2008 (12) TMI 28 - SC - Customs

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 ... Compliance with the principles of natural justice - Confiscation and penalty - misdeclaration of item - importer of various items of goods including Lithopone - appellants contended that the foreign supplier had mistakenly sent Tetracycline - accepted by the exporter - HELD THAT:- 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. - 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. 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. In view of the settled legal principles, there cannot be any doubt whatsoever that the principles of natural justice have been violated in this case. Thus, the impugned judgment cannot be sustained. It is set aside accordingly. 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.