WP/26968/2010 of Flemingo (DFS) pvt.Ltd., Vs The Commissioner of Customs, on 30 December 2010

1. AIR 1966 SC 1089

2. AIR 1969 SC 78

3. AIR 1999 SC 22 = (1998) 8 SCC 1

4. AIR 1961 SC 609

5. AIR 1957 AP 368

6. (1971) 3 SCC 20 = AIR 1970 SC 645

7. (1999) 9 SCC 17

8. AIR 1954 SC 207

9. AIR 1977SC 898

10. AIR 1961 SC 1615

11. (2010) 4 SCC 772

12. (2010) 8 SCC 110

13. (1985) AC 835 : (1985) 2 All E.R. 327 : (1985) STC 282

14. United States v Erika, Inc., (1982) 456 US 201 : 1972 L.Ed.2d 12 (1982)

15. (1983) 459 US 1205 : 75 L.Ed.2d 438 (1983)

16. AIR 1958 SC 86

17. AIR 1959 SC 308

18. (1978) 1 SCC 240

19. (1981) 1 SCC 80

20. (1989) 2 SCC 505

21.1991 (56) ELT 15 (Guj)

22.1999 (95) Comp Cas 537

23. (2006) 7 SCC 800

24. (2006) 8 SCC 103

25. (2007) 9 SCC 593

26. (2007) 10 SCC 88

27. (2010) 1 SCC 126

28. (1985) 3 SCC 398 : AIR 1985 SC 141629.(1985) 4 SCC 252 : AIR 1986 SC 55530.AIR 2005 Madras 24131.(1985) 1 All E.R. 842 : (1985) STC 14432.(1986) STC 6533.AIR 1966 SC 67134.AIR 1971 SC 109335.(1988) 4 SCC 1

THE HON’BLE SRI JUSTICE V.V.S.RAOAND

THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN

WRIT PETITION No.26968 OF 2010

30.12.2010

Between:

Flemingo (DFS) Private Limited

AND

…. Petitioner

The Commissioner of Customs,Custom House, Port Area,Visakhapatnam.

… Respondent

THE HON’BLE SRI JUSTICE V.V.S.RAOAND

THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN

WRIT PETITION No.26968 OF 2010

ORDER: (per Hon’ble Sri Justice V.V.S.Rao)

The petitioner is in the business of running duty free shops‘Flemingo’ at airports and seaports. This writ petition is filed assailing theOrder-in-Original (O-in-O) No.03/2010, dated 30.09.2010, (dispatched on07.10.2010) of the respondent. By the said impugned O-in-O, therespondent in exercise of powers under various provisions of theCustoms Act, 1962 ordered confiscation of sale proceeds of duty freegoods diverted to local markets, imposed penalty and orderedcancellation of Private Bonded Warehouse licence (the licence, forbrevity). The petitioner had obtained licence dated 10.09.2005 underSection 58(1) of the Customs Act issued by the Assistant Commissioner of Customs (Bonds), Visakhapatnam.

The officers of revenue intelligence of customs house gatheredinformation with regard to misuse of licence and improper/ unauthorizedremoval and sale of goods in the local market in the guise of sales tocrew members of foreign going vessels. On 22.01.2008, the merchantvessel MV.Hope Star was searched and in it was found non-duty paidfifty cartons of Cigarettes and fifteen cases of beer, branded as shipstores on the master’s request. They were removed by the petitioner fromthe bonded warehouse. The Inspecting Officials recorded the statementsof the local manager and, on further investigation, they found that thepetitioner had allegedly removed the non-duty paid goods from thebonded warehouse without following prescribed procedures and in grossviolation of the conditions of licence besides manipulating the documentsby forging wrong/additional entries in the duplicate and triplicate copiesof the sale vouchers so as to account for more quantities than what wasactually shown as sold to the crew members of the vessel as per originalcopies. Therefore, summons were issued under Section 108 of theCustoms Act to the sales executive, location manager and seaportoperational manager. The depositions of the bond officers were alsoobtained. From all these the respondent, having come to an opinion thatthe petitioner had removed non-duty paid bonded goods without keepingaccount and had resorted to re-export, issued a show cause notice beingF.No.CO1/2008-RI & I, dated 21.07.2008 to the petitioner and theirlocation manager, operational manager and sales executive to showcause as to why customs duty on the non-duty paid bonded goodsshould not be demanded under Section 72(1) of the Customs Act, as towhy interest should not be levied, as to why the non-duty paid bondedgoods should not be confiscated and as to why penalty should not beimposed besides cancelling the licence. The petitioner sent reply on18.10.2008 denying various allegations. They also sought personalhearing to the adjudication by the respondent. Another show causenotice dated 19.01.2009 was issued, this time invoking section 28(1) ofthe Act. The petitioner replied again on 08.10.2009 duly requesting forpersonal hearing.

Personal hearing was given on 19.03.2010. But the petitionerrequested for adjournment. It was posted to 12.04.2010. Subsequently, attheir request, it was advanced to 07.04.2010 and senior counsel for thepetitioner appeared and argued before Sri M.Ponnusamy, IRS, the thenCommissioner of Customs. On 19.05.2010, the Commissioner who heardthe case on 07.04.2010 was transferred. Sri P.V.R.Reddy, IRS tookcharge. The petitioner alleges that they received notice dated 09.07.2010on 12.07.2010, informing about another round of personal hearing, on06.08.2010. The hearing was adjourned to 16.09.2010 on request of the petitioner. On that day, the location manager, the sales executive or thepetitioner’s counsel did not appear. The adjudicating Commissionerconsidered the matter and passed O-in-O impugned in the writ petition.

