2023 (2) TMI 494 - HC - Customs

Procedural fairness upheld as Court sets aside penalty for improper service of Show Cause Notice

M/s. Sun Aviation Pvt. Ltd. Versus Commissioner Of Customs (Export)

The Court found that the petitioner's rights were violated as the Show Cause Notice was not properly served, leading to the imposition of a penalty under ... Violation of principles of natural justice - SCN not issued - sufficient opportunity of hearing to contest the allegations, not provided (audi alterem partem) - communications sent by speed post without acknowledgement due, would also fall within the deeming provision of Section 153(3) of the Customs Act or not - mode of communication of SCN - Levy of penalty on the petitioner under Section 114AA of the Customs Act, 1962 - non-existent exporters - exports under the Shipping Bills, were to fraudulently avail export benefits - HELD THAT:- It is important to note that Section 153(3) of the Customs Act does not provide for any mode of service; it merely stipulates the date on which an order, decision, summon, notice or any communication is deemed to have been served when it is dispatch through registered post or speed post. Thus, it is erroneous to contend that Section 153(3) of the Customs Act, provides for a mode of service other than as stipulated under 153(1)(b) of the Customs Act. As is apparent from the plain language of Section 153(3) of the Customs Act, it is open for any party to establish that the notices were not received on expiry of the normal time taken in transit for any article sent through speed post or registered post, as the case may be. In the present case, the petitioner has affirmed on affidavit that it did not receive the Show Cause Notice. The petitioner had informed the respondent prior to the date of personal hearing regarding non-receipt of the Show Cause Notice and had repeatedly requested for a copy of the same. No response was given by the Respondent to the said notices/request. In the given facts, it is difficult to accept that the petitioner has not discharged its burden to establish that it had not received the Show Cause Notice - Since there is no material to indicate that the Show Cause Notice was sent by speed post with acknowledgement due or had been served by any of the modes as specified under Section 153(1) of the Customs Act, there are no hesitation in accepting the petitioner’s contention that it was not served with the Show Cause Notice in question. There are merit in the contention that the impugned order has been passed in violation of principles of natural justice and the petitioner was not afforded full opportunity to contest the allegations against it. Consequently, the impugned order, to the limited extent that it imposes penalty on the petitioner, is set aside - petition allowed. Issues:Violation of principles of natural justice in serving Show Cause Notice and imposing penalty under Section 114AA of the Customs Act, 1962.Analysis:1. The petitioner challenged an order imposing a penalty under Section 114AA of the Customs Act, 1962, alleging non-receipt of a Show Cause Notice. The petitioner, an IATA Agent, claimed it was not involved in fraudulent exports but only booked air freight. 2. The core issue was whether principles of natural justice were breached by not serving a Show Cause Notice properly. The respondent contended that the notice was served correctly through speed post, relying on legal provisions and a Supreme Court decision. 3. The Court examined Section 153 of the Customs Act, which specifies modes of service. The respondent argued that the notice sent by speed post without acknowledgment due sufficed under Section 153(3) for deemed receipt, but the Court disagreed. 4. The Court clarified that Section 153(3) does not create a separate mode of service; it merely determines the date of deemed service for notices dispatched via registered post or speed post. The petitioner's claim of non-receipt was supported by its efforts to obtain the Show Cause Notice. 5. Ultimately, the Court found that the impugned order violated natural justice as the petitioner was not properly served the Show Cause Notice. The order imposing the penalty was set aside, allowing the respondent to issue a fresh notice and provide a fair opportunity for the petitioner to respond.6. The judgment emphasized the importance of adhering to procedural fairness and providing parties with adequate opportunities to present their case. The legal analysis focused on the specific provisions of the Customs Act regarding service of notices and the burden of proof in establishing non-receipt.7. By setting aside the penalty and allowing for a fresh opportunity to be heard, the Court upheld the principles of natural justice and ensured a fair adjudication process for the petitioner. The judgment underscored the significance of proper service of notices in administrative proceedings to safeguard the rights of the parties involved.