TaxTMI 
TaxTMI 
2019 (1) TMI 12
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....M AND MR AJITHKUMAR PP FOR CUSTOMS COCHIN JUDGMENT Introduction: In a global tender, a Company from foreign shores secures a contract. That contract is to run a complex of duty-free shops in an International airport. The Customs Department receives complaints and acts on them. It inspects the warehouse and duty-free shop, summons records, checks records, suspects malpractice, complains to several investigating agencies, hands down press briefings and, then, suspends the Company's license. The Company complains of harassment, of injury, and of infamy. It accuses the Customs officials of violating the law and procedure. So it approaches a departmental superior. That authority orders the business restoration; yet the officers on the filed refuse. As a result, the Company comes to Court. The Airport Authority laments wanton waste. It claims to have been caught in the cross fire between the Customs and the Company. It shows huge loss to the exchequer. Thus, the questions to be answered are these: (1) Balanced between the departmental necessity and public interest, is the business banishment the only just measure available pending the investigation? (2) Have....
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....e Company to resume its operations. In the meanwhile, the Commissioner has held continual press conferences and declared the Company's yet-to-be-established guilt to the world. Further, goes the allegation that the Commissioner has also complained about the Company to every conceivable authority. 7. In the above backdrop, the Company filed this Writ petition. This Court, per a Single Judge, on 26.06.2018 issued an interim direction: it suspended the Ext.P18 pending further adjudication. The Customs Department, then, filed an intra-court appeal-WA No.1278 of 2018-questioning the interim order. Through the judgment, dt.06.07.2018, the learned Division Bench relegated the parties to the pending writ petition. It closed the writ appeal, requiring the parties to maintain status quo till the writ petition is disposed of. Under those circumstances, I have taken up the main writ petition for disposal. Submissions: Petitioner's: 8. Sri Prasannen, the learned Senior Counsel, has, to begin with, addressed the threshold issue: the alternative remedy. He has drawn my attention to Section 129A of the Act to contend that the impugned order (Ext.P18) is administrative and, so, does not....
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....ion is that the Duty-Free Shop closure is uncalled for. According to him, since December 2017, the Company has been submitting its sales reports to the Customs Officials twice a day, with full details of the sales made, along with a detailed statement explaining the individuals to whom the sales were made. So, their closing the establishment from 19.04.2018 stands denuded of any reason; it is, he stresses, only an act of vengeance and vindictiveness. Respondents': Customs Department: 12. Sri Natraj, the learned Addl. Solicitor General (ASG) attacked the writ petition, first, on the grounds of maintainability. For this, he presses into service both latches and alternative remedy. According to the learned ASG, the sixth respondent passed an impugned order in April 2018, but, the petitioner wanted for over two months to file the writ petition. In the alternative, he asserts that the impugned order can be appealed against under Section 129A of the Act. As to the adjudicatory authority's powers, Sri Natraj draws my attention to Section 2(1) of the Act. Then he stresses that the Act is a complete code and an order referred to in Section 2(1) takes in an interim order. To sup....
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....a v W.A.Chadha 1993 Suppl.(4) SCC 260, State of Bihar v. P.P. Sharma 1992 Supp (1) SCC 222, Divine Retreat Centre v. State of Kerala (2008) 3 SCC 542 , Dhampur Sugar (Kashipur) Ltd. v. State of Uttaranchal (2007) 8 SCC 418, Gulam Mustafa v. State of Maharashtra (1976) 1 SCC 800, Muni Suvrat Swami Jain S.M.P. Sangh v. Arun Nathuram Gaikwad and Ors AIR 2007 SC 38 . 17. In the end, the learned ASG urges this Court to dismiss the writ petition as it is not only pre-mature, but also not maintainable. Airport Authority of India's: 18. Sri V. Santharam, the learned Standing Counsel for Airport Authority of India has complained that because of the rigid unjustified attitude the Customs authorities have adopted, the public interest has immensely suffered. For many months, the duty-free shop complex stands closed. According to him, besides Airport Authority loosing substantial revenue, many passengers have chosen to land, say, at Cochin International Airport, used the service of a duty-free shop there and then proceed to Thiruvananthapuram. In other words, as he puts it, the Airport Authority has been caught in cross fire of egos between egos of the departmental authorities. 19. ....