Conclusion

The petitioner contends that, after receiving notice dated09.07.2010 granting personal hearing, they had requested to change thetime for personal hearing from 3.00 p.m., to 11.00 a.m., on 06.08.2010,that in response thereto by communication, dated 21.07.2010, time ofhearing was changed, and that on 02.08.2010 they sent a communicationto the Assistant Commissioner of Customs seeking adjournment to anydate after 15.09.2010 (except 20[th] September) on the ground that theirsenior counsel was advised bed rest as he was not well. The petitioneralso contends that, without considering the same, the Commissioner SriP.V.R.Reddy, IRS, passed the impugned order though the matter washeard by Sri Ponnusamy. This, according to the petitioner, is illegal andviolative of principles of natural justice.

The Deputy Commissioner of Customs in the office of therespondent filed counter affidavit denying petition averments. It is statedthat the adjudicating authority had provided adequate opportunity underSection 122A of the Customs Act, and that the petitioner resorted todelays in the proceedings as a result of which, the respondent had nooption but to adjudicate the case as it is pending since long. It is furtheraverred that the adjudicating authority had given opportunity to thepetitioner on two occasions, which were not utilized by him in a propermanner. Therefore, the written reply to the show cause notice as well aswritten arguments were considered and the impugned order was passed.There was sufficient material before the adjudicating authority to warrantcancellation of the licence under Section 58(2)(b) of the Customs Act.The writ petition is also opposed referring to Section 129A of theCustoms Act which provides for an appeal to the appellate Tribunal.

The counsel for petitioner submits that the impugned O-in-O isviolative of principles of natural justice. He would urge that, underSection 122A of the Customs Act, the respondent is bound to grant threeadjournments during the adjudication proceedings. In this case, the sameis violated. He would urge that cancellation of the licence contravenesSection 58(2), in that reasonable opportunity was denied to petitioner.His submission is that though the Commissioner Sri Ponnusamy heardthe matter, the order was passed by the Commissioner Sri P.V.R.Reddy,which itself is illegal. These contentions are refuted by the SeniorStanding Counsel for Central Excise and Customs.

The question of maintainability of the writ petition, having regard toSection 129A of the Customs Act and the question of violative ofprinciples of natural justice, are interconnected. Therefore, both theissues need to be considered together. Articles 226 and 227 of Constitution confer power of judicial review on the High Courts. Thepower includes issuing writs in the nature of certiorari, habeas corpus,mandamus, prohibition and quo warranto, as well as directions andorders. These are writs, which were issued at the discretion of the King’sCourts in England to check excesses in the exercise of power byservants of the kingdom. The issue of writs; nay the exercise of judicialreview power is subject to certain limitations, some imposed by theconstitution or the statutes and others certain self-imposed limitations.One of these is the existence of alternative remedies. When the powerconferred by the Constitution under Articles 226 and 227 of Constitutionis exhaustive and wide enough, what is the justification for denyingconstitutional remedy?

Clive Lewis ‘Judicial Remedies in Public Law’ Sweet & Maxwell2004, at pp.410, explains “the rationale for exhaustion of alternativeremedies’ as follows.

A two-fold justification has been put forward. First, that whereParliament has provided for a statutory appeals procedure, it isnot for the courts to usurp the functions of the appellate body.The principle applies equally to bodies not created by statutewhich have their own appellate system. Secondly, the publicinterest dictates that judicial review should be exercisedspeedily, and to that end it is necessary to limit the number ofcases in which judicial review is used. More generally, the courtsnow encourage parties to resolve disputes without resorting tothe expense of litigation. To these reasons can be added theadditional expertise that the appellate bodies possess. In taxcases, for example, the appellate body, the General orSpecial Commissioners, have wide experience of thecomplex and detailed tax legislation. In employment cases,for example, the system of employment and EmploymentAppeal tribunals may be better equipped to deal with industrialissues than the High Court. In the financial services field,specialist procedures and a specialist tribunal have beenestablished to deal with certain matters. Similarly, where there isa further appeal to the courts, this may be to a division of theHigh Court particularly familiar with the area in question, as in taxcases, where the appeal is heard in the Chancery Division notthe Queen’s Bench Division. Parliament has provided for a statutory appeals procedure, it isnot for the courts to usurp the functions of the appellate body.The principle applies equally to bodies not created by statutewhich have their own appellate system. Secondly, the publicinterest dictates that judicial review should be exercisedspeedily, and to that end it is necessary to limit the number ofcases in which judicial review is used. More generally, the courtsnow encourage parties to resolve disputes without resorting tothe expense of litigation. To these reasons can be added theadditional expertise that the appellate bodies possess. In taxcases, for example, the appellate body, the General orSpecial Commissioners, have wide experience of thecomplex and detailed tax legislation. In employment cases,for example, the system of employment and EmploymentAppeal tribunals may be better equipped to deal with industrialissues than the High Court. In the financial services field,specialist procedures and a specialist tribunal have beenestablished to deal with certain matters. Similarly, where there isa further appeal to the courts, this may be to a division of theHigh Court particularly familiar with the area in question, as in taxcases, where the appeal is heard in the Chancery Division notthe Queen’s Bench Division.

