Laxman Exports Ltd v. Collector

Per: P.G. Chacko

1. These applications seek waiver of pre-deposit and stay of recovery in respect of the penalty amounts. The adjudicating authority imposed penalties of Rs 25 lakhs, Rs 1.25 crores, Rs 50 lakhs respectively on the appellants in appeal C/639, 640 and 644/09 under Section 114 (i) of the Customs Act. The learned counsel for the appellants have raised mainly the grievance of negation of natural justice. They have referred to the relevant records and have made an endeavour to show that a reasonable opportunity of being personally heard was not given by the Commissioner before passing the impugned order. It has also been submitted that their claim for cross-examining certain officers of customs and others was rejected without hearing them. It has also been submitted by the counsel for the first two appellants that those documents, which were seized from their premises by the investigating agency but not relied on in the show-cause notice, were not returned despite repeated requests. We have heard the learned Jt CDR, in answer to these submissions of the counsel. It is submitted that the appellants did not co-operate with the adjudicating authority and resorted to dilatory tactics in one way or the other whenever hearing notices were issued to them. According to the learned Jt CDR, the merits of the case have to be considered to determine whether the appellants should be directed to make pre-deposits under Section 129-E of the Act.

2. Having perused the records and considered the submissions, we are of the view that the adjudicating authority chose to dispose of the case hurriedly without following the principles of natural justice. In this scenario, it may not be desirable to keep the matter pending with the Tribunal. Therefore, after dispensing with pre-deposits, we take up the appeals for final disposal.

3. In the impugned order, foreign currencies equivalent to Rs 1,25,22,750/- were absolutely confiscated under Section 113 of the Customs Act read with the relevant provisions of the Foreign Exchange Management Act, 1999. The currencies were seized from the possession of Suresh Gangaram Hole (Appeal No. C/644/09). He himself admitted that the currencies belonged to Rajendra G Bhutada (appeal No. C/640/09). Smt. Bharati Bhutada (appeal No. C/639/09) is the wife of Mr. Rajendra G Bhutada. Without attempting to narrate events intervening the seizure and confiscation, we would like to mention that the question whether the currency could be allowed to be redeemed against payment of fine was not examined by the learned Commissioner. We suppose, this happened because neither Mr. Rajendra C Bhutada (owner of the currency), nor Mr. Suresh Hole (from whose possession it was seized) was given an opportunity of being heard. Shri and Smt. Bhutada got two opportunities of being heard, the first on 16.12.08 and, the second on 24.03.09. Earlier, there were two occasions when any hearing did not come through on account of inconvenience of the adjudicating authority. The learned counsel for these appellants has submitted that a third opportunity of being personally heard also should have been offered to them in terms of section 122a of the customs act. On 16.12.08, these two appellants attended personal hearing and reiterated their request for permission to cross-examine certain witnesses, as also for return of certain documents. The adjudicating authority did not accede to their request for cross-examination and also stated that his reasoning would be communicated through the final order of adjudication. As regards the request for supply of non-relied-upon documents, the adjudicating authority noted that its earlier direction for submission of a specific list of such documents had not been complied with. However, the learned Commissioner accepted their offer to furnish a list by 10.1.2009. With regard to the request of the parties for supply of information regarding travel particulars, the learned Commissioner maintained that such information was extraneous to the adjudication proceedings. It appears from the records that the list of documents which these appellants had promised to file on 10.1.09 was not submitted at all by them. On 24.3.09, Mr. Rajendra G Bhutada submitted a letter to the Commissioner informing him that he had challenged his decision dated 16.12.09 before the Honble Bombay High Court and, therefore, the hearings should be deferred. The learned counsel for Mr. Bhutada has submitted that the writ petition was withdrawn. The Jt CDR has placed on record sufficient materials to indicate that the writ petition filed by Mr. Rajendra C Bhutada was rejected by the Honble High Court vide order dated 23.9.09 giving opportunity to the petitioner to pursue appellate remedy against the Commissioners final order of adjudication. It appears from the documents filed by the learned Jt CDR that the writ petition was filed against denial of cross-examination and that it was not further pursued before the High Court inasmuch as, during the pendency of the writ petition, the Commissioner passed final order of adjudication. It also appears from the Honble High Courts order dated 23.9.09 that their Lordships noted that the writ-petitioner had alternate efficacious remedy. Accordingly, the petition was rejected by making it clear that it will be open to the petitioner to prefer an appeal against the Commissioners order. These records would, therefore, indicate that the grievance in the writ petition against denial of an opportunity to cross-examine the witnesses can be agitated by them in the present appeals filed against the order of adjudication passed by the Commissioner. The learned Jt CDR has also filed some documents to show that all the documents wanted by Mr. Rajendra G Bhutada were supplied to him on 5.3.09 and, therefore, there is no question of supply of any document to him. On a perusal of all the records filed by both sides, we find that Shri and Smt Bhutada received all the documents mentioned in the list of documents annexed to the show-cause notice. One of these documents is a panchnama dated 14.6.06 ? an inventory of documents and other things seized by the investigating agency from the residence of Mr. Bhutada. The case of the Bhutadas is that they never received any of the documents contained in the box file cited at serial No. 1 of the annexure to the panchnama. It has been submitted that none of these documents was relied upon in the show-cause notice and that all these documents are required by them to file a reply to the show-cause notice. The documents filed by the learned Jt CDR (letter dated 5.3.09 of the Assistant Commissioner of Customs (AIU) to Mr. Rajendra C Bhutada) does not clearly show that the documents contained in the box file mentioned in the annexure to the above panchnama were supplied to them. Apparently, these documents were not supplied to the Bhutadas. The case law cited by the learned counsel includes Silicon Graphite System (India) Pvt Ltd vs Union of India 2006 (204) ELT 247 (Bom), wherein it was held by the Honble High Court that documents seized from the party but not relied-upon in the show-cause notice required to be returned to them. It was held that the request for such return of documents to enable preparation of a reply to the show-cause notice could not be held to be frivolous. The High Courts decision was followed by this Bench in the case of Shripra Alloys Ltd vs Commissioner 2007 (220) ELT 297 (Tri-Mum). Today, it is trite law that any document seized by an investigating agency but not found to be reliable for the Revenue should be returned to party who might require it in support of his own defence vis-`-vis the allegations in the show-cause notice. In the present case, we have found that the non-relied-upon documents were not returned to the appellants.