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....mitted that this Court may not interfere with an interim order for that falls beyond the adjudicatory ambit of Article 226. In support, he relies on Ratnagiri Gas and Power (P) Ltd. v. RDS Projects Ltd. (2013) 1 SCC 524, Special Director v. Mohd. Ghulam Ghouse (2004) 3 SCC 440 and Union of India and Anr v. Kunisetty Satyanarayana AIR 2007 SC 906. Company's Reply: 22. Sri Prasannen, in his reply, has submitted that the entire proceeding and the Ext.P18 order stands vitiated on the singular grant of bias. According to him, the authorities have acted with the predetermined notion of forcing the Company to close its business. To support his contentions, he relies on Manuelsons Hotels (P) Ltd. v. State of Kerala (2016) 6 SCC 766, and State of W.B. v. Shivananda Pathak. (1998) 5 SCC 513 Discussion: I. The Issues & the Parties: To remind ourselves, these are the issues to be addressed: (1) Balanced between the departmental necessity and public interest, is the business banishment the only just measure available pending the investigation? (2) Have the officials been biased-acting in bad faith? (3) In an administrative set up, can an official in the....
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....led in the mahazar, dt.21.12.2017. Again, on 21.12.2017, the Superintendent, allegedly on the Commissioner's instructions, asked Madhan to appear before him. 26. In this context, the Company alleges that Madhan was pressurised to give a false statement, but he did not yield. So the Superintendent and two other officials "brutally manhandled" him. Of this incident, after examining the CCTV footage, the Central Industrial Security Force (CISF) seems to have submitted "an incident report" on the same day; that is, 21.12.2017. On Madhan's complaint, Valliathura Police Station has registered Crime No.2248 of 2017, too. 27. Then, on 19.04.2018, the Commissioner passed the Ext.P18 order, purportedly under Sec. 58B (2) of the Customs Act, 1962. That order has suspended the Company's special warehouse license with immediate effect, pending enquiry. The order also restrains the Company from depositing any more goods in the special warehouse during the suspension. Soon thereafter, on 20.04.2018, followed the Ext.P19 order, passed by the Superintendent. That follow-up notice stops all operations in the Duty-Free Shops in the International Airport. 28. Aggrieved, the Company complained....
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....uld even amount to breaching the national security. In that context, the Department maintains that the Company's employees secured the passport details of nearly thirteen thousand international passengers for diverting foreign liquor to the black market. And this has forced the competent authority to suspend the petitioner's warehouse license. As it summarizes the Company's alleged misconduct, and also as it supplies the justification for the authorities to suspend the Company's warehouse license, it pays to extract this portion from the respondent's counteraffidavit: "Under these circumstances, keeping in mind the gravity of the issue involved and taking note of the violation of the license conditions and rules under the Customs Act, the Competent Authority was forced to suspend the warehouse license of the petitioner. Furthermore, the petitioner-Company has clandestinely obtained passport details for nearly 13,000 international passengers who have travelled to the airport, for diverting foreign liquor to the black market thereby misusing immigration data and further fabricated evidence amounting to breach of National Security." 33. As the record reveal....
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....conditions of the licence, the Principal Commissioner of Customs or Commissioner of Customs may cancel the licence granted under section 57 or section 58 or section 58A. But before any licence is cancelled, the licensee shall be given a reasonable opportunity of being heard. 37. What assumes importance is the subsection (2). According to it, the Principal Commissioner of Customs or Commissioner of Customs may, without prejudice to any other action that may be taken against the licensee and the goods, "suspend operation of the warehouse during the pendency of an enquiry under sub-section (1)." Subsection (3) sets out the consequences to licence suspension. 38. Section 108 empowers the Customs officer to summon persons to give evidence and to produce documents. And Section 129A provides for an appeal to the Appellate Tribunal against, for instance, the decision or order passed by the Principal Commissioner of Customs or Commissioner of Customs as an adjudicating authority. V. The Issues in Perspective: 39. First, I must set the adjudicatory bounds to the issues now I undertake to discuss. But this writ petition has come before this Court with the departmental action still....
