M/S Mohammed Fariz & Co. v. Commissioner of Customs, Willingdon Island, Cochin

_**"C.R."**_ ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** ## **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **TUESDAY ,THE 30TH DAY OF OCTOBER 2018 / 8TH KARTHIKA, 1940** **WA.No. 1841 of 2018** **AGAINST THE ORDER/JUDGMENT IN WP(C) 480/2018 of HIGH COURT** ## **APPELLANT/S:** **M/S MOHAMMED FARIZ & CO., XII/386, NEAR GOVT. HIGH SCHOOL, CHALISSERY PO, PALAKKAD DT.- 679536, REPRESENTED BY ITS MANGING PARTNER M.M.IBRAHIM** **BY ADV. C.K. KARUNAKARAN** **RESPONDENT/S:** **COMMISSIONER OF CUSTOMES CUSTOM HOUSE, WILLINGDON ISLAND, COCHIN – 682009.** ## **OTHER PRESENT:** ## **SRI SREELAL WARRIER, SC** **THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 30.10.2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** _WA 1841/2018_ 2 ## **JUDGMENT** Ashok Menon, J. The appellant is a firm engaged in the business of importing and processing of betel nuts. The appellant filed W.P.(C) No.480/2018 to quash Ext.P5 proceedings of the Commissioner of Customs (Adjudicating Authority) disallowing the request made by the appellant vide Exts.P3 and P4 to cross-examine some witnesses, whose statements have been relied on as material against the firm in a proceeding by the Commissioner of Customs against the appellant for which a show cause notice under Section 25 of the Customs Act, 1962 (for short “the Act”) was issued. The appellant had filed the Writ Petition seeking issuance of a writ of mandamus to direct the respondent to permit cross-examination of the two witnesses, who are co-noticees in the proceedings. in initiation of which Ext.P2 notice was issued. 2. The facts are that the Customs Authorities conducted a search in the offices of the appellant-firm and _WA 1841/2018_ 3 seized certain documents. Consequent to which, Ext.P2 show cause notice was issued calling upon the firm to show cause why the value of the betel nuts imported by the petitioner from Indonesia covered by 26 Bills of Entry referred to therein shall not be re-determined and the differential duty amounting to Rs.6,42,67,411/- with interest and penalty be realised. The allegations were of mis-declaration of Country of origin and under-valuation. The betel nuts were said to be sourced from Indonesia but routed through Bangladesh to avail of the Preferential Trading Arrangement with SAARC Countries (SAPTA). The appellant-firm would assert that they were unaware of the Country of origin and had declared correct value in the bills of entry and that the proceeding was initiated solely based on the statements allegedly given to the Authorities by two persons, namely, Narendra Lodya and Dhaval Lapasiya, the former an Indonesian Indenter. The petitioner requested for copies of the statements and also sought permission to cross-examine those persons in order to discredit their versions. Exts.P3 and P4 are the _WA 1841/2018_ 4 representations made by the firm. However, the request for cross-examining those persons was turned down, though copies of the statements were handed over. Ext.P5 is the communication received by the firm denying their request to cross-examine the two witnesses and the same is challenged in the Writ Petition. Before we proceed we have to notice that substantial evidence relied on to support the allegation of mis-declaration and under-valuation, as we see from Ext.P2 notice, are the statements of the two individuals above referred and their e-mail communications. 3. The learned Single Judge, after considering the rival arguments and referring to the decisions of the Hon'ble Supreme Court in _**Canara Bank v. Debasis Das, (2003) 4 SCC 557**_ and _**Andaman Timber Industries v. Commissioner of Central Excise, Kolkata, (2016) 15 SCC 785**_ , held that the Adjudicating Authority in its discretion shall permit examination of witnesses, but the question as to whether in a given case, the decision declining permission to adduce evidence or cross-examine persons is correct can be considered only after the conclusion of proceedings, having _WA 1841/2018_ 5 regard to the prejudice, if any, caused to the party on account of the same. 4. The petitioner in W.P.(C) No.480/2018 is aggrieved by the judgment and is before us submitting that the learned Single Judge failed to consider the ratio contained in _**Andaman Timber Industries**_ in the proper perspective and that the denial of opportunity to cross-examine the witnesses on the basis of which proceedings were initiated against the firm is illegal. 5. We heard the learned Counsel appearing for the petitioner and the learned Standing Counsel for the Central Board of Excise & Customs. 