Court invalidates search operation by DRI, emphasizes fair procedures & cross-examination rights

The court found that the search and seizure operation conducted by the Directorate of Revenue Intelligence (DRI) violated principles of natural justice due to the denial of cross-examination and failure to follow proper procedures. As a result, the court set aside the orders and remanded the matters for re-adjudication, emphasizing the importance of fair procedures and allowing the petitioners to cross-examine witnesses. The court also directed that the goods should not be disturbed or disposed of until the re-adjudication process is completed.

---

---

Issues Involved:
1. Legality of the search and seizure operation by the Directorate of Revenue Intelligence (DRI).
2. Violation of principles of natural justice due to denial of cross-examination.
3. Impact of the prior High Court judgment on the ongoing adjudication process.
4. Relevance and admissibility of statements under Section 108 of the Customs Act.
5. Applicability of the Master Circular issued by the Central Board of Excise and Customs.

Detailed Analysis:

1. Legality of the Search and Seizure Operation by the Directorate of Revenue Intelligence (DRI):
The petitioners argued that they were intercepted by the DRI officials before they could declare the gold they brought, thus denying them a chance to declare the goods. The DRI officials conducted a search and seized the goods based on a single seizure mahazar, which included 129 passengers arriving from various flights between 05.11.2019 and 07.11.2019. The petitioners contended that the seizure was not conducted in accordance with proper procedures, including the presence of independent witnesses and the recording of statements in front of a Magistrate.

2. Violation of Principles of Natural Justice Due to Denial of Cross-Examination:
The petitioners claimed that the adjudication process violated principles of natural justice as they were denied the opportunity to cross-examine the independent mahazar witnesses and the DRI officials involved in the search and seizure. They argued that this denial rendered the entire adjudication process flawed. The court noted that cross-examination is a critical aspect of ensuring fairness in adjudication and that the denial of this opportunity could vitiate the proceedings.

3. Impact of the Prior High Court Judgment on the Ongoing Adjudication Process:
The petitioners pointed out that a prior judgment by the High Court dated 28.04.2021 had observed that the adjudication proceedings could not continue for determining the guilt of the petitioners due to the non-availability of CCTV footage, which was crucial evidence. The respondents argued that this judgment was specific to two petitioners and not applicable to all 129 passengers. However, the court found that the Customs Department had acknowledged the relevance of the pending writ petitions in their show cause notices and should have awaited the final decision before proceeding with the adjudication.

4. Relevance and Admissibility of Statements Under Section 108 of the Customs Act:
The respondents contended that the statements recorded under Section 108 of the Customs Act were voluntary and had not been retracted by the petitioners until the reply to the show cause notice. They argued that these statements were sufficient evidence and did not require corroboration through cross-examination. The court, however, emphasized that the statements alone were not enough and that the presence and testimony of independent witnesses were crucial for corroborating the seizure mahazar.

5. Applicability of the Master Circular Issued by the Central Board of Excise and Customs:
The petitioners referred to a Master Circular dated 10.03.2017, which mandates that statements relied upon in adjudication proceedings should be established through cross-examination if requested by the noticee. The respondents argued that this circular was primarily for the administration of the Central Excise Act, but the court found that the principles outlined in the circular were applicable to the Customs Act as well.

Conclusion:
The court concluded that the denial of cross-examination and the failure to follow proper procedures during the search and seizure operation violated the principles of natural justice. It set aside the impugned orders and remanded the matters back to the respondents for re-adjudication, ensuring that the petitioners are given a fair opportunity to cross-examine the independent witnesses and DRI officials involved. The court also emphasized that the goods in question should not be disturbed or disposed of until the re-adjudication process is completed.

---