The decisions of Supreme Court of India and other High Courts aregalore in this regard. The principle is well established that no writ wouldordinarily lie if there is an effective and efficacious alternative remedyprovided by the statute itself. This rule, however, has mainly fourexceptions. These are (i) When Constitutional validity of the statute ischallenged (K.S.Venkataraman and Company (P) Limited v State ofMadras[[1]]and Dhulabhai v State of Madhya Pradesh[[2]]);

(ii) Where the impugned action is in violation of fundamental rightespecially under Articles 14 and 19(1)(a) or (g) of Constitution;

(iii) Where the impugned order/action is in breach of natural justice; and

(iv) When challenge is to the action which is patently and ex facie without jurisdiction. In Whirlpool Corporation v Registrar of Trade Marks,Mumbai[[3]], the Supreme Court clarified this position. If a matter requirestechnical knowledge, which is available in the statutory appellate forum,ordinarily, the High Court would not be inclined to exercise discretionunder Article 226 of Constitution of India. These principles are wellsettled.

Further, in tax matters, ordinarily Courts have declined to exercise

writ jurisdiction. In C.A.Abraham v I.T.Officer[[4]],the appellant alongwith another was partner in M/s.M.P.Thomas and Company engaged infood grains business. The firm submitted Returns to Income Tax Officer(ITO). On the ground that the firm was carrying transactions in fictitiousnames, and had suppressed income for AY 1948-1949, show causenotice was issued for imposing penalty under Section 28 of Income TaxAct, 1922. Explanation was submitted. ITO passed orders imposingpenalty for AYs 1950-1951 and 1951-1952. Appeals were dismissed bythe appellate authority. The same was assailed in Certiorari proceedingsbefore the Kerala High Court. The Court rejected relying on a Judgmentof the A.P.High Court in Mareddi Krishna Reddy v Income Tax Officer, Tenali[[5]]. In Appeal with Certificate of High Court, the Supreme Courtconsidered two questions, namely, whether High Court could haveentertained a writ petition ignoring alternative remedy provided by the Actand whether the provisions imposing penalty can be interpreted bypointing out deficiencies. On the first question, it was held that, “assesseecannot abandon to resort to machinery provided under the Act anddirectly invoke remedy under Article 226 of Constitution of India”. Theobservations are as follows (para 3).

In our view, the petition filed by the appellant should not havebeen entertained. The Income Tax Act provides a completemachinery for assessment of tax and imposition of penalty andfor obtaining relief in respect of any improper orders passed bythe Income Tax authorities, and the appellant could not bepermitted to abandon resort to that machinery and to invoke thejurisdiction of the High Court under Article 226 of the Constitutionwhen he had adequate remedy open to him by an appeal to theTribunal.

In Champalal Binani v The Commissioner of Income Tax, West Bengal[[6]]the Commissioner of Income Tax issued a notice to theappellant under Section 33-B of the Income Tax Act, 1922 to show causeas to why the orders of assessment for AYs 1953-1954 to 1960-1961should not be revised. Copies of the notices were sent to the addresses disclosed in the IT Returns. On the date of hearing, none appeared forthe assessee. The Commissioner set aside the orders and directed theITO to make fresh assessment after enquiry and the investigation.Against the said order, the appellant moved the High Court of Calcutta byfiling a writ petition. Holding that the notice under Section 33-B was notserved on the assessee, the learned single Judge set aside the order ofthe Commissioner. The Division Bench reversed the order holding thatnotice was served. The Supreme Court dismissed the appeal andreiterated that when the Income Tax Act provides a complete and self-contained machinery for redressal of grievances, no party can be allowedto invoke the extraordinary remedy under Article 226 of Constitution ofIndia. The relevant observations are as follows (para 5).

We deem it necessary once more to emphasize that theIncome Tax Act provides a complete and self-containedmachinery for obtaining relief against improper action taken bythe departmental authorities, and normally the party feelinghimself aggrieved by such action cannot be permitted to refuseto have recourse to that machinery and to approach the HighCourt directly against the action. … A writ of certiorari isdiscretionary; it is not issued merely because it is lawful todo so. Where the party feeling aggrieved by an order of anAuthority under the Income Tax Act has an adequatealternative remedy which he may resort to against theimproper action of the authority and he does not availhimself of that remedy the High Court will require a strongcase to be made out for entertaining a petition for a writ.Where the aggrieved party has an alternative remedy theHigh Court would be slow to entertain a petition challengingan order of a taxing authority, which is ex facie withjurisdiction. A petition for a writ of certiorari may lie to the HighCourt, where the order is on the face of it erroneous or raisesquestion of jurisdiction or of infringement of fundamental rights ofthe petitioner.

Chanan Singh and Sons v Collector Central Excise[[7]]was acase where a writ petition was filed before the P&H High Courtchallenging the order of the CEGAT (now CESTAT) allowing thedepartment’s appeal. The High Court dismissed the writ petition holdingthat there is a statutory alternative remedy available. Aggrieved by thesame, appeal was carried to the Supreme Court. Confirming the order ofthe High Court, the Supreme Court observed (para 2) as under.