4. Bhutadas did not get a third opportunity of being personally heard. In this connection, the learned Jt CDR has also referred to section 122a of the customs act. This provision was considered by a Co-ordinate Bench of this Tribunal in the case of Jindal Waterways Ltd vs Commissioner 23009 (247) ELT 715 (Tri-Mum). The Bench held that maximum three adjournments could be granted to a party by an adjudicating authority and that whether adjournment should be granted or not would entirely depending upon the discretion of the adjudicating authority depend upon the circumstances of the case. The Bench further held that, even after grant of three opportunities, nothing prevented the authority from showing necessary indulgence to the party, if any extreme difficulty was brought on record in the matter of attending the earlier personal hearings. We have found sufficient reason, in the instant case, to hold that the adjudicating authority ought to have given the parties a reasonable opportunity of being heard after supplying of the requisite documents and by extending time for filing reply to the show-cause notice. The position is equally true with regard to the third appellant. He got three opportunities of being heard viz 16.12.08, 5.3.09 and 18.2.09. On the first date, he sought adjournment. On the second occasion, he did not appear before the Commissioner, nor did he seek any adjournment. On the third occasion, he appeared before the Commissioner but insisted on an opportunity of cross-examining certain witnesses as also of filing a reply to the show-cause notice. The Commissioner granted some time to file a reply to the show-cause notice inasmuch as the party himself offered to file the reply within three weeks but no reply was filed within the agreed time. A reply, however, was filed on 21.3.09. In the meanwhile, in a letter dated 17.3.09, the Commissioners office asked the party to file final reply to show-cause notice by 25.3.09. Obviously, on 25.3.09 the partys reply was on record, the same having been filed on 21.3.09. We have seen a copy of this reply, which contains many submissions with regard to the currencies seized from his possession. This letter inter alia insisted on an opportunity to cross-examine witnesses. There was apparently no communication between the appellant and the Commissioner between 25.3.09 and 30.3.09, the date on which the order was passed. Natural justice requires that, after the filing of a reply to the show-cause notice, an opportunity of being personally heard be given to the noticee. This did not take place in respect of the third appellant.

