International Cargo Services vs Union Of India (Uoi), Through ...
2005 Latest Caselaw 706 Del

JUDGMENT

Swatanter Kumar, J.

1. The petitioner impugns the order dated 5th January, 2005 passed by the Commissioner of Customs, New Delhi, inter alia on the following grounds:-

1. The order is violative of principles of natural justice as neither the petitioner was granted an opportunity of being heard prior to the passing of the order, nor it ex facie demonstrates application of mind by the competent authority;

2. The maxim audi alteram partem would have to be read into the provisions of Regulations 20 (2) of the Custom House Agents Licensing Regulations, 2004 (hereinafter referred to as 'the Regulations'), its violation vitiate the order;

3. The respondents having issued a show cause notice to the petitioner under Section 124 of The Customs Act, 1962 (hereinafter referred to as 'the Act'), there was no purpose of invoking the provisions of Regulation 20 (2) of the Act and furthermore the respondents have failed to adhere to the procedure prescribed in Regulation 22 of the said regulations;

4. In any case the order is an arbitrary exercise of power and is liable to be set aside.

2. Having noticed the contentions raised on behalf of the petitioner, we may now refer to the facts giving rise to the present petition. M/s. International Cargo Services is a proprietorship concern and is also a registered custom house clearing agent with the Customs Authorities since 1998 having license number 61 of 1998. Under the terms of the license, petitioner is rendering the services of clearing and presenting documents on behalf of the importers/exporters for clearing import and export of goods with the custom authorities. A temporary license was issued to the petitioner in the year 1996 and in the year 1998 the petitioner was issued a regular license. It is the case of the petitioner that they have clear and unblemished record and they were never found to be contravening the provisions of the license or the law. Somewhere in October 2002, the petitioner had written to the custom authorities about the misuse of the license by some other person which was pending with the respondents. On 24th December, 2004 the petitioner received a show cause notice from the office of respondent no.2 [Commissioner of Customs (I & G)] that there was violation of the terms of the license and the drawback benefits derived by certain exporters including M/s. Ritambra International have violated the provisions of license as well as the other terms of license, and thus, the show cause notice was issued in terms of Section 124 of the Act, without prejudice to any other action that may be taken against the parties. Reply to the show cause notice was to be submitted by the petitioner within 30 days from the date of receipt of the said notice. According to the petitioner he had received the show cause notice on 29th December, 2004 and as such he could submit the reply thereto by 29th January, 2005. However, on 18th January, 2005, the petitioner received an order which was dated 'Nil', but during the course of arguments it was informed to the Court by the learned Counsel appearing for the respondents that the order is dated 5th January, 2005. In terms of this order the license of the petitioner was suspended with immediate effect and he was required to surrender all cards issued to the petitioner. It is this order which has been challenged in the present writ petition.

3. Upon notice the respondents have submitted that the present writ petition is not maintainable because the petitioner can challenge the impugned order under the provisions of the regulations and/or the Act before the competent authority. On merits, it is submitted that the show cause notice related to action as contemplated under Section 124 of the Act, which itself was issued without prejudice to the rights of the Department to take other actions permissible to them in law. Keeping in view the averments made in the order, there was complete justification on the part of the respondents in suspending the license of the petitioner. Thus, it is submitted that the writ petition is liable to be dismissed.

4. The regulations have been framed in exercise of the powers conferred under sub-section (2) of Section 146 of the Act, and Regulations of 2004 are in supercession of the Customs House Agents Licensing Regulations, 1984. In terms of these regulations, power is vested in the respondents to revoke and/or suspend the license. In addition, they also have the power under Regulation 21 of the regulations to prohibit the agent from working in one or more sections of the custom station on the event there is violation of the obligations laid down under Regulation 13 of the regulations. It will be appropriate to refer to the provisions which have been invoked by the authorities in passing the impugned order. The relevant Regulations 20, 21 and 22 read as under:-

"20. Suspension or revocation of license. - (1) The Commissioner of Customs may, subject to the provisions of Regulation 22, revoke the license of a Customs House Agent and order for forfeiture of part or whole of security, or only order forfeiture of part or whole of security, on any of the following grounds, namely:-

(a) failure of the Customs House Agent to comply with any of the conditions of the bond executed by him under Regulation 10;

(b) failure of the Customs House Agent to comply with any of the provisions of these regulations, within the jurisdiction of the said Commissioner of Customs or anywhere else;

(c) any misconduct on his part, whether within the jurisdiction of the said Commissioner of Customs or any where else which in the opinion of the Commissioner renders him unfit to transact any business in the Customs Station.