The appellant challenged before the High Court an orderof the Tribunal allowing the appeal of the Revenue. The HighCourt simply said that the appellant had a statutory alternativeremedy and the appellant had to avail that statutory remedyinstead of filing writ petition. Accordingly, the High Courtdismissed the writ petition. The appellant instead of challengingthe order of the Tribunal by availing the statutory alternativeremedy, has filed this appeal by special leave challenging theorder of the High Court. We are of the view that the High Courtwas right in dismissing the writ petition directing the appellant toavail the statutory alternative remedy.

In K.S.Rashid & Son v ITI Commission[[8]], a Constitution Bench of the Supreme Court held as follows.

So far as the second point is concerned, the High courtrelies upon the ordinary rule of construction that where thelegislature has passed a new statute giving a new remedy, thatremedy is the only one which could be pursued. It is said that theTaxation on Income (Investigation Commission) Act, 1947, itselfprovides a remedy against any wrong or' illegal order of theInvestigating Commission and under section 8 (5) of the Act, theaggrieved party can apply to the appropriate Commissioner ofIncome-tax to refer to the High court any question of law arisingout of such order and thereupon the provisions of S. 66 and 66-Aof the Indian Income-tax Act shall apply with this modificationthat the reference shall be heard by a bench of not less thanthree Judges of the High court. We think that it is not necessaryfor us to express any final opinion in this case as to whethersection 8 (5) of the Act is to be regarded as providing the onlyremedy available to the aggrieved party and that it excludesaltogether the remedy provided for under article 226 of theConstitution. For purposes of this case it is enough to state thatthe remedy provided for in article 226 of the Constitution isa discretionary remedy and the High court has always thediscretion to refuse to grant any writ if it is satisfied that theaggrieved party can have an adequate or suitable reliefelsewhere.

In Jai Singh v Union of India[[9]], the Supreme Court observed that,when there are serious questions of disputed facts, this Court need notexercise jurisdiction under Article 226 of the Constitution of India. Thefollowing passage from the said judgment needs excerption.

The High court dismissed the writ petition on the ground that itinvolved determination of disputed questions of fact. It was alsoobserved that the High court should not in exercise of itsextraordinary jurisdiction grant relief to the appellant when he hadan alternative remedy. After hearing Mr. Sobhagmal Jain onbehalf of the appellant, we see no cogent ground to take a viewdifferent from that taken by the High court. There cannot, in ouropinion, be any doubt on the point that the extent of purity of thegypsum won by the appellant is a question of fact. It has alsobeen brought to our notice that after the dismissal of the writpetition by the High court, the appellant has filed a suit, in whichhe has agitated the same question which is the subject-matter ofthe writ petition. In our opinion, the appellant cannot pursue twoparallel remedies in respect of the same matter at the sametime.

In Carl Still G.M.B.H. v State of Bihar[[10]], another Constitution Bench considered the question whether this Court can exercisejurisdiction under Article 226 of the Constitution even though authoritiesare constituted by special enactments to decide disputes. In paragraph11 of the said judgment, it was observed thus:

It is next contended for the respondents that, whateverthe merits of the contentions based on the construction of thecontract, the proper forum to agitate them would be theauthorities constituted under the Act to hear and decide disputesrelating to assessment of tax, that it was open to the appellantsto satisfy those authorities that there have been no sales suchas are liable to be taxed, that indeed they were bound to pursuethe remedies under the Act before they could invoke thejurisdiction of the court under Art. 226 and that the learnedJudges of the High court were, therefore, right in declining toentertain the present petitions. It is true that if a statute sets up atribunal and confides to it jurisdiction over certain matters and if aproceeding is properly taken before it in respect of such matters,the High court will not, in the exercise of its extraordinaryjurisdiction under Art. 226, issue a prerogative writ so as toremove the proceedings out of the hands of the tribunal orinterfere with their course before it. But it is equally well settledthat, when proceedings are taken before a tribunal under aprovision of law, which is ultra vires, it is open to a partyaggrieved thereby to move the court under Art. 226 for issuingappropriate writs for quashing them on the ground that they areincompetent, without his being obliged to wait until thoseproceedings run their full course.

In a recent judgment, in Raj Kumar Shivhare v Directorate ofEnforcement[[11]], the Supreme Court observed as under (paras 30 and31).

The argument that writ jurisdiction of the High Courtunder Article 226 of the Constitution is a basic feature of theConstitution and cannot be ousted by parliamentary legislation isfar too fundamental to be questioned especially after thejudgment of the Constitution Bench of this Court in L.ChandraKumar v Union of India ((1997) 3 SCC 261). However, that doesnot answer the question of maintainability of a writ petition whichseeks to impugn an order declining dispensation of pre-depositof penalty by the Appellate Tribunal. … When a statutory forumis created by law for redressal of grievance and that too in afiscal statute, a writ petition should not be entertained ignoring thestatutory dispensation. In this case the High Court is a statutoryforum of appeal on a question of law. That should not beabdicated and given a go-by by a litigant for invoking the forum ofjudicial review of the High Court under writ jurisdiction.

