Unlawful Revocation of Approvals under Customs Act & HCCAR: Lack of Compliance with Natural Justice Principles

The Tribunal found the revocation of approvals under the Customs Act, 1962, and HCCAR, 2009, to be unlawful due to a lack of compliance with natural justice principles. The Customs Department's actions were deemed improper as no show-cause notice was given, and proper procedures were not followed. The Tribunal directed the department to issue a show-cause notice, provide necessary documents, and allow the appellant to respond, ultimately setting aside the revocation order and remanding the case for further proceedings.

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Issues Involved:

1. Legality of the revocation of approvals granted under Section 8, Section 45 of the Customs Act, 1962, and Regulation 10 of HCCAR, 2009.
2. Compliance with principles of natural justice in the revocation process.
3. Validity of the concerns raised by the Customs Department regarding the existence of a manufacturing unit in the customs area.

Summary:

Issue 1: Legality of the Revocation of Approvals
The appellant argued that the revocation of approvals granted under Section 8 and Section 45 of the Customs Act, 1962, read with Regulation 10 of HCCAR, 2009, was without legal basis. The premises had been inspected multiple times, and objections raised were complied with, leading to the issuance of Notification No.01/2022(NT) on 24/01/2022. The appellant contended that the revocation was abrupt and lacked any allegation of misuse or violation of conditions.

Issue 2: Compliance with Principles of Natural Justice
The appellant claimed that the revocation order violated principles of natural justice as no show-cause notice was issued, and the verification report post-survey dated 08/02/2023 was not provided to them. Regulation 12 of HCCAR, 2009, which prescribes the procedure for suspension or revocation of approvals, was not followed. The appellant emphasized that they were not given an opportunity to present their case or respond to the survey report, resulting in a gross violation of natural justice.

Issue 3: Validity of Concerns Raised by Customs Department
The Customs Department argued that the existence of a manufacturing unit in the customs area could lead to complications, including GST implications. They contended that Regulation 6(2) of HCCAR, 2009, does not allow leasing premises to private third parties, and the appellant violated this condition. The department maintained that the revocation was based on a thorough inspection and analysis, and the appellant could re-apply after complying with the observations in the survey report.

Judgment:
The Tribunal found that the revocation order dated 16/02/2023 was not in accordance with the law. The Customs Department had knowledge of the manufacturing unit's existence and had approved the premises after multiple inspections and compliance with objections. The Tribunal noted that the department had not communicated any new facts or issued a show-cause notice, violating Regulation 12 of HCCAR, 2009.

The Tribunal directed the department to issue a show-cause notice within a week, clearly stating the grounds for the proposed action and providing a copy of the survey report dated 08/02/2023 to the appellant. The appellant was to file a reply within one week, and the Commissioner was to decide the issue within a fortnight thereafter. The impugned order dated 16/02/2023 was set aside, and the appeal was allowed by way of remand.

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