(2) Notwithstanding anything contained in sub-regulation (1), the Commissioner of Customs may, in appropriate cases where immediate action is necessary, suspend the license of a Customs House Agent where an enquiry against such agent is pending or contemplated.

21. Prohibition.- Notwithstanding anything contained in regulation 22, the Commissioner of Customs may prohibit any Customs House Agent from working in one or more sections of the Customs Station, if he is satisfied that such Customs House Agent has not fulfillled his obligations as laid down under regulation 13 in relation to work in that section or sections.

22. Procedure for suspending or revoking license under Regulation 20.- (1) The Commissioner of Customs shall issue a notice in writing to the Customs House Agent stating the grounds on which it is proposed to suspend or revoke the license and requiring the said Customs House Agent to submit, within such time as may be specified in the notice, not being less than forty-five days, to the Deputy Commissioner of Customs or Assistant Commissioner of Customs nominated by him, a written statement of defense and also to specify in the said statement whether the Customs House Agent desires to be heard in person by the said Deputy Commissioner of Customs or Assistant Commissioner of Customs.

(2) The Commissioner of Customs may, on receipt of the written statement from the Customs House Agent, or where no such statement has been received within the time-limit specified in the notice referred to in sub-regulation (1), direct the Deputy Commissioner of Customs or Assistant Commissioner of Customs to inquire into the grounds which are not admitted by the Customs House Agent.

(3) The Deputy Commissioner of Customs or Assistant Commissioner of Customs shall, in the course of inquiry, consider such documentary evidence and take such oral evidence as may be relevant or material to the inquiry in regard to the grounds forming the basis of the proceedings, and he may also put any question to any person tendering evidence for or against the Customs House Agent, for the purpose of ascertaining the correct position.

(4) The Customs House Agent shall be entitled to cross-examine the persons examined in support of the grounds forming the basis of the proceedings, and where the Deputy Commissioner of Customs or Assistant Commissioner of Customs declines to examine any person on the grounds that his evidence is not relevant or material, he shall record his reasons in writing for so doing.

(5) At the conclusion of the inquiry, the Deputy Commissioner of Customs or Assistant Commissioner of Customs shall prepare a report of the inquiry recording his findings.

(6) The Commissioner of Customs shall furnish to the Customs House Agent a copy of the report of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, and shall require the Customs House Agent to submit, within the specified period not being less than sixty days, any representation that he may wish to make against the findings of the Deputy Commissioner of Customs or Assistant Commissioner of Customs.

(7) The Commissioner of Customs shall, after considering the report the inquiry and the representation thereon, if any, made by the Customs House Agent, pass such orders as he deems fit.

(8) Any Customs House Agent aggrieved by any decision or order passed under regulation 20 or sub-regulation (7) of regulation 22, may prefer an appeal under section 129A of the Act to the Customs, Central Excise and Service Tax Appellate Tribunal established under sub-section (1) of section 129 of the Act."

5. The above provisions are to be read and interpreted in conjunction with the scheme of the Act and the regulations framed there under. What should be the scope of exercise of power by the respondents under these provisions would have to be examined keeping in view the object sought to be achieved by these regulations and keeping in mind the language of the order. Thus, reference to the language of the order would be inevitable, which reads as under:-

" ORDER

1. M/s. International Cargo Services, 40, Moti Bagh-II, Near Nanakpura Gurudwara, New Delhi, are holders of regulat CHA license No. 61/98 valid up to 24.9.2008 issued by the Commissioner of Customs (Import and General) New Custom House, New Delhi to transact customs clearance work in the jurisdiction of Delhi Custom Stations.

2. Whereas an enquiry is contemplated against the said Custom House Agent by the Commissioner of Customs Air Cargo Export, New Custom House, New Delhi, in relation to the alleged involvement of Custom House Agent in an export fraud case in filing Shipping Bill Nos. 612996 dt. 23.05.01 dt. 23.05.01, 6250048 dt. 22.10.01, 6250052 dt. 22.10.01, 6250056 dt. 22.10.01 and 6250059 dt. 22.10.01 on behalf of M/s. Rithambra International, G-54 Ground Floor, Priyanka Towers, Basai Darapur, Moti Nagar, New Delhi, for export of Ready made Garments, wherein the said CHA has failed to discharge the obligation entrusted upon him vide the Custom House Agent License Regulations 2004, and the concerned erring exporter for whom the relevant shipping bills were filed by the CHA has also found to be non-existent and without taking a proper authorization from the said exporter.

