2023 (9) TMI 733 - HC - Customs

Appeal Orders Overturned: Proceedings to Restart with Cross-Examination to Uphold Natural Justice in FERA Cases.

Ajay Saraogi, Sanjay Saraogi and Monotosh Saha Versus Union of India and Special Director, Enforcement Directorate, Foreign Exchange Management Act, New Delhi & Anr.

The HC set aside the orders under appeal in the three cases, mandating that adjudication proceedings restart from the evidence stage, ensuring all ... Principles of natural justice (audi alterem partem) - whether the adjudicating authority was right in refusing an opportunity of cross-examination of natural persons whose statements recorded under Section 108 of the Customs Act, 1962 had been referred to and relied upon in the adjudication order, or not? - HELD THAT:- In UNION OF INDIA AND ANOTHER VERSUS TULSIRAM PATEL AND OTHERS [1985 (7) TMI 371 - SUPREME COURT] the Supreme Court has considered several appeals by special leave and petitions under Article 32 of the Constitution raising substantial question of law as to the interpretation of Articles 309, 310 and 311 of the Constitution. The proceedings involved government servants who had been either dismissed or removed from service without holding any enquiry, they being not informed of the charges against them nor given any opportunity of being heard in respect of such charges. LAKSHMAN EXPORTS LIMITED VERSUS COLLECTOR OF CENTRAL EXCISE [2002 (4) TMI 66 - SC ORDER] has also recognized that, an assessee should be allowed to cross examine the representatives of the prosecution to establish that the goods in question had been accounted for in their books of accounts and appropriate amount of Central Excise had been paid, in proceedings under the Central Excise Act, 1944. The contours of natural justice in the context of seizure of a vehicle by the Customs Department under the provisions of the Customs Act, 1962 had come up on consideration in TAPAN KUMAR BISWAS VERSUS UNION OF INDIA (UOI) AND ORS [1995 (7) TMI 429 - CALCUTTA HIGH COURT]. In the facts of that case, the writ petitioner had neither filed show-cause nor took any steps to inspect the documents. In such context, request for cross-examination had been turned down. It had observed that, Section 124 of the Customs Act, 1962 itself provides for the extent of application of the principles of natural justice. In the facts of that case, it had held that, the writ petitioner was not entitled to cross-examine any witness. Principles of natural justice have two primary facets, namely, no one should be the judge of his cause and hear the other side. The issues that have been raised in the three appeals pivot around the audi alterem partem rule of the principles of natural justice - Principles of natural justice have been recognized to be a part of Article 14 of the Constitution of India. It has also been recognized that, Article 14 is not the sole repository of the principles of natural justice. Principles of natural justice stand attracted in every adjudicatory proceeding, be it judicial, quasi judicial or administrative, unless specifically excluded by statute. An administrative action or a quasi judicial decision has to conform with the principles of natural justice when such action or decision affects the rights or results in consequences for a party. Audi alteram partem which is a dimension of the principles of natural justice has the requirement of allowing cross-examination of the witnesses who give evidence against the delinquent. It has been recognized by judicial pronouncements that, administrative and quasi judicial orders must also adhere to the principles of natural justice. Courts have held that adherence to the principles of natural justice in the decision making process of administrative and quasi judicial authorities/bodies prevents injustice. Courts have carved out an exception to the adherence to the principles of natural justice. In FEA 25 of 2009 the appellant had suffered order in original and appellate authority’s order where, at both stages, the prayer for cross-examination of prosecution witnesses had been negated. On the parity of the reasoning of FEA 2 of 2009 and FEA 3 of 2009, since, the authorities had introduced evidence of natural persons in the adjudication proceedings, the appellant was entitled to cross-examine such natural person. Not having been allowed to cross-examine such witness of the prosecution, in the adjudication proceedings, the entire proceedings stood vitiated. The appellate authority had incorrectly held that the appellant was not entitled to cross-examine the prosecution witnesses. The authorities are at liberty to commence the adjudication proceedings from the stage of evidence of the prosecution. All prosecution witnesses have to be allowed to be cross-examined by the appellants - appeal disposed off. Issues Involved:1. Right to cross-examine witnesses in adjudication proceedings.2. Violation of principles of natural justice.3. Applicability of Section 138B of the Customs Act, 1962 to FERA proceedings.4. Relevance of statements recorded under Section 108 of the Customs Act, 1962 in FERA proceedings.5. Burden of proof under Section 71 of FERA.Summary:1. Right to Cross-Examine Witnesses:The primary issue in all three appeals was whether the adjudicating authority was correct in refusing the opportunity for cross-examination of individuals whose statements were recorded under Section 108 of the Customs Act, 1962 and relied upon in the adjudication order. The High Court emphasized the importance of cross-examination in ensuring the principles of natural justice, referencing multiple judicial precedents that support the right to cross-examine witnesses in quasi-judicial proceedings.2. Violation of Principles of Natural Justice:The Court held that the denial of cross-examination constituted a breach of the principles of natural justice. The adjudicating and appellate authorities failed to provide adequate reasons for denying cross-examination, and the absence of cross-examination of Mr. Nirmal Kumar Karmakar, whose statements were pivotal, vitiated the proceedings. The Court underscored that adherence to natural justice is imperative in adjudicatory processes affecting rights and resulting in consequences for the parties involved.3. Applicability of Section 138B of the Customs Act, 1962:The Court found that the conditions under Section 138B of the Customs Act, 1962, which allow for the admissibility of statements without cross-examination under certain circumstances, were not met. The authorities did not establish that Mr. Nirmal Kumar Karmakar was unavailable or incapable of giving evidence. Therefore, the refusal to allow cross-examination was unjustified.4. Relevance of Statements Recorded under Section 108 of the Customs Act, 1962:It was argued that statements recorded under Section 108 of the Customs Act, 1962, could not be used in FERA proceedings. The Court noted that while such statements could be relevant, their admissibility must be tested through cross-examination to ensure fairness and adherence to natural justice.5. Burden of Proof under Section 71 of FERA:The Court referred to the Vinod Solanki case, which clarified that the burden of proof under Section 71 of FERA does not imply a reverse burden on the accused. The authorities must establish contraventions on a preponderance of probability, if not beyond reasonable doubt, especially given the quasi-criminal nature of the proceedings.Conclusion:The High Court set aside the orders under appeal in all three cases, directing that the adjudication proceedings be recommenced from the stage of evidence, with all prosecution witnesses available for cross-examination by the appellants. This decision reinforces the necessity of adhering to the principles of natural justice in quasi-judicial proceedings under FERA.