, the Additional Collector of Customs. Citing that the appellant made no attempt in the personal hearing to substantiate their claim of lawful importation, the Additional Collector passed an order confiscating the watches under Section 167(8), Sea Customs Act, read with Section 3(2) of the Imports and Exports (Control) Act, 1947. The writ petition filed by the appellant to set aside the said order was allowed by a Single Judge of the High Court on the ground that the burden of proof on the Customs Authorities had not been discharged by them. The Division Bench of the High Court reversed this order on appeal stating that the burden of proving lawful importation had shifted upon the firm after the Customs Authorities had informed them of the results of their enquiries.
27. In appeal before this Court, one of the four arguments advanced on behalf of the appellant was that the adjudicating officer had breached the principles of natural justice by denying them the opportunity to cross-examine the persons from whom enquiries were made by the Customs Authorities. The Supreme Court rejected this argument stating as follows: (Kanungo & Co. case(1973(2) SCC 438 = 1973 SCC (Cri) 846)., SCC p. 442, para 12) "12. We may first deal with the question of breach of natural justice. On the material on record, in our opinion, there has been no such breach. In the show-cause notice issued on 21-8-1961, all the material on which the Customs Authorities have relied was set out and it was then for the appellant to give a suitable explanation. The complaint of the appellant now is that all the persons from whom enquiries were alleged to have been made by the authorities should have been produced to enable it to cross-examine them. In our opinion, the principles of natural justice do not require that in matters like this the persons who have given information should be examined in the presence of the appellant or should be allowed to be cross-examined by them on the statements made before the Customs Authorities. Accordingly we hold that there is no force in the third contention of the appellant."
28. Coming to the case at hand, the adjudicating authority has mainly relied upon the statements of the appellants and the documents seized in the course of the search of their premises. But, there is no dispute that apart from what was seized from the business premises of the appellants, the adjudicating authority also placed reliance upon the documents produced by Miss Anita Chotrani and Mr Raut. These documents were, it is admitted, disclosed to the appellants who were permitted to inspect the same. The production of the documents duly confronted to the appellants was in the nature of production in terms of Section 139 of the Evidence Act, where the witness producing the documents is not subjected to cross-examination. Such being the case, the refusal of the adjudicating authority to permit cross-examination of the witnesses producing the documents cannot even on the principles of the Evidence Act be found fault with. At any rate, the disclosure of the documents to the appellants and the opportunity given to them to rebut and explain the same was a substantial compliance with the principles of natural justice. That being so, there was and could be no prejudice to the appellants nor was any demonstrated by the appellants before us or before the courts below. The third limb of the case of the appellants also in that view fails and is rejected." ( emphasis supplied)
35. Thus there is no doubt that where a plea of violation of principles of natural justice by denying a party an opportunity to cross examine witnesses is raised in proceedings under the Customs Act,1962 or similar legislation, the question of prejudice suffered to such party by such denial has to be gone into. If there is no prejudice caused by such denial, no relief can be granted to him. The issues arising in this case are thus answered as above.
36. Having perused the impugned order passed by the 2nd respondent, prima facie, it appears to us that the basis for levying penalty against the petitioners were their statements recorded under Section 108 of the Customs Act, 1962, wherein certain confessions appear to have been made by them implicating themselves in the smuggling of cigarettes, which was subject matter of enquiry.
37. Therefore, we are of the opinion that no prejudice has been caused to the petitioners by the action of the 2nd respondent in denying an opportunity to them to cross-examine the other persons who had implicated them in the said act of smuggling.
38. We have also noticed that the petitioners were admittedly given a show-cause notice on 04.04.2016; they gave response there to on 02.03.2017 and 07.10.2019; and their counsel was also given a personal hearing on 02.03.2017 and 09.10.2019. So the contention of the petitioners that there were violation of other principles of natural justice, cannot also be sustained.
39. In this view of the matter, we are not inclined to entertain this Writ Petition.
40. We accordingly dismiss this Writ Petition at the admission stage as not maintainable, giving liberty to the petitioner to avail the alternative remedy of Appeal under Section 129A of the Customs Act, 1962.
41. We clarify that we have not expressed any opinion on the merits of the claims of the petitioners and whatever observations have been made by us are only for the purpose of disposal of this Writ Petition and cannot be treated as conclusive; and if any such appeal is preferred by the petitioners, the same shall be decided by the Appellate Authority uninfluenced by any observations made by us in this order. No order as to costs.
42. Consequently, miscellaneous petitions, pending if any, shall stand closed.
______________________________ M.S. RAMACHANDRA RAO, J ________________________ T.AMARNATH GOUD, J Date: 6 .11.2020 gra