Penalty quashed for failure to disclose overseas enquiry materials; importer denied right to know and answer allegations

SC held that the confiscation and penalty could not stand because the Commissioner relied on undisclosed overseas enquiry materials without supplying copies or permitting inspection, violating principles of natural justice. The importer had declared Lithopone but part of the consignment contained Tetracycline HCl; nonetheless a person charged with misdeclaration is entitled to know and answer the grounds and documents on which penal action is based. The impugned order was quashed and set aside for failure to afford a proper hearing.

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Issues: (i) Whether the impugned order of confiscation and imposition of redemption and personal fines was passed in violation of the principles of natural justice by relying on overseas enquiry material which was not supplied to or made available for inspection by the appellants.

Analysis: The authorities exercised powers capable of producing civil and penal consequences including confiscation, redemption fine and personal penalties. The show cause notice referred to results of an overseas enquiry but acknowledged that the enquiry was incomplete and that evidences gathered could not be disclosed at that stage. Despite the non-conclusive nature of the overseas enquiry and non-disclosure of documents relied upon, the impugned order made liberal use of the enquiry's purported findings. When a statutory authority exercises quasi-judicial functions leading to civil or penal consequences, the affected party is entitled to a proper hearing which, in this context, includes supply of or an opportunity to inspect materials upon which adverse findings are based. Reliance on undisclosed departmental material that the appellant cannot inspect or controvert breaches the requirement of a fair hearing and the settled principles governing administrative and quasi-judicial decisions.

Conclusion: The impugned order violated the principles of natural justice; the order is set aside and the matter is remitted to the Commissioner of Customs for fresh consideration, with a direction that if the Commissioner intends to rely on the overseas enquiry materials, relevant copies be supplied or inspection be permitted to the appellants.

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