2024 (8) TMI 1003 - HC - Customs

High Court sets aside customs order due to jurisdictional defect and denial of cross-examination under Article 226

HC allowed writ petition under Article 226 challenging seizure and adjudication order. Court found jurisdictional defect where seizure was based on belief ... Reason to believe - seizure vitiated for lack of valid reasons - jurisdictional defect where seizure grounds differ from adjudication grounds - violation of principles of natural justice - denial of cross-examination - extraordinary writ jurisdiction under Article 226Reason to believe - seizure vitiated for lack of valid reasons - jurisdictional defect where seizure grounds differ from adjudication grounds - Seizure and consequent adjudication are vitiated where the recorded 'reason to believe' for seizure is not the same as the basis on which adjudication proceeded, amounting to lack of jurisdiction. - HELD THAT: - The Court held that 'reason to believe' is foundational to valid seizure and must be an honest belief based on reasonable grounds. The seizure receipt recorded a belief of illegal import under a notification permitting import into India of goods previously imported into Nepal, whereas the show-cause notice and final adjudication proceeded on a finding of illegal export. This contradiction between the grounds for seizure and the basis of adjudication removes the foundational basis for the seizure. As the Court noted, if the foundational 'reason to believe' is absent or materially different from the basis of subsequent proceedings, the seizure and any adjudication predicated on it suffer from lack of jurisdiction and are liable to be set aside. The Court found that this foundational defect justified exercise of extraordinary jurisdiction under Article 226. [Paras 5, 6, 8, 11]Seizure and adjudication set aside for lack of valid 'reason to believe' and consequent jurisdictional defect.Violation of principles of natural justice - denial of cross-examination - extraordinary writ jurisdiction under Article 226 - Denial of the petitioners' request to cross-examine the seizing officer amounted to breach of principles of natural justice and warranted interference by the High Court. - HELD THAT: - The petitioners had specifically sought cross-examination of the Inspector of Customs who made the seizure; that request was recorded in the adjudication order but not permitted. The Court relied on authority recognising the right to cross-examine as fundamental to natural justice. Given the contradiction between the seizure memorandum and the show-cause notice (import versus export), the opportunity to test the seizing officer's reasons was material to the fairness of the proceeding. The denial to summon and permit cross-examination was held to be a violation of natural justice, and in conjunction with the foundational defect in the seizure, justified the exercise of writ jurisdiction under Article 226. [Paras 10, 11]Adjudication set aside for breach of natural justice by refusing cross-examination of the seizing officer.Final Conclusion: Writ petition allowed; impugned adjudication order set aside for (a) foundational defect in the recorded 'reason to believe' which vitiated the seizure and deprived the adjudicating authority of jurisdiction, and (b) breach of principles of natural justice by denying cross-examination of the seizing officer; directions made for release of goods/security or refund as applicable. Issues:Seizure of goods based on incorrect grounds; Violation of principles of natural justice by denying cross-examination; Lack of jurisdiction in adjudication proceedings.Analysis:The petitioners challenged the seizure of goods and the adjudication order, arguing that the reason for seizure did not align with the adjudication proceedings initiated, which violated Section 100 of the Customs Act, 1962 requiring 'reasons to believe' for seizure. The seizure was purportedly for violating a customs notification regarding import from Nepal, but the show-cause notice and adjudication order focused on illegal export, specifically sugar not notified under the Act. The petitioners' request for cross-examination of the seizing officer was not permitted, contrary to principles of natural justice as highlighted in legal precedents.The Department's Standing Counsel noted the petitioners' failure to appeal the matter through statutory remedies and emphasized the export policy's requirement for a release order for exporting sugar. The seizure receipt indicated a violation of a specific customs notification related to goods imported into India from Nepal, not illegal export as alleged in the show-cause notice and adjudication order. The foundational aspect of 'reason to believe' for seizure was found to be absent, rendering the invocation of Article 226 necessary, as established in legal precedents.The High Court referred to legal precedents emphasizing the discretionary nature of writ jurisdiction, highlighting the need for strong grounds to invoke extraordinary remedies. The denial of cross-examination of the seizing officer and the jurisdictional discrepancy between illegal import and illegal export allegations justified the court's intervention under Article 226. The court allowed the writ petition, setting aside the impugned order and directing the release of any security provided or refund of paid amounts.In a concurring opinion, Justice Partha Sarthy agreed with the decision to allow the writ petition, emphasizing the importance of upholding principles of natural justice and jurisdictional integrity in adjudication proceedings.