6. The learned Single Judge had drawn a distinction in the case in hand from the facts in _**Andaman Timber**_ _**Industries** (supra)_ in so far as the cited decision being rendered after culmination of the proceedings by issuance of an order, which was held to be a nullity, for reason of cross-examination not having been permitted. In a given case, where the allegations are founded not solely upon such statements, but on other materials as well, then the _WA 1841/2018_ 6 adjudicating authority has to take a call as to whether the cross-examination of the person shall be permitted, if requested by the noticee. It was also observed that if the adjudicating authority decides not to give an opportunity to cross-examine the person concerned, whose statement is relied on, the order would be certainly a nullity, if the same is founded on the said statement. On the other hand, if the order is founded on materials other than the statement, the same would not be vitiated for noncompliance of the principles of natural justice. The decision declining permission to adduce evidence or cross-examine was held to be correct and the learned Single Judge has observed that it can be considered only after the conclusion of proceedings, having regard to the prejudice, if any, caused to the party on account of such denial. Approaching this Court under Article 226 of the Constitution, before the culmination of the proceedings in matters like this is wholly premature and such a view would promote expeditious completion of the proceedings and _WA 1841/2018_ 7 prevent protraction of the proceedings at the instance of unscrupulous litigants. 7. In _**Andaman Timber Industries**_ , the appellant therein had challenged the finding of the adjudicating authority for the reason that he was not allowed to crossexamine the dealers, whose statements were relied on by the adjudicating authority in passing the order. The Hon'ble Supreme Court held thus: _“6. According to us, not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the adjudicating authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the adjudicating authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said_ _WA 1841/2018_ 8 _dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.”_ 8. The learned Central Government Standing Counsel would canvass the proposition that; whether the rejection of permission to cross-examine the witness resulted in any prejudice to the appellant could only be decided after the adjudication order is made by the authority, and then, the propriety of relying upon statements of witnesses by the adjudicating authority, without giving opportunity to cross-examine the witnesses, has to be examined. Only in such circumstances, could it be said that prejudice was caused to the appellant and not otherwise. It is submitted that in _**Andaman Timber Industries,**_ adjudication was completed by the authority relying upon testimony of two witnesses without affording opportunity to the implicated persons to cross-examine and test the veracity of their statements. The learned Department Counsel would therefore, submit that the learned Single Judge was _WA 1841/2018_ 9 perfectly justified in holding that the permission now sought by the appellant at a stage when the adjudication proceedings is yet to commence, would be premature. 9. In _**State of Kerala v. Shaduli, 1977 KHC 345: AIR**_ _**1977 SC 1627**_ , it is held thus: _“3. One of the rules which constitutes a part of the principles of natural justice is the rule of audi alterem parterm which requires that no man should be condemned unheard. It is indeed a requirement of the duty to act fairly which lies on all quasi judicial authorities and this duty has been extended also to the authorities holding administrative enquiries involving civil consequences or affecting rights of parties because, as pointed out by this Court in A.K. Kraipak and Ors. v. Union of India, "the aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice" and justice, in a society which has accepted socialism as its article of faith in the Constitution, is dispensed not only by judicial or quasi judicial authorities but also by authorities discharging administrative functions. This rule which requires an opportunity to be heard to be given to a person likely to be affected by a decision is also, like the genus of which it is a species, not an inflexible rule having a fixed connotation. It has a variable content depending on the nature of the inquiry, the framework of the law under which it is held, the constitution of the authority holding the inquiry, the nature and character of the rights affected and the consequences flowing from the decision. It is, therefore, not possible to say that in every case the rule of audi alterem partem_ _WA 1841/2018_ 10 _requires that a particular specified procedure to be followed. It may be that in a given case the rule of audi alterem partem may import a requirement that witnesses whose statements are sought to be relied upon by the authority holding the inquiry should be permitted to be cross-examined by the party affected while in some other case it may not. The procedure required to be adopted for giving an opportunity to a person to be heard must necessarily depend on the facts and circumstances of each case.”