2025 (7) TMI 11 - HC - Customs

Prayer for a direction upon the respondent no.3 to withdraw/cancel the impugned order - provisional release of the goods in terms of Section 110A of Customs Act 1962 - failure to supply the petitioner with the copy of the list of documents relied upon - violation of principles of natural justice - HELD THAT - The case made out by the respondents that the petitioner was served with the relied upon documents does not appear to be a plausible one. Nothing has been placed before this Court to demonstrate that the petitioner had been supplied with the relied upon documents. Taking note of the fact that the decision was rendered by the adjudicating officer being the respondent no.3 on 24th October 2024 without supplying the petitioner with the copy of the list of documents relied upon and the copies of the documents I am of the view that the order dated 24th October 2024 cannot be sustained and the same is set aside with a further direction upon the respondents to re-adjudicate the aforesaid show cause by giving an opportunity of hearing to the petitioner in accordance with law. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

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

• Whether the petitioner was duly supplied with copies of the documents relied upon by the customs authorities in the show cause notice under Section 124 of the Customs Act, 1962, as required by principles of natural justice.
• Whether the adjudicating authority's final order dated 24th October, 2024, passed without supplying the petitioner with the relied upon documents and without allowing the petitioner to participate in the sampling process, is sustainable in law.
• Whether the petitioner was entitled to have fresh samples drawn from the consignment in the presence of the petitioner and tested at an FSSAI accredited laboratory prior to adjudication.
• Whether the recovery steps initiated pursuant to the impugned adjudication order should be stayed or quashed pending re-adjudication.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Supply of relied upon documents to the petitioner

Relevant legal framework and precedents: Under the Customs Act, 1962, particularly Section 124, the show cause notice issued to a party must specify the grounds of demand and the documents relied upon. Principles of natural justice require that the party must be given a fair opportunity to defend itself, which includes providing copies of the documents relied upon to enable effective response.

Court's interpretation and reasoning: The Court noted that although the impugned order states that the relied upon documents were supplied along with the show cause notice, this assertion was not supported by any contemporaneous response to the petitioner's repeated requests for such documents. The petitioner's emails and letters dated 9th August, 2024 and 1st October, 2024, complaining about non-supply of the documents, remained unanswered by the adjudicating authority.

Key evidence and findings: The petitioner's written communications requesting the documents and the absence of any reply or proof of supply by the respondents were critical. The Court found the respondents' claim of supply to be unsubstantiated and not plausible.

Application of law to facts: Since the documents were not supplied, the petitioner was denied a fair opportunity to prepare its defense, violating principles of natural justice and statutory requirements under the Customs Act.

Treatment of competing arguments: The respondents relied on the impugned order's assertion of supply and subsequently provided copies of the documents during the hearing to avoid controversy. However, the Court emphasized that retrospective supply does not cure the defect in the original adjudication process.

Conclusions: The Court concluded that the failure to supply the relied upon documents before adjudication rendered the order dated 24th October, 2024 unsustainable.

Issue 2: Opportunity for fresh sampling and testing at an accredited laboratory

Relevant legal framework and precedents: The Customs Act and allied regulations provide for sampling and testing of imported consignments to determine conformity with prescribed standards. The right to participate in the sampling process and to have samples tested at accredited laboratories is integral to ensuring transparency and fairness.

Court's interpretation and reasoning: The petitioner's request for fresh sampling in adequate number in its presence and testing at an FSSAI accredited laboratory was denied by the customs authorities. The Court found this denial to be contrary to the principles of fair procedure and natural justice.

Key evidence and findings: The petitioner's written requests for fresh sampling and testing, and the absence of any cogent reason from the respondents for denial, were significant. The Court observed that allowing fresh sampling and testing would "iron out all differences and in the interest of justice" be just and reasonable.

Application of law to facts: The Court directed the respondents to draw fresh samples from the petitioner's consignment at ICD, Durgapur, in the presence of the petitioner upon prior notice, and to send the samples to an FSSAI accredited laboratory for testing. The test report must be supplied to the petitioner before offering an opportunity of personal hearing.

Treatment of competing arguments: The respondents did not advance any substantial argument against the petitioner's request for fresh sampling and testing, and the Court treated the petitioner's claim favorably to uphold fairness.

Conclusions: The petitioner's entitlement to fresh sampling and testing was upheld, and the respondents were directed to comply accordingly before re-adjudication.

Issue 3: Validity of the adjudication order dated 24th October, 2024 and recovery proceedings

Relevant legal framework and precedents: Adjudication orders under the Customs Act must be passed in compliance with statutory mandates and principles of natural justice. Recovery of dues arising from such orders cannot proceed if the order itself is vitiated by procedural irregularities.

Court's interpretation and reasoning: Since the adjudication order was passed without supplying the petitioner the relied upon documents and without allowing fresh sampling, it was held to be legally unsustainable. Consequently, the recovery steps initiated pursuant to that order were also quashed.

Key evidence and findings: The Court relied on the procedural defects identified and the absence of any compliance with the petitioner's requests for documents and sampling as grounds to invalidate the order and stay recovery.

Application of law to facts: The Court set aside the impugned order and quashed the recovery proceedings, directing re-adjudication within four months.

Treatment of competing arguments: The respondents' contention that the order was valid was rejected due to procedural non-compliance.

Conclusions: The adjudication order dated 24th October, 2024 was set aside, recovery proceedings quashed, and re-adjudication ordered.

3. SIGNIFICANT HOLDINGS

The Court held:

"The order dated 24th October, 2024 cannot be sustained and the same is set aside with a further direction upon the respondents to re-adjudicate the aforesaid show cause by giving an opportunity of hearing to the petitioner in accordance with law."

"It would be just and reasonable to direct the respondents to draw fresh samples from the petitioner's consignment standing at ICD, Durgapur, in presence of the petitioner upon prior notice to the petitioner in accordance with law and to send the same to any FSSAI accredited laboratory and the test report thereof be also supplied to the petitioner prior to offering the petitioner an opportunity of personal hearing."

"The steps taken by the respondents for recovery of arrears arising out of the adjudication order in original dated 24th October, 2024 stands quashed."

Core principles established include the mandatory requirement to supply copies of relied upon documents to the party in show cause proceedings under the Customs Act, adherence to natural justice by permitting participation in sampling and testing, and the invalidity of adjudication orders passed without compliance with these requirements.

The final determinations were:

• The impugned adjudication order dated 24th October, 2024 was set aside.
• The petitioner must be supplied with all relied upon documents before re-adjudication.
• Fresh samples must be drawn in the presence of the petitioner and tested at an accredited laboratory.
• Recovery proceedings based on the impugned order were quashed.
• The respondents were directed to complete re-adjudication within four months.