2025 (6) TMI 1682 - HC - Customs

Confiscation - penalty u/s 112(a)(i) of Customs Act, 1962 - concealing foreign currency recovered/seized - impugned order passed ex-parte - violation of principles of natural justice - HELD THAT - It appears that respondent No. 2 has not taken care to serve the notice upon the petitioner at his USA address and has made a lame excuse that the notice was served at the address available on record. It is not in dispute that the impugned foreign currency was seized on arrival of the petitioner on 06.10.2022 and the panchnama was also carried out at the time of seizure. Respondent No. 2 has therefore remained negligent in not taking the current address of the petitioner at the relevant time and only relied upon the local address at Anand. Even the passport of the petitioner would contain his permanent address at USA. In that view of the matter the excuse made by respondent No. 2 in the affidavit-in-reply to the effect that the show-cause notice was served on the address available on the record which has returned back with a remark insufficient address as well as reliance placed on the provision of section 153(e) of the Act, 1962 for substituted service of affixing the show-cause notice on notice board cannot be accepted. Respondent No. 2 has therefore committed a gross violation of the principles of natural justice by not serving copy of the show-cause notice upon the petitioner at the USA address disclosed by the him in the statement as well as in the passport - Impugned Order-in-Original is hereby quashed and set aside as the same is passed in breach of principles of natural justice by not providing an opportunity of hearing to the petitioner. The matter is remanded to respondent No. 2 to pass a fresh de novo order after providing an opportunity of hearing to the petitioner in accordance with law - Petition allowed in part by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

• Whether the impugned Order-in-Original dated 24.05.2023, passed by the Additional Commissioner of Customs, confiscating foreign currency and imposing penalty under the Customs Act, 1962, was validly passed in accordance with the principles of natural justice.
• Whether the petitioner was duly served with the show-cause notice dated 16.03.2023 as required under the Customs Act, 1962, and whether proper service was effected in compliance with statutory provisions and principles of natural justice.
• Whether the failure to serve the petitioner with the show-cause notice and the order constituted a violation of the petitioner's right to be heard, thereby rendering the impugned order liable to be quashed.
• Whether the reliance on substituted service under section 153(e) of the Customs Act, 1962, by affixing the notice on the Customs House notice board, was sufficient and valid in the facts of this case.
• Whether the petitioner's alleged failure to update address or appear in adjudication proceedings could justify passing the order ex-parte without service of notice at the petitioner's known overseas address.
• Whether the petitioner has an alternative remedy under section 120A of the Customs Act, 1962, and the extent to which this affects the Court's interference with the impugned order.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the impugned Order-in-Original in light of principles of natural justice

Relevant legal framework and precedents: The principles of natural justice mandate that no order affecting a person's rights or interests can be passed without giving that person a reasonable opportunity to be heard. Under the Customs Act, 1962, show-cause notices must be served on the concerned person to enable them to respond before an order of confiscation and penalty is passed. Failure to serve notice and hear the party negates the validity of the order.

Court's interpretation and reasoning: The Court observed that the impugned order was passed ex-parte without the petitioner having been given an opportunity to reply to the show-cause notice. The petitioner only became aware of the show-cause notice upon his subsequent visit to India in 2023, after which he filed a reply. The Court found this to be a clear breach of natural justice.

Application of law to facts: Since the petitioner was never served the show-cause notice at his known overseas address, and the order was passed without hearing him, the Court held the impugned order to be invalid. The Court emphasized that the right to be heard is fundamental and cannot be circumvented by procedural lapses.

Treatment of competing arguments: The respondents argued that the petitioner deliberately avoided the proceedings and did not update his address, thus justifying the ex-parte order. The Court rejected this, noting that the department failed to take adequate steps to serve notice at the petitioner's known address abroad, which was disclosed in the petitioner's passport and statements.

Conclusion: The impugned order was passed in violation of natural justice principles and is liable to be quashed.

Issue 2: Validity of service of show-cause notice under section 153(e) of the Customs Act, 1962

Relevant legal framework: Section 153(e) of the Customs Act, 1962 permits substituted service by affixing the notice on the notice board of the Customs House if service by ordinary means is not possible. However, such substituted service is only permissible after reasonable attempts to serve the notice at the last known address.

Court's interpretation and reasoning: The Court noted that the show-cause notice sent to the petitioner's local address in Anand was returned undelivered with the remark "insufficient address." Thereafter, the department affixed the notice on the Customs House notice board. However, the Court held that this was insufficient in the facts of the case because the petitioner's overseas address was known and available on record, including in his passport.

Application of law to facts: The Court found that the department's failure to attempt service at the petitioner's overseas address, and reliance on affixing notice locally, was negligent and did not satisfy the requirements for valid substituted service.

Treatment of competing arguments: The respondents justified the service on the ground that the petitioner did not update his address and that the notice was served at the address available on record. The Court held that the department's reliance on the local address alone was inadequate and did not conform to due process.

Conclusion: The substituted service under section 153(e) was not valid in this case, and the petitioner was not properly served with the show-cause notice.

Issue 3: Effect of petitioner's alleged failure to update address or appear in proceedings

Court's reasoning: While the respondents contended that the petitioner's failure to update his address or respond to proceedings amounted to mala fide conduct delaying the process, the Court emphasized that the primary duty to ensure service lies with the department. The petitioner had disclosed his overseas address in the passport and statements, which the department failed to utilize for service.

Conclusion: The petitioner's alleged inaction does not absolve the department of its obligation to serve notices properly. Hence, the petitioner's conduct does not justify passing the order without notice and hearing.

Issue 4: Availability of alternative remedy under section 120A of the Customs Act, 1962

Relevant framework: Section 120A provides an appellate remedy against orders passed under the Customs Act. The respondents argued that the petitioner had the alternative remedy of appeal and therefore the Court should not interfere.

Court's reasoning: The Court acknowledged the existence of the appellate remedy but held that this does not preclude judicial review of orders passed in violation of natural justice principles. The Court found it appropriate to quash the impugned order and remit the matter for fresh adjudication with proper service and hearing.

Conclusion: The existence of an alternative remedy does not bar interference where fundamental procedural lapses have occurred.

3. SIGNIFICANT HOLDINGS

The Court held:

"The impugned Order-in-Original is hereby quashed and set aside as the same is passed in breach of principles of natural justice by not providing an opportunity of hearing to the petitioner."

"The excuse made by respondent No. 2 in the affidavit-in-reply to the effect that the show-cause notice was served on the address available on the record which has returned back with a remark 'insufficient address' as well as reliance placed on the provision of section 153(e) of the Act,1962 for substituted service of affixing the show-cause notice on notice board, cannot be accepted."

The Court established the core principle that proper and effective service of show-cause notices at the correct and known address is a mandatory prerequisite for passing any adjudicatory order under the Customs Act, 1962. Substituted service under section 153(e) cannot be invoked as a shortcut without exhausting all reasonable means of service, especially when the overseas address is known.

The Court emphasized that violation of natural justice by passing an ex-parte order without notice and hearing renders such order liable to be quashed and remanded for fresh consideration.

Finally, the Court directed the adjudicating authority to pass a fresh de novo order after providing the petitioner an opportunity of hearing within a stipulated period, ensuring compliance with principles of natural justice.