3. Therefore on the basis of the records placed before me and also being satisfied that continuance of CHA license No. 61/98 of M/s. International Cargo Services, is not in the public interest, I, Suman Nayar, Commissioner of Customs (Import and General), New Delhi in exercise of power vested in me under Regulation 20(2) of the Custom House Agent License Regulations '2004, hereby order suspension of CHA license No. 61/98 of M/s. International Cargo Services with immediate effect. The CHA is directed to surrender all the cards issued to them immediately.

4. This order is issued without prejudice to any other action being taken or proposed to be taken under the Customs Act, 1962 or any other law for the time in being force, against the said CHA, their employee or any other person.

(SUMAN NAYAR)

COMMISSIONER OF CUSTOMS

M/s. International Cargo Services

40, Moti Bagh-II,

Near Nanakpura Gurudwara, New Delhi."

6. It is clear from the bare reading of the impugned order that respondents have exercised the powers vested in them under Regulations 20 (2) of the regulations. Regulation 22 lays down the procedure which the respondents are required to follow while revoking or suspending the license of an agent. This could be done on the ground and for the reasons which are contemplated under these provisions or terms and conditions of the license. It is the case of the respondents themselves before us that the show cause notice has been issued to the petitioner in relation to an action contemplated under the provisions of Section 124 of the Act. In other words, admittedly, no show cause notice was issued to the petitioner under Regulation 22 of the regulations. The contention raised on behalf of the respondents is that the provisions of Regulation 20 (2) do not contemplate issuance of any such notice and are 'emergent provisions'. Under that provision, the respondents have power to act immediately and order suspension during the pendency of other proceedings. This power could be invoked even where an action is contemplated against the agent.

7. The principles of natural justice have twin ingredients. Firstly, the person likely to be adversely effected by the action of the authorities should be given notice to show cause or granted reasonable opportunity of being heard in consonance with the maxim audi alteram partem. Secondly, the order so passed by the authorities should give reasons for arriving at any conclusion showing proper application of mind. Violation of either of these principles normally would render an order particularly quasi-judicial in nature invalid. Violation of principles of natural justice is violation of basic rule of law and would invite judicial chasticism. However, this rule is not without exceptions. Of course, the exception to such a rule are rare. Where the legislative scheme of provisions of a statute suggest that intent of the legislature is to take emergent action, in that event and subject to fulfillment of ingredients of the provisions, an order could be passed without affording pre-decisional hearing and an expeditious post-decisional hearing may amount to substantial compliance with the basic rule of law. Regulation 20 (1) empowers the Commissioner of Customs to revoke the license of an agent and even order forfeiture of part or whole security. This action could be taken restricted to the grounds spelled out in the regulation itself. This power can hardly be invoked by the authorities for instantly revoking a license while under 20 (2) of the regulations the same authority may in appropriate cases where immediate action is necessary suspend the license of the agent where enquiry against such agent is pending or contemplated. The emphasis is on the expression 'immediate action is necessary' and 'enquiry against such agent is pending or contemplated'. Furthermore, this regulation opens with non-obstante expression 'notwithstanding anything contained in sub-regulation (1)'. Thus, provisions of sub-regulation (2) would take precedence and recourse thereto can be taken despite the pendency of proceedings for revocation of license. In normal course, the procedure prescribed under Regulation 22 has to be followed by the authorities. In a case where immediate or emergent circumstances do not exist, notice should be issued to the agent, before authorities could pass an order in exercise of their powers under Rule 20 (1) or 21. However, this may not be quite true in an emergent situation. Where the authorities are of the considered view that the facts and circumstances disclose sufficient grounds for invoking emergent provisions and it is absolutely essential to suspend the license of the agent, in public interest, there the authorities may do so without serving a notice on the agent, but at the same time ensuring that post-decisional hearing is granted to the agent and the matter is considered with utmost expeditiousness. The rules of natural justice would have to be read into regulation 20 (2) but with the proviso that post-decisional hearing in emergent situation and subject to the satisfaction of the competent authority would be granted at the very first possible opportunity. Wherever a license is suspended without hearing, the authorities would be under obligation to grant post-decisional hearing to the agent immediately thereafter and ensure that the authorities after hearing the concerned party and upon due application of mind consider the matter whether the order of suspension should continue during the period of enquiry or otherwise. Such an approach would be just, fair and would further the object sought to be achieved by these provisions. The expression 'immediate' has to be harmoniously read and construed with other provisions including the provisions of regulations 20 and 22. The period specified in regulation 22 would have the effect of rendering the expression 'immediate' ineffective and meaningless. Therefore, applying the principle of harmonious construction, the provisions will have to be given their true and correct meaning and they should be permitted to operate in the field in which they are intended to operate by the legislature, so as to avoid any conflict between the language of these two provisions. An order of suspension is bound to have serious consequences upon the business of the agent and tantamounts to practically closing the business of the agent. As such to permit an order of suspension, even passed in emergent situations, to continue for indefinite period without hearing the agent would definitely be infringement of the principles of natural justice and basic rule of law as well. The only way in which both these provisions can operate without conflict is to hold that an order of suspension in 'emergent' situation can be passed for recorded reasons without hearing the agent at the first instance but should be granted opportunity of showing cause immediately thereafter and the authorities are expected to apply their mind whether the order of suspension so passed should be permitted to continue or not. This power is an exception to the normal rule of audi alteram partem and therefore recourse to it should be only in the case of immediate action in public interest or to prevent breach of statutory provisions, regulations or conditions of license, failing which serious consequences are bound to flow.