In United Bank of India v Satyawati Tondon[[12]], the SupremeCourt again recalled the settled law observing thus:Unfortunately, the high Court overlooked the settled law that the High Court will ordinarily not entertain apetition under Article 226 of the Constitution if an effectiveremedy is available to the aggrieved person and that thisrule applies with greater rigour in matters involvingrecovery of taxes, cess, fees, other types of public moneyand the dues of banks and other financial institutions. In ourview, while dealing with the petitions involving challenge to theaction taken for recovery of the public dues, etc. the High Courtmust keep in mind that the legislations enacted by Parliamentand State legislatures for recovery of such dues are a code untothemselves inasmuch as they not only contain comprehensiveprocedure for recovery of the dues but also envisage constitutionof quasi-judicial bodies for redressal of the grievance of anyaggrieved person. Therefore, in all such cases, the High Courtmust insist that before availing remedy under Article 226 of theConstitution, a person must enhaust the remedies availableunder the relevant statute.

The position in English Courts is also well accepted. In R v IRCEx parte Preston[[13]], Lord Scarman summed up the position in EnglishAdministrative Law, thus:

My fourth proposition is that a remedy by way of judicial reviewis not to be made available where an alternative remedyexists. This is a proposition of great importance. Judicial reviewis a collateral challenge: it is not an appeal. When Parliamenthas provided by statute appeal procedures, as in the taxingstatutes, it will only be very rarely that the courts will allowthe collateral process of judicial review to be used to attackan appealable decision. In the first part of his speech my nobleand learned friend, Lord Templeman, has set out in detail theample appeal procedures available to a taxpayer aggrieved by adecision of the commissioners to exercise their powers andduties under Part XVII of the Act of 1970 to counteract a taxadvantage alleged to have been obtained by him. … But casesfor judicial review can arise even where appeal procedures areprovided by Parliament. The present case illustrates thecircumstances in which it would be appropriate to subject adecision of the commissioners to judicial review. I accept thatthe court cannot in the absence of special circumstances decideby way of judicial review to be unfair that which thecommissioners by taking action against the taxpayer havedetermined to be fair.

In US Administrative Law, the position is no different. Explicit andimplicit legislative preclusions of judicial review are adhered to. Butabsolute preclusions of judicial review are not presumed unless theCongress specifically bars review whereas the bar of review to a limitedextent is readily inferred. In such cases, review may be postponed to enable the executive agency to exercise discretion at various levels aswilled by the Congress. In Erika[[14]], the U.S., Supreme Court ruled that,“judicial review may be shaped or postponed, to allow the agencies tofilter a myriad of fact-based claims, such as Social Security claims, thatare suited to resolution by specialist agencies and special procedures”.

In National Association of Home Health Agencies v Schweiker[[15]],the Court held that the legislative policy of placing limitations is to preventclaimants, who seek judicial review of their claims for benefits, frombypassing the specific procedural requirements provided by Congress invarious Acts, and the policy underlying this limitation to judicial reviewwas avoided bringing the Courts into complex interplay between variouscompeting concerns, the resolution of which depends on the facts.

The petitioner does not seriously dispute the legal position.Relying on State of U.P., v Mohammad Nooh[[16]],GullapalliNageswara Rao v A.P.S.R.C.[[17]], Gudikanti Narasimhulu v PublicProsecutor, High Court of A.P.[[18]], Ramji Dayawala and Sons (P)Limited v Invest Import[[19]], State of U.P., v Maharaja DharmanderPrasad Singh[[20]], Shree Rama Packaging v Union of India[[21]],Union of India v E.K.Andrew[[22]], Suresh Chandra Nanhorya vRajendra Rajak[[23]]Baraka Overseas Traders v Director General ofForeign Trade[[24]], Popcorn Entertainment v City IndustrialDevelopment Corporation[[25]],M.P.State Agro IndustriesDevelopment Corporation Limited v Jahan Khan[[26]]and SatwatiDeswal v State of Haryana[[27]], the petitioner’s counsel submits that, asthe arguments were heard by one Commissioner but the order waspassed by another Commissioner, there is violation of principles ofnatural justice.

If the hearing authority and the deciding authority are different, itwould destruct the concept of judicial hearing[[28]]. But as a matter of fact,if the deciding authority also gives an opportunity to hear the matterwhich is not availed by the person, or the statute enabling adjudicationitself excludes natural justice or affords limited access to natural justice,there cannot be scope for complaint. The ratio of the Constitution Bench i n Union of India v Tulsiram Patel[[29]]as summarized in Satyavir Singh v Union of India[[30]],to the extent relevant, is as below.

ØThe principles of natural justice are not the creation of Article14 of the Constitution. Article 14 is not the begetter of theprinciples of natural justice but is their constitutional guardian.14 of the Constitution. Article 14 is not the begetter of theprinciples of natural justice but is their constitutional guardian.ØThe principles of natural justice consist primarily of two mainrules, namely, “nemo judex in causa sua” and “audi alteramrules, namely, “nemo judex in causa sua” and “audi alteram partem” (“hear the other side”). The corollary deduced fromthe above two rules and particularly the audi alteram partemrule was “qui aliquid statuerit parte inaudita altera, aequumlicet dixqui aliquid statuerit parte inaudita altera, aequum licetdixerit haud aequus fuerit” (he who shall decide anythingwithout the other side having been heard, although he mayhave said what is right will not have done what is right” or asis now expressed “justice should not only be done but shouldmanifestly be seen to be done”). These two rules and theircorollary are neither new nor were they the discovery ofEnglish judges but were recognized in many civilizations andover many centuries.