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....of Customs as "an adjudicating authority." In Raj Kumar Shivhare, the Supreme Court has relied on its earlier Constitution Bench decision in Thansingh Nathmal v. Supdt. of Taxes AIR 1964 SC 1419, also a decision in a fiscal law. Commenting on the High Court's expansive exercise of jurisdiction under Article 226-subject to of course its self-imposed limitation-Thansingh Nathmal has observed as follows: the High Court does not act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by a statute. "[W]here it is open to the aggrieved petitioner to move another tribunal, or even [the High Court] itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Article 226 of the Constitution." 44. Much has been said about the alternative remedy and much more will be said with the passing time. Abundant adjudicatory water keeps flowing under the judicial bridges on this count. No doubt. It is a fertile field of forensic deliberations, the expressions s....
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....ee submitted to the Council a report of its enquiry into the allegations of misconduct against a member. The Supreme Court has held that failure of natural justice in the trial body cannot be cured by a sufficiency of natural justice in an appellate body 49. In Common Cause v. Union of India, 1999 6 SCC 667 an authority's conduct in distributing the public largess came to be considered. Then, the Supreme Court has considered "misfeasance in public office", which is a specific tort. On facts, it has held that the ingredients of that tort were not wholly met in the case. But the Court has observed that even where no recognized tort such as trespass, nuisance, or negligence is committed, public authorities or officers may be liable in damages for malicious, deliberate or injurious wrong-doing. There is thus a tort called misfeasance in public office, and which includes malicious abuse of power, deliberate maladministration, and perhaps also other unlawful acts causing injury. 50. In Manjit Singh Moolsingh Sethi v. Maharashtra Assembly 2007 (1) CTC 42 a Full Bench of the Bombay High Court has underlined the importance of decisional finality of any judicial proceeding ....
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....hief Commissioner passed. The Ext.P21 reads: "2. The matter has been considered. Instructions have been issued for opening up of the Duty-Free Shops which were closed under the Orders of the Superintendent (Bond), Air Customs, Trivendrum letter C. No.VIII/16/02/2017 dated 20.04.2018, with reference to Order under Section 58(B) of the Customs Act, 1962, by the Commissioner of Customs (PREV), Cochin, issued from file F. VIII/26/20/2017 CCP (Prev.) on 19.04.2018. 3. You may contact the local customs formation for further action in this matter." 56. The Department has asserted that the Commissioner of Customs (Prev.) has acted in his judicial or quasi-judicial capacity. So that order can be interfered with only in appeal-not otherwise. On the other hand, the Company has contended that it is a mere administrative order. Then, the Principal Chief Commissioner is empowered to interfere with that. 57. In the first place, the Principal Chief Commissioner has not interdicted the Ext.P18; what he has interfered with is the Ext.P19. It is a well-known proposition of law that a void order compels no compliance; its validity can be questioned even collaterally. That said,....
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....ly hurl, epithets like 'national security', indiscriminately, as if it were an unpierceable armour the Customs Department wears so none could question it. It is not. (e) Non-Cooperation of the Company Officials: 60. The counter also asserts that some of the Company's superior officials have not turned up till date for giving statements even after repeated reminders. First, it has not provided the details of those superior officials who refused to turn up. Second, those official's failure, if true, to turn up would not be a justifiable factor to suspend the petitioner's license. The suspension of license, I reckon, stands on a different footing. It cannot be an arm-twisting devise to compel somebody's presence or to extract what one desires. For securing any witness, the Department has provisions galore in the Act and the Rules. (f) Duty Evasion: 61. The Department maintains that the preliminary quantification of the duty evasion made by the petitioner Company by illegal sales amounts to about Rs. 6 crore. The investigation also reveals, the Department further asserts, a shortage of foreign currency equivalent to Rs. 2.2 crores "in the deposits of....