_ The learned CGSC referring to the above decision would argue that giving an opportunity to a person to be heard or cross-examined must necessarily depend upon the facts and circumstances of each case and in the case in hand, it is premature to grant permission to the appellant to cross- examine the witnesses, whose statements were recorded during the course of investigation. ## 10. In _**M/s Kanungo and Co. v. Collector of Customs,**_ _**Calcutta, 1973 KHC 589: (1973) 2 SCC 438**_ , the Hon'ble Supreme Court held thus: _“12. We may first deal with the question of breach of natural justice. On the material on record, in our opinion, there has been no such breach. In the show-cause notice issued on August 21, 1961, all the material on which the Customs Authorities have relied was set out and it was then for the appellant to give a suitable explanation. The complaint of the appellant now is_ _WA 1841/2018_ 11 _that all the persons from whom enquiries were alleged to have been made by the authorities should have been produced to enable it to crossexamine them. In our-opinion, the principles of natural justice do not require that in matters like this the persons who have given information should be examined in the presence of the appellant or should be allowed lo be crossexamined by them on the statements made before the Customs Authorities. Accordingly we hold that there is no force in the third contention of the appellant.”_ 11. Section 108(1) of the Act empowers any Gazetted Officer of Customs to summon any person, whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making under this Act. Sub-section (3) of Section 108 provides that all persons so summoned shall be bound to attend either in person or through authorised agent, as such officer may direct and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and produce such documents and other things as may be required. Every inquiry under Section 108 shall be deemed to be a judicial proceeding under Sections 193 and 228 of I.P.C. _WA 1841/2018_ 12 Section 122A of the Act, gives an opportunity to the person affected to be heard in the proceedings, which fulfills the principles of _audi alterem partem,_ which reads as follows: _“_ _**122A. Adjudication procedure** .— (1) The adjudicating authority shall, in any proceeding under this Chapter or any other provision of this Act, give an opportunity of being heard to a party in a proceeding, if the party so desires.”_ 12 _._ It has to be emphasised that in _**Shaduli's**_ case this Court had found fault on grounds of violation of principles of natural justice, for reason of refusal of right to cross-examine a wholesale dealer. There the accounts of a wholesale dealer was relied on to make the best judgment in the case of a retail dealer, on grounds of suppression of purchases. The assessee sought crossexamination of the wholesale dealer. The satisfaction arrived at of the accounts being not properly maintained, for rejecting it as incorrect and incomplete, was held to be possible only after giving an opportunity to the assessee to prove otherwise, which right also included cross-examination of the other dealer. In _**Andaman Timber**_ _**Industries**_ the Adjudicatory Authority was relying on the _WA 1841/2018_ 13 statement given by the two witnesses during the adjudicatory process, but did not grant opportunity to the person accused to cross-examine those witnesses to discredit their testimony. The Hon'ble Supreme Court noticed that the accused had specifically sought cross- examination. The authority having mentioned the fact of such a prayer, refused it but had not dealt with the plea raised by the assessee of the prejudice caused to the assessee on that ground. 13. The objection raised by the Department is that it is premature to decide whether cross-examination of the witnesses, who had given statements during the stage of investigation, is proper or not. We are surprised at the contention raised, in these days of increasing litigation, long pendency of matters, the drive for speedy disposal and the need, which always existed, to bring to book delinquents. If a procedural infirmity is brought to the notice of the Constitutional Court, the prayer to rectify it cannot wait till a prejudice is found as against the final determination, which would result in setting aside _WA 1841/2018_ 14 the final order. At that stage; given the time within which finality is reached in our system, the entire proceedings would be rendered a nullity, for reason alone of the deponents in the statements being not available for cross- examination, for whatever reason. 