ØIt is well established both in England and in India that theprinciples of natural justice yield to and change with theexigencies of different situations and do not apply in thesame manner to situations which are not alike. They areneither cast in a rigid mould nor can they be put in a legalstrait jacket. They are not immutable but flexible and can beadopted, modified or excluded by statute and statutory rulesas also by the constitution of the tribunal which has to decidea particular matter, and the rules by which such tribunal isgoverned.

ØIf legislation and the necessities of a situation can excludethe principles of natural justice including the audi alterampartem rule, a fortiori so can a provision of the Constitutionsuch as the second proviso to Article 311(2).the principles of natural justice including the audi alterampartem rule, a fortiori so can a provision of the Constitutionsuch as the second proviso to Article 311(2).

ØThe principles of natural justice must be confined within theirproper limits and not allowed to run wild. The concept ofnatural justice is a magnificent throughbred on which thisnation gallops forwards towards its proclaimed and destinedgoal of “Justice, social, economic and political”. Thisthroughbred must not be allowed to turn into a wild and unrulyhorse, careering off where it lists, unsaddling its rider andbursting into fields where the sign “no pasaran” is put up. proper limits and not allowed to run wild. The concept ofnatural justice is a magnificent throughbred on which thisnation gallops forwards towards its proclaimed and destinedgoal of “Justice, social, economic and political”. Thisthroughbred must not be allowed to turn into a wild and unrulyhorse, careering off where it lists, unsaddling its rider andbursting into fields where the sign “no pasaran” is put up.

Therefore, the rule that whenever natural justice is violated, thejudicial review Court should ignore the statutorily provided remedy ofappeal or revision and entertain the writ petition is not acceptableabsolutely. In all tax cases - judicial notice may be taken that theendeavour of the tax payer is to gain as much time as possible, andpostpone payment probably to maintain financial liquidity in businessoperations. The Court, therefore, must strictly scrutinize in proceedingunder Article 226 of Constitution with respect to the availability of remedyunder the Statute. Further, there cannot be any doubt that all issues in taxmatters are not simple questions of fact and law. The expertconsideration by specialist tribunals may be necessary at the firstinstance before the judicial remedy is made available as provided in thestatute. All the direct and indirect tax laws provide the remedy of appealor revision to the High Court against specialist tribunals establishedunder the law made under Article 323B of the Constitution of India.Ignoring the legislative intention behind creating such elaborate taxdispute resolution mechanisms the High Court may not ordinarilyinterfere with the show cause notices which are themselves issued in compliance with the statute and/or assessment orders passed afterdetailed consideration.

I n Salam Khan v Tamil Nadu Wakf Board, Chennai[[31]], theChief Justice Markandey Katju (as he then was), dealt with this aspect ofthe matter and made the following observations.

No doubt, alternative remedy is not an absolute bar to thefiling of writ petitions, but at the same time it is well settled thatwrit jurisdiction is discretionary jurisdiction and when there is analternative remedy, ordinarily a party must resort to that remedyfirst before approaching this court. Entertaining writ petitionsstraight away without insisting that a party should first avail of thealternative remedy is an over liberal approach which has causedimmense difficulties to the High Courts in the country becausethey have added to the huge arrears. The Courts have alreadybecome overburdened by this over liberal approach insteadof following the settled legal principle that a writ petitionshould ordinarily be dismissed if there is an alternativeremedy. The High Courts in India are already tottering andreeling under the burden of massive arrears which haveflooded the dockets of the Court, and such kind of overliberal approach has only multiplied this problem manifold.If this approach is further continued a time will surly comewhen the High Courts will find it impossible to function. Allthis has happened because unfortunately some Courts havedeparted from well-settled legal principles.

Even in cases where there is demonstrable breach of naturaljustice, as of right a petition for judicial review would not lie. Theaggrieved can appear before a specialist agency, be it a departmentalauthority or a quasi-judicial tribunal – and agitate in matters like taxes,social security, distribution of benefits to poor wherein elaboratebackground facts need to be evaluated. The issue of natural justice canalways be considered even by the appellate authority/tribunal. We mayrefer to two English cases viz., Banin v Mackinlay (Inspector of Taxes)[[32]]and R v Brentford General Commissioners Ex p.Chan[[33]].

Clive Lewis in Judicial Remedies, (2004 edn., p 412), afterconsidering the issue comes to the conclusion that in the tax field issuesof natural justice can be dealt with by the appeal system. The learned author gives the following reasons.

One issue that has arisen is the extent to which questions ofprocedural error or breach of natural justice are suitable forresolution by an appellate mechanism. This area straddles theborder between general public law and the specialized statutoryscheme, since the issue of what procedure is appropriatedepends on what is fair in the circumstances of a particularcase. Breaches of the procedural rules will normally be dealt withon appeal, where the statutory scheme itself sets out therelevant procedural rules. Breach of the common lawprocedural error or breach of natural justice are suitable forresolution by an appellate mechanism. This area straddles theborder between general public law and the specialized statutoryscheme, since the issue of what procedure is appropriatedepends on what is fair in the circumstances of a particularcase. Breaches of the procedural rules will normally be dealt withon appeal, where the statutory scheme itself sets out therelevant procedural rules. Breach of the common law principles of natural justice may be dealt with on appeal,providing that the appellate body can deal adequately withsuch complaints. In the tax field, for example, the courtshave held that issues of natural justice may be dealt with bythe appeal system. Appeals on points of law to the county courtin the housing field encompass all the grounds of judicial review,including procedural irregularity. Where challenges to thefairness of the initial decision may be raised on appeal, it wouldnot generally be appropriate to grant judicial review of the initialdecision.

