2025 (12) TMI 719 - HC - Customs

Customs officers penalised for delaying speaking orders, violating natural justice and frustrating importer's appellate rights under remand directions

HC held that customs authorities' failure to pass speaking orders on enhancement of value of imported goods, despite a binding remand by Commissioner ... Violation of principles of natural justice - failure to pass speaking order - customs duty paid under protest - enhancement of value of imported goods - HELD THAT:- The Respondents’ not passing any speaking orders in this matter is a gross dereliction of their duty. Firstly, the Commissioner (Appeal)’s remand order binds these Respondents, in terms of which the speaking order should have been made within some reasonable period. In any event, this Court, in the case of Canon India Private Limited Vs. Union of India [2025 (9) TMI 769 - BOMBAY HIGH COURT], this Court has held that it is the duty of the Customs Authorities to decide the importer’s claim by passing a speaking order. This Court has further held that by not passing such speaking orders or by delaying their passing, the Customs Authorities cannot frustrate the importers’ right of an effective redressal to appeal or other remedies. The above observations apply to the factual situation in the present case. There is no justification for the Respondents either not to pass the speaking orders or to delay their passing unreasonably. This is more so because apart from the statutory duty, the Respondent Nos. 2 to 6 were bound by the remand order made by the Commissioner (Appeals). Accordingly, this is a fit case to impose costs upon the Respondents for dereliction in the discharge of their statutory duty and for failing to comply with the remand order directions issued by the Commissioner (Appeals). The Respondent Nos 2 to 6 is directed to grant the Petitioner a personal hearing, [in case the officers who had given a personal hearing earlier are no longer seized of these matters], and to pass speaking orders as expeditiously as possible and in any event within two months from the Petitioner communicating an authenticated copy of this order to the Respondents. It is clarified that the speaking orders must be communicated to the Petitioner within these 2 months. Petition allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the customs authorities failed in their statutory duty by not passing speaking orders under Section 17(5) of the Customs Act pursuant to enhancement of assessable value and a binding remand by the appellate authority. 1.2 Whether such failure to pass speaking orders, despite payment of duty under protest and repeated representations, violates principles of natural justice and frustrates the importer's statutory right to appeal and other remedies. 1.3 Whether imposition of costs on the customs authorities is warranted for dereliction of statutory duty and non-compliance with the remand directions of the appellate authority. 1.4 Whether the prayer for issuance/waiver of Detention-cum-Demurrage Waiver Certificate could be granted in the present proceedings. --- 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2: Duty to pass speaking orders under Section 17(5) of the Customs Act; effect on natural justice and appellate remedies (a) Legal framework as discussed 2.1 The Court noted the statutory scheme under Section 17(5) of the Customs Act requiring the proper officer to pass a speaking order when reassessing Bills of Entry, particularly where value is enhanced and duty is paid under protest. 2.2 The Court relied on its own earlier decision in Canon India Private Limited, which held that customs authorities are under a duty to decide the importer's claim by passing a speaking order and that delay or failure in passing such orders cannot be used to frustrate the importer's right to effective redress by way of appeal or other remedies. 2.3 The Court drew detailed support from the decision of the Supreme Court in M/s. ASP Traders v. State of Uttar Pradesh, rendered in the context of Section 129(3) of the CGST Act, 2017, emphasizing that: (i) Principles of natural justice mandate that responses to show cause notices must be considered and a reasoned, speaking order rendered. (ii) The statutory right of appeal is predicated on the existence of a formal adjudicating order; absence of a reasoned order deprives the taxpayer of this remedy and undermines fairness, due process, and access to justice. (iii) Failure to issue a speaking order creates a legal vacuum, potentially violating Article 265 of the Constitution, which prohibits levy or collection of tax except by authority of law. (iv) The Supreme Court, relying on Kranti Associates, reiterated that reasons are indispensable to judicial and quasi-judicial decisions, ensuring transparency, accountability, and effective judicial review. (b) Interpretation and reasoning 2.4 The Court found that the Petitioner's Bills of Entry had been subjected to enhanced valuation and consequential higher duty, which the Petitioner paid under protest owing to the perishable nature of the imported goods. 2.5 The Commissioner (Appeals) had allowed the appeal and remanded the matter to the proper officer for passing speaking orders under Section 17(5). This remand order was held to be binding on the customs authorities, who were expected to comply within a reasonable period. 2.6 Despite the remand order, the grant of personal hearing on 1 November 2022, and written submissions filed the same day, no speaking order was passed. Multiple reminders by the Petitioner over an extended period also remained unheeded. 2.7 The Court characterized the continued inaction of the authorities as 'gross dereliction of their duty', noting that: (i) the statutory obligation to pass speaking orders existed independently; and (ii) in addition, there was a specific remand direction from the appellate authority. 2.8 Applying the principles from ASP Traders and Canon India, the Court held that non-passing or unreasonable delay in passing speaking orders impermissibly frustrates the importer's statutory right to appeal and other remedies, offends principles of natural justice, and cannot be justified merely because duty was already paid, including when paid under protest. 2.9 The Court held that the obligation to pass a speaking order subsists even where payment has been made (voluntarily or under protest), and failure to do so is contrary to the constitutional requirement that tax be levied and collected only by authority of law. (c) Conclusions 2.10 The Court concluded that the customs authorities had unlawfully failed to discharge their statutory obligation under Section 17(5) and had violated principles of natural justice by not passing a speaking order despite a binding remand, personal hearing, and repeated representations. 2.11 The Court directed Respondent Nos. 2 to 6 to grant a personal hearing to the Petitioner, if necessary, and to pass reasoned speaking orders under Section 17(5) as expeditiously as possible and, in any event, within two months from communication of an authenticated copy of the Court's order, with a further direction that such orders must be communicated to the Petitioner within the same period. --- Issue 3: Imposition of costs for dereliction of duty and non-compliance with remand order (a) Interpretation and reasoning 3.1 The Court held that the failure of the customs authorities to pass speaking orders, despite a clear remand order of the Commissioner (Appeals) and repeated reminders over a long period, amounted to serious dereliction of statutory duty. 3.2 The Court found such conduct particularly egregious in light of the settled legal position, including the binding precedent in Canon India, and the principle that authorities cannot frustrate statutory remedies by inaction. 3.3 The Court considered the imposition of costs appropriate both to mark disapproval of the authorities' conduct and to compensate the Petitioner for being compelled to litigate due to administrative inaction. (b) Conclusions 3.4 The Court ordered that Respondent Nos. 2 to 6 shall collectively pay costs of Rs. 25,000/- to the Petitioner within four weeks. 3.5 It was directed that the said amount be first paid by Respondent No. 2 within the stipulated period, with liberty to Respondent No. 2 to recover proportionate amounts from Respondent Nos. 3 to 6 thereafter. --- Issue 4: Prayer regarding Detention-cum-Demurrage Waiver Certificate (a) Interpretation and reasoning 4.1 The Court noted that the Petitioner had sought relief in respect of Detention-cum-Demurrage Waiver Certificate. 4.2 The Court held that such relief could not appropriately be considered and granted in the present writ proceedings in the manner sought. (b) Conclusions 4.3 The Court declined to grant the waiver in this petition but directed that, if the Petitioner has applied or applies for such waiver, the concerned authorities shall consider the request in accordance with law and on its own merits. 4.4 The rule was made partly absolute in terms of the directions to pass speaking orders and the award of costs, with the limited observation on consideration of the detention/demurrage waiver by the competent authority.