5. Therefore, the case of the appellants that they were not given a reasonable opportunity of being heard cannot be rejected.

6. It is settled law that cross-examination of witness cannot be claimed as a matter of right by any person involved in an adjudication proceedings. At the same time, this Tribunal, High Courts and the Supreme Court have held in a plethora of cases that the request of a party to cross-examine a witness has to be examined on its merits. Cross-examination is a part of evidence-taking whether it be before an adjudicating authority or before a court. Personal hearing follows evidence-taking. The proceedings must culminate in an order. In the present case, the learned Commissioner apparently took the stand that his reasoning for not acceding to the request for cross-examination would be mentioned in the final order. This, in our view, does not conform to the rule of natural justice. Once a witness has been cross-examined, it is open to either side to claim support from the record of cross-examination, at the final hearing stage. If the reasoning for denying cross-examination are stated only in the final order, the whole proceedings should be held to be violative of the principles of natural justice. In this context, the Honble High Courts order dated 23.9.09 in writ petition No. 793/09 comes to our mind once again. While disposing of the writ petition, their Lordships observed that the writ petitioner had an alternative efficacious remedy by way of appeal against the order of adjudication. It is this remedy which is being pursued by the appellants at present against the denial of cross-examination. The case law cited by the counsel on the cross-examination aspect includes Air Trade International vs Commissioner 2010 (251) ELT 471 (Tri-Mum), Bharat K Dattani vs Commissioner 2000 (121) ELT 256 (Tri), Swadeshi Politex Ltd vs Collector 2000 (122) ELT 641 (SC), Laxman Exports Ltd vs Collector 2002 (143) ELT 21 (SC) etc. In most of these cases, the matters were remanded to the original authority with a direction to consider the request for cross-examination on merits and then to pass final orders. Mr. Rajendra named six persons to be cross-examined, while Mr. Suresh Hole named eight persons to be cross-examined. Counsel for Mr. Rajendra has submitted that he wants to cross-examine all the six witnesses, while counsel for Mr. Suresh Hole has submitted that he wants to cross-examine all the witnesses barring one (Smt. Bharati R Bhutada). The adjudicating authority will have to examine whether cross-examination of the witnesses has to be allowed to the appellants after considering the facts and evidence already on record. His decision on this issue has to be communicated to the parties concerned in keeping with the principles of natural justice, but before this exercise, the non-relied-upon documents must be returned to the parties concerned and an opportunity of filing final reply to the show-cause notice should also be given to them. In case the originals of any of such documents are required to be retained for purposes of prosecution, or any on-going investigations relating to these appellants, such documents shall be retained and copies thereof should be supplied to the appellants. It shall be only after the filing of reply to the show-cause notices that the Commissioner should consider the request for cross-examination of witnesses. The reason why the witnesses should be cross-examined shall be clearly spelt out in the replies to the show-cause notice and the same shall be considered by the learned Commissioner and appropriate decision taken thereupon, which should be intimated to the appellants. Personal hearing will then follow.

7. We would also like to make it clear that the Commissioner shall have no liability to furnish any information to the appellants if he finds that such information belongs to extra-departmental authorities. It is open to the appellants to invoke the provisions of the Right to Information Act to obtain the information from such authorities. The obligation of the Commissioner pertains exclusively to the documents which are within his command.

8. In the result, we set aside the impugned order and allow these appeals by way of remand with a request to the Commissioner of Customs to undertake de novo adjudication of the case in accordance with law and in terms of the directions contained herein, by scrupulously following the principles of natural justice. Needless to say that a speaking order has to be passed on all issues. In the nature of this case, the learned Commissioner has to pass final order within a period of six months from the date of receipt of a certified copy of this order. The learned counsel for the appellants, under instructions from the clients, undertake to co-operate with the adjudicating authority. They also undertake not to seek any adjournment except on exceptional grounds to the satisfaction of the Commissioner. (Dictated in Court.) (Sahab Singh) Member (Technical) (P.G. Chacko) Member (Judicial)