The legal position is that interference by the Court, ignoring theappellate mechanism, depends on what is fair in the circumstances ofparticular case, and what is the statutory scheme itself that mandatesprocedural fairness including compliance with natural justice. If thestatute itself curtails or excludes natural justice with or without limitations,it is a sure test to deny judicial review. For instance, the statute mayempower the quasi judicial body to give a personal hearing only whenasked for. If the civil consequences are not drastic, the statute maymandate only “hearing by representation in writing” which itself would besufficient compliance with natural justice (see M.P.Industries Limited vUnion of India[[34]], Union of India v Jyoti Prakash[[35]]and Indru Ramchand Bharvani v Union of India[[36]]).

There may be other situations where opportunity of filing objectionsin writing and as well as opportunity of personal hearing is to be given bythe appellate authority or conditional with regard to the time, number ofhearings, number of adjournments, place of hearing or locus of theperson likely to be aggrieved. With this background, we may considerSection 58 of the Customs Act, which reads as under.

58. Licensing of private warehouses.- (1) At any warehousingstation, the Assistant Commissioner of Customs or DeputyCommissioner of Customs may license private warehouseswherein dutiable goods imported by or on behalf of the licensee,or any other imported goods in respect of which facilities fordeposit in a public warehouse are not available, may bedeposited.

(2) The Assistant Commissioner of Customs or DeputyCommissioner of Customs may cancel a licence granted undersub-section (1) –

(a) by giving one month’s notice in writing to the licensee; or (b) if the licensee has contravened any provision of this Act orthe rules or regulations or committed breach of any of theconditions of the licence:

Provided that before any licence is cancelled under clause (b),the licensee shall be given a reasonable opportunity of beingheard.

(3) Pending an enquiry whether a licence granted under sub-section (1) should be cancelled under clause (b) of sub-section

(2), the Assistant Commissioner of Customs or DeputyCommissioner of Customs may suspend the licence.

Sub-section (1) of Section 58 of Customs Act deals with the issue ofthe licence. Sub-section (2) empowers the cancellation of licence if thelicensee has contravened any of the provisions of the Customs Act,Customs Rules or regulations or has committed breach of any conditionsof licence, by giving one month’s notice to the licensee and by affording a“reasonable opportunity” of being heard. In this case, there is no disputethat while submitting explanation to the show cause notice, the petitionerdid ask for personal hearing. As we shall presently show “givingreasonable opportunity of being heard” does not mean that theadjudicating authority should adjourn the case from time to time monthafter month to suit the convenience of the petitioner’s counsel, and waitfor a long period before passing O-in-O. The power of the adjudicatingauthority to afford a reasonable opportunity of being heard is also, in ourconsidered opinion, circumscribed by Section 122A of the Customs Act,which reads as under.

122A. Adjudication procedure. – (1) The adjudicating authorityshall, in any proceeding under this Chapter or any otherprovision of this Act, give an opportunity of being heard to a partyin a proceeding, if the party so desires.(2) The adjudicating authority may, if sufficient cause is shown,at any stage of proceeding referred to in sub-section (1), granttime, from time to time, to the parties or any of them and adjournthe hearing for reasons to be recorded in writing:Provided that no such adjournment shall be granted more thanthree times to a party during the proceeding.shall, in any proceeding under this Chapter or any otherprovision of this Act, give an opportunity of being heard to a partyin a proceeding, if the party so desires.(2) The adjudicating authority may, if sufficient cause is shown,at any stage of proceeding referred to in sub-section (1), granttime, from time to time, to the parties or any of them and adjournthe hearing for reasons to be recorded in writing:Provided that no such adjournment shall be granted more thanthree times to a party during the proceeding.

A plain reading of the above would show that no party is entitled toseek more than three adjournments after commencement of theadjudication. There is no dispute that adjudication commences with theissue of show cause notice and submission of explanation/objections bythe licensee or assessee as the case may be. If it is a case where thelicensee asks for personal hearing, he is entitled only for threeadjournments. The rule of natural justice is complied by giving threeadjournments before conclusion of proceedings. If a licensee fails to availthe “reasonable opportunity”, and remains ex parte, it cannot complain ifthe adjudicating authority concludes adjudication. If such construction isnot accepted, Section 122A especially the proviso thereto would becomemeaningless.