8. The authorities with the above exception are expected to adhere to the principles of natural justice wherever they exercise their powers for revoking and/or suspending a license in consonance with the provisions of Regulation 20 read with 22.

9. It would be relevant to make a reference to the provisions of Section 146(2) of the Act, under which the board has been empowered to make regulation, but only for the purposes of carrying out the provisions of this Section and under clause (e) of the said section, regulations can be framed, the circumstances in which a license may be suspended or revoked. This by itself indicates the need to act strictly in accordance with regulations and ensure that the circumstances spelled out in the regulation are satisfied, before any order adverse to the interest of the agent is passed by the authorities. An exception to a rule cannot be permitted to frustrate the substantive rule itself and must be construed so as to ensure that an exception remains an exception and does not obliterate the rule itself.

10. Natural justice is a procedural requirement of fairness. Those whose duty is to decide, must act justly and fairly. Normally, they should hear the parties by granting them opportunity of adequate representation and they must state some reasons in their final conclusions. This doctrine has been extended to statutory authorities or Tribunal exercising quasi-judicial functions and now even to administrative authorities, which can determine civil right or obligations (Rattan v. Managing Committee 1993 (4) SCC 10)

11. The exclusion of principles of natural justice by specific legislative provision is not unknown to law. Such exclusion would either be specifically provided or would be imperative consequence of language of the provision. Instead of making a final order without hearing, a temporary action may be necessary without a full hearing. In such cases, 'due process' is specified by offering a full hearing before the final order is made. Of course, such legislation may be struck down as offending due process, if no safeguard is provided against arbitrary action. It is equally settled principle that in cases of urgency, a post-decisional hearing would satisfy the principles of natural justice. Reference can be made to the case of Maneka v. Union of India (1978)1 SCC 248 and State of Punjab v. Gurdayal AIR 1980 SC 319. The provisions of regulation 20(2) clearly indicates exclusion of principles of natural justice, at least at the initial stages, by necessary implication. In cases where the conduct of the agent is such that it would cause serious prejudice to the public interest as well as violates the provisions of the Act, it may be a case of invoking the provisions of the regulations with immediate effect. The provisions of the Act and the regulations classify different situations. The situations relate to providing of right of hearing in terms of regulation 22 for invoking powers under the regulations 20 (1), while in an emergent situation under regulation 20 (2) the post-decisional, hearing but within the shortest span would be adequate compliance to the principles of natural justice. We must herein emphasise the need on the part of the authorities to no way prolong the order of suspension even by a day than necessary, without granting hearing to the applicant.

12. It is true that in administrative action, vesting the person of civil consequences, the principles of natural justice should be adhered to. In the case of M/s. Raj Restaurant and Anr. v. Municipal Corporation of Delhi (1982) 3 SCC 338, the Supreme Court held as under:-

"Where in order to carry on business a license is required, refusal to give license or cancellation or revocation of license would be visited with both civil and pecuniary consequences and as the business cannot be carried on without the license it would also affect the livelihood of the person. In such a situation before either refusing to renew the license or cancelling or revoking the same, the minimum principle of natural justice of notice and opportunity to represent one's case is a must. In the present case, no such opportunity was given before taking the decision not to renew the license. The action disclosing the decision being in violation of the principle of natural justice, deserves to be quashed."

13. Where certain provisions of a statue do not grant pre-order hearing to the effected party, while in some other provisions of the same statute, sub-hearing is specifically provided for. The result would be that prior provisions exclude the application of audi alteram partem by necessary implication. If nothing else, this is certainly a weighty consideration to be taken into account along with civil consequences, which would entail from such action. In the case of Mohinder Singh Gill v. The Chief Election Commissioner, New Delhi AIR 1978 SC 851, the Supreme Court held as under:-

"We have been told that wherever the Parliament has intended a hearing it has said so in the Act and the rules and inferentially where it has not specified it is otiose. There is no such sequitur. The silence of a stature has no exclusionary effect except where it flows from necessary implication."

