SPECIAL DRIVE COULD NOT BE A JUSTIFICATION FOR VIOLATION OF NATURAL JUSTICE

[Mr. M. GOVINDARAJAN]

Adjudication in tax matters is done after issuing of show cause notice to the assessee giving time to give his reply. The assessee is to give reply within the time stipulated in the show cause notice indicating his case in detail.   The assessee, afterwards will be given opportunity of being heard for which in the reply to the show cause notice itself the assessee is to indicate whether he wants to be heard in person.  Then only the order will be passed by the Adjudicating Authority.  The same is the position in appeal proceedings also. Natural Principles of justice are to be followed in any adjudication process.  At any cost there shall be no deviation. 

In ‘Shree Hari Chemicals Exports Limited V. Union of India’ – 2011 (24) STR 653 (Bom) the petitioners filed the present writ petition aggrieved by a communication issued to them by the Assistant Commissioner, Customs (Preventive) Alibag Division.   In the said communication the petitioners have been informed that the Deputy Commissioner of Customs, who was nominated by the Commissioner of Customs for finalization of the provisional assessments of certain bills of entry under a special drive, had finalized the assessments and passed orders accordingly.  The orders have been passed without giving an opportunity of being heard to the petitioner. Each of the communications contains an annexure setting out the provisional assessments that have been finalized by the Deputy Commissioner. The petitioners are called upon to pay the duty finalized and alleged to have been short paid.

The petitioners put for the following before the High Court:

No hearing was afforded to them by the Deputy Commissioner of Customs;

No speaking order has been passed;

Even the elementary principles of Natural Justice have therefore not bee complied with.

The Department contended that the petitioners may file an appeal against the order passed by the Deputy Commissioner, finalizing the assessments, on special drive. 

During the hearing the department accepted that no opportunity of being heard was given to the petitioners. The Court is of the view that it is a fit and proper case for the exercise of the writ jurisdiction and there is no reason to relegate the petitioners to the remedy of filing of an appeal before the appellate authority.

In this case the Court held there is an utter failure on compliance of the principles of natural justice. The High Court relied on the decision of the Supreme Court in ‘Automotive Tyre Manufacturers Association V. Designated Authority’ – 2011 -TMI - 201474 - SUPREME COURT OF INDIA in which the Supreme Court held that if one person hears and other decides, a personal hearing would be an empty formality.  The Supreme Court further held that an order passed by a quasi-judicial authority without complying with the principles of natural justice would therefore be invalid. The High Court held that the principles shown by the Supreme Court in the above case is squarely applicable to the present case. Merely because there was a special drive to clear a backlog of matters that would afford no justification for the department not to comply with fundamental principles of natural justice. The High Court further held that efficiency in the disposal of quasi-judicial proceedings is important but, that cannot be at the cost of overriding fundamental principles known to the law of the land.

The High Court on the above grounds set aside the impugned communications and the consequent assessment orders. The Court gave directions that the Deputy Commissioner of Customs should pass fresh orders finalizing the assessments after furnishing to the petitioners an opportunity of being heard. The petitioners were also directed to appear before the concerned Deputy Commissioner of Customs entrusted with the hearing of the cases with an authenticated copy of the order of High Court in this case. The Adjudicating Authority shall take necessary steps in accordance with law to finalize the assessment after giving reasonable opportunity of being heard and complying with the principles of Natural Justice on an expeditious basis.