Indisputably, in their reply dated 08.10.2009 to the show causenotice dated 19.01.2009, the petitioner requested to grant them personalhearing. After receiving the show cause notice dated 19.01.2009, thepetitioner sent six interim replies and requested for copies of statementsof crew members/passengers. They were asked to appear in the office on 10.09.2009 in response to which the petitioner’s operations manager SriAjay Thoria visited Custom House on 15.09.2009 and 16.09.2009 andgathered information. The petitioner then, through their counsel, sent adetailed reply dated 08.10.2009. They also sought personal hearing.There is no dispute that in response thereto the respondent gavepersonal hearing on 19.03.2010 when the petitioner’s sales executive SriG.V.S.Kondala Rao appeared. At the request of other noticees, thehearing was postponed to 12.04.2010 which was preponed to07.04.2010. On that day Sri Habibulla Basha, Senior Advocate and SriMani Shankar, counsel for petitioner argued the matter and submittedwritten arguments. What happened thereafter? It is necessary to refer to relevant paragraph in the impugned O-in-O (paragraph 41.8).

Due to change of adjudicating authority another opportunity hasbeen granted on 06.08.2010 in order to follow the principles ofnatural justice and the same has been adjourned to 16.09.2010as requested on behalf of M/s.Flemingo (DFS) Pvt., Ltd., and SriAjay Thoria, Operational manager (Seaport) of M/s.Flemingo(DFS) Pvt., Ltd. Again they requested another adjournmentwhich was not accepted by the adjudicating authority in as muchas they have been granted two hearings by the presentAdjudicating Authority in addition to the hearings granted by thethen Commissioner and decided to process the case as perevidence available in the file. Shri V.Prasad Rao and SriG.V.S.Kondala Rao have neither appeared for personal hearingon 06.08.2010 nor requested for adjournment of the same andhence, it is presumed that they do not want to appear againbefore the adjudicating authority and therefore, whatever theyhave submitted during the first round of the personal hearinghave been taken on record.been granted on 06.08.2010 in order to follow the principles ofnatural justice and the same has been adjourned to 16.09.2010as requested on behalf of M/s.Flemingo (DFS) Pvt., Ltd., and SriAjay Thoria, Operational manager (Seaport) of M/s.Flemingo(DFS) Pvt., Ltd. Again they requested another adjournmentwhich was not accepted by the adjudicating authority in as muchas they have been granted two hearings by the presentAdjudicating Authority in addition to the hearings granted by thethen Commissioner and decided to process the case as perevidence available in the file. Shri V.Prasad Rao and SriG.V.S.Kondala Rao have neither appeared for personal hearingon 06.08.2010 nor requested for adjournment of the same andhence, it is presumed that they do not want to appear againbefore the adjudicating authority and therefore, whatever theyhave submitted during the first round of the personal hearinghave been taken on record.

Section 122A mandates no more than three adjournments. Theadjudicating authority granted more than three adjournments and whennone appeared on 16.09.2010, on behalf of the company, the incumbentCommissioner passed the impugned order. We are convinced that“reasonable opportunity” was not denied to the petitioner. Alleged denialof natural justice is not reason enough to bypass the alternative remedyand approach this Court. As noticed supra, principles of natural justicecan be precluded by the statute or can be applied in a restrictive manner.Alternative remedy – we are aware is not an absolute bar for invoking theremedy of judicial review but, ordinarily in tax matters, the High Courtwould not entertain writ petitions against a show cause notice or againstthe order which can be challenged before the appellate tribunalconsisting of judicial and revenue members. It is within the discretion ofthe High Court whether to exercise the jurisdiction or not. In this case, weare convinced that it is not a case where we should exercise ourdiscretion under Article 226 of Constitution ignoring Section 122A of the Customs Act.

Customs Act.

In the result, for the above reasons, we see no ground to interfere.While giving liberty to the petitioner to avail the remedy under theCustoms Act, and without expressing any opinion on the merits of thecase, the writ petition is dismissed without any order as to costs.

_______________

(V.V.S.RAO, J)

.12.2010.PlnNote: LR copy be marked. (By order) pln ______________________________

(RAMESH RANGANATHAN, J)

[1]AIR 1966 SC 1089[2]AIR 1969 SC 78[3]AIR 1999 SC 22 = (1998) 8 SCC 1[4]AIR 1961 SC 609[5]AIR 1957 AP 368[6](1971) 3 SCC 20 = AIR 1970 SC 645[7](1999) 9 SCC 17[8]AIR 1954 SC 207[9]AIR 1977SC 898[10]AIR 1961 SC 1615[11](2010) 4 SCC 772[12](2010) 8 SCC 110[13](1985) AC 835 : (1985) 2 All E.R. 327 : (1985) STC 282[14]United States v Erika, Inc., (1982) 456 US 201 : 1972 L.Ed.2d 12 (1982)[15](1983) 459 US 1205 : 75 L.Ed.2d 438 (1983)[16]AIR 1958 SC 86[17]AIR 1959 SC 308[18](1978) 1 SCC 240[19](1981) 1 SCC 80[20](1989) 2 SCC 505[21]1991 (56) ELT 15 (Guj)[22]1999 (95) Comp Cas 537[23](2006) 7 SCC 800[24](2006) 8 SCC 103[25](2007) 9 SCC 593[26](2007) 10 SCC 88

[27](2010) 1 SCC 126[28]Gollapalli Nageswara Rao[29](1985) 3 SCC 398 : AIR 1985 SC 1416[30](1985) 4 SCC 252 : AIR 1986 SC 555[31]AIR 2005 Madras 241[32](1985) 1 All E.R. 842 : (1985) STC 144[33](1986) STC 65[34]AIR 1966 SC 671[35]AIR 1971 SC 1093[36](1988) 4 SCC 1