14. When the appellant has been called upon to answer to the accusation made against him, it is his right to defend himself reasonably at the earliest opportunity afforded to him, and it would in no way prejudice the Department or stall their inquiry if the prayer is allowed. Waiting till the adjudication process is over and then deciding upon whether any prejudice was caused to the appellant, on grounds of not affording an opportunity to cross-examine the witnesses, whose statements were relied on, would amount to an abuse, in so far as the alleged delinquent being absolved of the consequences merely for reason of a procedural error. After so many years rectification of the error by permitting cross-examination would be rendered impossible in many circumstances. Vitiating the entire proceedings by reason of a procedural _WA 1841/2018_ 15 error, which cannot be redone is a greater evil, than the delay occasioned in following the principles of _audi alterem partem_ , to ensure no ground of a procedural error being raised to challenge a final order. The popular adage “A stitch in time saves nine” applies equally to adjudication proceedings and that is the principle espoused in _**Shaduli's**_ case. _**Andaman Timber Industries**_ cautions us that if a prayer for cross-examination was allowed when it was sought, the order could have been sustained. 15. In case if the appellant is permitted to crossexamine the witnesses at an earlier stage, it would only help the Department to arrive at a right conclusion as to whether the statements of those witnesses, who had withstood the rigor of being subjected to crossexamination, are to be relied upon in the adjudicating process against the appellant or not. It can never be premature because the statements are already in the file and in case the statements are against the appellant, implicating or accusing him, undoubtedly, it would be used against him. Such statements will definitely not be ignored _WA 1841/2018_ 16 by the Adjudicatory Authority. Even if it is not relied on; at this stage it is premature for the authority to speak on whether the statements would be used against the delinquent or not. We here once more observe that Ext.P2 notice issued to the appellant, substantially and pointedly refer to the statements recorded from the two individuals and their e- mail communications. The statements have to be tested with the other materials available and the adjudicating authority cannot now come to a conclusion as to whether the statements would be relied on or not. It would be puerile to contend that if eventually the order is set aside, the department would suffer that order; as in cases where personal rights alone are involved. Here there is a statutory infringement alleged and the consequences cannot be absolved of, on mere admission or acquiescence. Hence, we find that it is in public interest and the interest of justice to permit the appellant to cross-examine the two witnesses, whose statements have been recorded by the Adjudicatory Authority. The finding of the learned Single Judge relegating the propriety of the Adjudicatory _WA 1841/2018_ 17 Authority's decision to a later stage, is, in our opinion, not appropriate. Hence, the impugned judgment is set aside and the appeal is allowed directing the respondents to give an opportunity to the appellant to cross-examine the witnesses, who have given statements against the appellant. There is a contention raised by the Department, that the appellant has not even filed a detailed objection and has reserved their right to file their objections after the cross-examination. We do not think that there is any bar in relying on any material brought out in cross-examination, which the delinquent has not stated in the objection. In any event since the statements of the witnesses, who are sought to be cross-examined, were supplied to the delinquent, the appellant shall file their detailed objections within two weeks of the receipt of the certified copy of this judgment. But however that would not preclude the delinquent/appellant from raising a contention, on the basis of the cross-examination, even if the same is not raised in the objection filed. That is the _WA 1841/2018_ 18 essence and spirit of adjudication. The writ appeal is disposed of directing the respondent to summon the persons who gave the statements, with notice to the appellant and permit cross-examination of those summoned. However if the presence of the said persons cannot be procured, the adjudicatory authority would proceed further and the sustainability of the final order would, then, depend on whether the order passed is on the sole premise of the statements recorded. The writ appeal is allowed with the above directions. No order as to costs. ## **Sd/-** **K.VINOD CHANDRAN** **JUDGE** ## **Sd/-** **ASHOK MENON JUDGE** _dkr_