Court upholds Customs' power delegation to Director (Audit) | Testimonial compulsion not applicable | Liability determination requires investigation

The court upheld the Central Board of Excise and Customs' authority to invest the Director (Audit) with powers of a Central Excise Officer. It deemed the assignment of cases to the Director (Audit) as legal, stating it was an administrative function not requiring adherence to natural justice principles. The court clarified that testimonial compulsion protections under Article 20(3) do not apply to adjudication proceedings under fiscal statutes. It held that liability determination concerning a scheme of arrangement requires factual investigation. The court found the reward scheme did not create bias or pecuniary interest affecting adjudication, dismissing the writ petition and upholding the impugned notifications and orders as legal.

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Issues Involved:
1. Vesting of powers under the Act on the Director (Audit).
2. Power of assigning cases to Director (Audit).
3. Testimonial compulsion in adjudication proceedings.
4. Scheme of arrangement under the Companies Act, 1956.
5. Reward Scheme.

Summary:

1. Vesting of Powers under the Act on the Director (Audit):
The main question was whether the Central Board of Excise and Customs could invest the Director (Audit) with the powers of a Collector of Central Excise for purposes of Section 11-A of the Central Excises and Salt Act, 1944. The court held that Section 2(b) of the Act allows the Central Board of Excise and Customs to invest any person with the powers of a Central Excise Officer. The Director (Audit) was not already an officer of the Central Excise Department, and thus the Board's action was within its jurisdiction. Therefore, the impugned Notification No. 330/86 dated May 29, 1986, was intra vires the provisions of the Act.

2. Power of Assigning Cases to Director (Audit):
The petitioners contended that the transfer of cases to the Director (Audit) was illegal as there was no provision in the Act or the Rules for such a transfer. The court held that the Central Board of Excise and Customs has the implied authority to assign cases to one of the competent authorities. The assignment of cases is an administrative function and does not require adherence to principles of natural justice. The impugned order dated February 11, 1987, assigning the petitioner's case to the Director (Audit) was held to be legal.

3. Testimonial Compulsion in Adjudication Proceedings:
The petitioners argued that simultaneous proceedings with the show cause notices and the criminal complaint were violative of Article 20(3) of the Constitution. The court held that the protection under Article 20(3) applies only to persons accused of an offence in proceedings before a Court of law or a judicial Tribunal, and not to adjudication proceedings under fiscal statutes. The court recorded the Additional Solicitor General's statement that any statements made by the petitioners in adjudication proceedings would not be used in criminal prosecution.

4. Scheme of Arrangement under the Companies Act, 1956:
The petitioners contended that the scheme of arrangement sanctioned by the Calcutta High Court transferred all liabilities and duties of Duncans to NTC, and thus Duncans and its directors had no liability. The court held that the show cause notices were issued for evasion of duty during a period when both Duncans and NTC were operational. The determination of liability requires investigation of facts, and the adjudicating authority would decide the scope and effect of the scheme of arrangement.

5. Reward Scheme:
The petitioners argued that the reward scheme resulted in departmental bias and pecuniary interest of the Director (Audit) in the proceedings. The court held that the scheme was intended to encourage officers to detect violations of law and did not result in bias. The Director (Audit) was not directly eligible for rewards, and any indirect pecuniary interest was too remote to affect the adjudication. The doctrine of necessity was invoked, requiring the Director (Audit) to adjudicate the case despite any speculative bias.

Conclusion:
The writ petition was dismissed, and the impugned notifications and orders were upheld as legal and valid.

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