2023 (2) TMI 494 - HC - Customs

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

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 ... Service of show cause notice - principles of natural justice - mode of service by registered post or speed post with acknowledgement due - deeming provision as to service under Section 153(3) - rebuttable presumption of serviceService of show cause notice - principles of natural justice - Impugned order set aside as passed in violation of principles of natural justice for non-service of the Show Cause Notice. - HELD THAT: - The Court found no material to show that the Show Cause Notice was served in any of the modes prescribed under Section 153(1) of the Customs Act. The petitioner repeatedly informed the respondent of non-receipt and sought a copy of the Show Cause Notice; no copy was furnished. Having affirmed by affidavit non-receipt and having notified the authority prior to the hearings, the petitioner discharged its burden to rebut the presumption of service. In these circumstances the imposition of penalty without affording the petitioner a fair opportunity to contest the allegations violated the principles of natural justice and the penalty imposed on the petitioner was set aside. [Paras 11, 16, 17, 18]Penalty set aside on ground of violation of natural justice for non-service of Show Cause Notice.Mode of service by registered post or speed post with acknowledgement due - deeming provision as to service under Section 153(3) - rebuttable presumption of service - Interpretation of Section 153(1)(b) and Section 153(3): service by speed post/registered post must conform to the mode in sub section (1)(b) (i.e., 'with acknowledgement due') and the deeming provision in sub section (3) only fixes timing and is rebuttable. - HELD THAT: - The Court held that Section 153(3) does not itself create a different mode of service; it only prescribes when service is to be deemed to have occurred for communications sent by registered post or speed post. The mode of service remains that prescribed in Section 153(1)(b), which requires service by registered post or speed post 'with acknowledgement due'. The presumption created by Section 153(3) as to receipt is rebuttable, and a party may prove non-receipt. Consequently, communications dispatched by speed post without evidence of acknowledgement due cannot be treated as complying with the mode of service under Section 153(1)(b) merely by invoking the deeming provision of sub section (3). [Paras 12, 13, 14, 15]Section 153(3) is a deeming provision as to time of service and does not dispense with the requirement of service 'with acknowledgement due' under Section 153(1)(b); the presumption is rebuttable.Service of show cause notice - rebuttable presumption of service - Order remitted to the respondent to issue a fresh Show Cause Notice and pass an appropriate order after affording the petitioner a full opportunity of hearing. - HELD THAT: - Having set aside the impugned order to the extent it imposed penalty due to violation of natural justice, the Court clarified that the respondent is not precluded from initiating fresh proceedings. The respondent may serve a Show Cause Notice afresh in accordance with Section 153 and may thereafter pass an appropriate order after giving the petitioner sufficient opportunity to be heard. [Paras 19]Respondent permitted to issue a fresh Show Cause Notice and pass an order after affording opportunity of hearing.Final Conclusion: The penalty imposed on the petitioner is set aside as the Show Cause Notice was not shown to have been served in the modes prescribed by Section 153; Section 153(3) is a rebuttable deeming provision as to time of service and does not negate the requirement of service 'with acknowledgement due' under Section 153(1)(b). The respondent may issue a fresh Show Cause Notice and pass an order after affording the petitioner a proper opportunity to be heard. 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.