14. We have already noticed that plain reading of the regulation 20 (2) would show that it is an emergent provision and its very purpose may be frustrated if the hearing is to be granted without exception and irrespective of the compelling facts and circumstances of the case, justifying passing of such an order. In the present case, no circumstances existed which would suggest invoking of this emergency provisions without taking recourse to the principle of natural justice. Furthermore, the order does not state, much less specifically give reasons which show proper application of mind by the concerned authorities for arriving at such a conclusion. Even administrative orders should be supported by proper reasons and application of mind (Union of India v. E.G. Nambudiri AIR 1991 SC 1216). Thus, on both these accounts, the petitioner is entitled to succeed.

15. Now, we would refer to the facts of the present case in light of the principles of law afore-referred. The bills relate to the year 2001 which are stated to be the foundation, for the alleged violation of the terms of license or regulations. In the impugned order, there is no reference to the date, time and circumstances relating to the breach of regulation or terms of license and furthermore no reason, whatsoever, has been stated in the order, even to satisfy the commonly known ingredients for invoking the urgency clause. Though, the license has been suspended with immediate effect, but there is not even an iota of reference to the circumstances or reasons which weighed with the authorities in coming to the conclusion that it was a case where immediate actions was necessary. The regulation clearly placed an obligation upon the authorities to record their satisfaction that it is not only expedient but also necessary for the authorities and situation of emergent action existed, so as to compel them to invoke the provisions of regulation 20 (2). Here, the impugned order suffers from dual patent infirmities. Despite the fact that the matter was pretty old, no opportunity was granted to the petitioner of being heard and secondly there is no application of mind by the competent authorities. Non-compliance to these essential elements relating to basic rule of law would ex facie vitiate the order. Strange enough the order does not bear the date. However, as stated by the learned Counsel appearing for the respondents the order was issued on 5th January, 2005. Before that the respondents had already invoked the provisions of Regulation 22 as well as Section 124 of the Act and it served the notice to show cause why the action be not taken against the petitioners. This reflects an in-built contradiction in the actions of the respondents. First they issued the show cause notice and waited for number of days before they passed the impugned order which was issued before the period stipulated in the notice had expired. It is true that the show cause notice was issued for a different purpose but this action of the respondents has to be examined from the point of view whether any emergent situation existed at the relevant time when the impugned order was issued or not?

16. We have already noticed that respondents have raised a preliminary objection to the very maintainability of the writ petition on the ground that the petitioner should take recourse to the alternative statutory remedy of appeal provided under Section 128 of the Act and more particularly under regulation 22(8), which specifically grants right of appeal to an agent against such an order of the authority before the Central Excise and Service Tax Appellate Tribunal. No doubt, an alternative remedy is available to the petitioner under the regulations itself, but that by itself may not be a sufficient ground for dismissing the writ petition because of availability of alternative remedy particularly when the order impugned in the writ petition is passed in violation to the provisions of the regulations and is also clearly against the principles of natural justice. Patent violation of principles of natural justice or basic rule of law would vitiate the order and the proceedings in their entirety. In such circumstances, it may not be necessary for the Court to compel the petitioner to take recourse to such alternative remedy which may not be effective and efficatious alternative remedy available to the petitioner.

17. It is not an absolute rule of law that availability of an alternative remedy would bar entertainment of a writ petition under Article 226 of the Constitution of India, always and in all circumstances. It is obligatory upon the respondent who raises such an objection to show that remedy is not of onorous character and is adequately effective in the facts of the given case. It should also show that compliance of such alternative remedy would not be a mere formality but would be in consonance with the concept of substantial justice. The existence of an alternative remedy does not per se bar the jurisdiction of the Court under Article 226 but only raises a point for its consideration in the exercise of its discretion (M/s. Baburam Prakash Chandra Maheshwari v. Zila Parishad, Muzaffarnagar AIR 1969 Supreme Court 556 and A.V. Venkateswaran, Collector of Customs v. Ramchand Sobhraj Wadhwani and Anr. AIR 1961 Supreme Court 1506).

18. For the reasons aforestated, we would allow this writ petition and quash the order of suspension dated 5th January, 2005. However, the respondents would be at liberty to re-consider the case of the petitioner in accordance with law.

19. In the facts and circumstances of the case, the parties are left to bear their own costs.