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....Goods) Regulations 2016. According to the Department, the Company's conduct "appears" to attract Sections 72, 112, 114A, 114AA, 117, 132, and 135 of the Customs Act 1962. I may, in this context, observe this allotment was by the Airport Authority. The Department seems bent on making heavy weather of this alleged anomaly. 65. The Company presents a different picture. It claims that what it first occupied was a temporary space space allotted by the Airport Authority. After getting the letter of allotment dated 13.09.2017 from the same authority for regular warehouse, the Company surrendered the temporary space. It asserts that all this has happened right with the Customs Department's knowledge and approval, too. To sustain this contention, the Company has placed on record the Space Certificates and Re-warehousing certificates issued by the Customs Department (Exhibit P-31). Airport Authority seems to support the Company's stand on this issue. (h) Data Breach - Falsification: 66. The Department has a specific contention against the Company's plea that its systems were hacked and data were breached. According to it, the Company took up that plea only when the Customs Depar....
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....ntendent, was taking Sri P. Madan to the Doctor for first aid, some staff of the Duty-Free Shop manhandled him and forcibly took away Sri Madan thereby obstructing the Superintendent from discharging his duty and completing the statement of Sri P. Madan. A written complaint was given to the CISF and to the Airport Director in this regard." 70. These days technology is the Orwellian Big Brother. Facts remain intact; only their interpretation yields to variation. Here, first, the injured Madhan lodged a police complaint. And that complaint soon had its cousin: a complaint by the Department officials. Both crimes have been registered. Besides that, the CISF had captured in its closed-circuit cameras whatever happened on the floor of the international airport. But it could not pry into what had happened in the interrogation room. So these are the issues the police may investigate in the counter crimes: surrounded by the officials and faced with an allegation of violating the law, has Madhan, the Company's employee, punched the investigating officer in the face? After hitting the investigating officer, has Madhan "tried to go out of the room and fell on the floor resulting in an inju....
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....f him, that too under an investigation conducted by an officer, 7th respondent, who is an accused in Crime No. 2248 of 2017 registered by Valiyathura Police Station. These facts are stated in the form of an additional counter affidavit only to bring to the notice of this Hon'ble Court the unfair and illegal manner the investigation is being conducted by the customs officials. (italics supplied) (k) The Court's Interim Observations: 73. On 31st August 2018, the petitioner's counsel reminded the Court that on remand from the Division Bench, this Bench had already heard the petitioner's counsel and adjourned the matter only at the respondent's request. That day too, that is on 31st August, the respondents sought time. But the petitioner's counsel, then, complained that besides taking adjournments to complete their arguments, the Customs officials had still been persisting with summoning the petitioner's employees and threatening them. In response, the learned Central Government Counsel assured the Court that "until the matter is heard and decided by this Court, the 6th respondent/10th respondent will not proceed further." 74. Now, we can see the docket order of 18th September....
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....pursuit of these officials. They have complained to every central investigating agency imaginable. True, they justify it. But before they could even go half way through their investigation, they rang the alarm bells, painted a scary picture, even invoked national security. The offence alleged, though, confines to fudging of accounts. 78. On the allegations of incessant press briefings, I find not much denial. Nor is there any justification available. I fail to see what drove the officials to hold the press meets, often. There are two factors to be considered: the sixth respondent's complaint-spree and his press propaganda. I reckon he has acted in haste on both counts. True, one needs to be vigilant against crime and the possibility of crime, too. But that exercise must be in good faith. The press may have the right to know, as does a common man. But the officials need not lay bare the information at the door step of the press. One needs to counterbalance the right to disseminate information with the other person's right to reasonable safeguards from calumny. For drawing conclusions at the preliminary stage of investigation-and spreading that first blush opinion as if it were ir....
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....o just cause or excuse or without there being reasonable relation to the purpose of exercising statutory power. 83. Bad faith cannot be conflated with colourable exercise of power. The former assumes the act intra vires, but to have been performed with malefic mind. On the other hand, the latter asserts, not merely assumes, that the act is ultra vires. The Supreme Court in Gulam Mustafa has observed that striking down any act of mala fide exercise of power is a judicial reserve power exercised lethally, but rarely. Charge of bad faith against public bodies and authorities is more easily made then made out. 84. In Dhampur Sugar the Supreme Court has held that allegations of bad faith are serious in nature and they essentially raise a question of fact. It is, therefore, necessary for the person making such allegations to supply full particulars in the petition. If sufficient averments and requisite materials are not on record, the court would not make 'fishing' or roving inquiry. It must be demonstrated by facts. Moreover, the burden of proving bad faith is on the person leveling such allegations and the burden is "very heavy". 85. Divine Retreat Centre deals both with the b....
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....retion cannot be guided by expediency. Courts are not free from statutory fetters. "Justice is to be rendered in accordance with the law. Judges are not entitled to the exercise the discretion wearing the robes of judicial discretion and pass orders based solely on their personal predictions and peculiar dispositions." 89. While passing interim orders, it is unnecessary to elaborately deal with the merits. Yet is desirable and proper, according to Mohd. Ghulam Ghouse, for the High Court to indicate the reasons which have weighed with it in granting such an extraordinary relief in the form of an interim protection. 90. Ratnagiri Gas and Power has observed that the law casts a heavy burden on the person alleging bad faith to prove it based on the facts either admitted or satisfactorily established-logical inferences deductible from those facts not excluded, though. Mere assertion or a vague or bald statement is not sufficient. An administrative authority, stresses Ratnagiri Gas, must act bona fide and should never act with an improper motive, or ulterior purposes, or against the statute, or by improperly exercising discretion to achieve some ulterior purpose. The action taken m....
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....s does not necessarily indicate that the author of the document is biased or capricious. It only indicates that the care which should be exercised has not been exercised in the drawing up of the notice. In that case, the applicants could not prove that the officers were biased, and the applicants had not taken the stand that the notice was drafted carelessly. That the investigators had actively participated in the previous proceedings would not, according to the Court, disqualify them in any way from performing the role they were performing in the present case. There is nothing to be read as a limitation on this power of the officers merely because they have an express power to require explanations in certain limited circumstances. (l3) Shades of Meaning: 95. Granted, the learned ASG has laid much emphasis on the principle of mala fides and malice in fact or in law. Given the deleterious consequences that flow from holding an official guilty of mala fides, the Courts have understandably laid stringent stipulations on that count. Making up an allegation of bad faith is easy, but making it out is, almost, next to impossible. For an official enjoys a presumption of acting in goo....
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....its-until the arguments were completed. On the day the Company's counsel had to reply, they both came up with counter affidavits. The Court refused to take them on record. But strangely they are found in the case bundle, but without any docket reference to them. So I have not looked into them. 100. In Gayathri Women's Welfare Assn. v. Gowramma 2011 2 SCC 330, the Supreme Court has considered at what stage a counter-claim could be filed. It has, in that context, held that a counterclaim, no doubt, could be filed even after the written statement is filed, but that does not mean that a counterclaim can be raised after issues are framed and the evidence is closed. On facts, the Supreme Court has approved the Trial Court's rejecting the belatedly filed counter claim. It is, no doubt, true that allegations of mala fides and of improper motives on the part of those in power are frequently made and their frequency, observed the Supreme Court in C.S. Rowjee v. State of A.P. AIR 1964 SC 962, has increased in recent times. In this task which is thus cast on the courts, it would aid the adjudication if those against whom allegations are made came forward to place before the court either....