2025 (7) TMI 581 - HC - Customs

Challenge to impugned communication - petitioner s request for renewal of self sealing licence for a further period of five years has been rejected on the ground that the Facility Circular No.15 of 2023 dated 21.07.2023 issued by the Chennai Customs has been contravened by the petitioner - wrongful availment of benefit of S.No.39 of N/N. 24/2005-Cus - opportunity of personal hearing not provided - violation of principles of natural justice - HELD THAT - No personal hearing was also afforded to the petitioner as seen from the impugned communications. The petitioner also claims that they are having the self sealing licence for a period of 10 years and that they had also renewed the licence previously. The petitioner also claims that since they are a very large exporter of Solar Modules and they are in the business for more than 50 years the impugned communications will certainly affect the petitioner s business activities. Therefore the petitioner ought to have been granted a personal hearing by the respondents and the respondents should have considered their explanation before issuing the impugned communications which have drastic civil consequences on the petitioner. If the petitioner is able to prove that they are not at fault and that they have not contravened any other provisions of the Customs Act their rights will be greatly prejudiced if the impugned communications are allowed to be implemented. This Court is of the considered view that the impugned communications have been issued in violation of principles of natural justice as no personal hearing was afforded to the petitioner and the contentions raised by the petitioner before this Court have not been considered in the impugned communications. The impugned communications dated 08.04.2025 29.03.2025 and 10.10.2024 respectively are hereby quashed and the respondents are directed to re-consider the petitioner s application seeking for renewal of the self sealing licence on merits and in accordance with law after affording one personal hearing to the petitioner and after giving an opportunity for the petitioner to submit their explanation and considering the same on merits and in accordance with law - Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The Court considered the following core legal questions:

a) Whether the rejection of the petitioner's application for renewal of self sealing licence on the ground of contravention of the Customs Act, as per Facility Circular No.15 of 2023, was justified.

b) Whether the respondents properly considered the petitioner's submissions regarding the status of two cases registered against them under the Customs Act, including the dropping of one case and payment of differential duty and interest in the other.

c) Whether the petitioner was afforded the principles of natural justice, specifically the right to a personal hearing before the impugned communications were issued.

d) Whether the impugned communications violated any legal provisions or procedural fairness, thereby warranting quashing.

2. ISSUE-WISE DETAILED ANALYSIS

a) Legitimacy of rejection of renewal application based on alleged contraventions under the Customs Act

The legal framework involved the provisions of the Customs Act and the Facility Circular No.15 of 2023 issued by Chennai Customs, which governs the renewal of self sealing licences. The Circular mandates that renewal can be refused if the applicant is found to have contravened provisions of the Customs Act.

The respondents relied on two cases registered against the petitioner: one for wrongful benefit under Notification No.24/2005-Cus and another for wrongful availment of Free Trade Agreement benefits on import of Poly Solar Cells from Malaysia.

The Court noted that the petitioner produced evidence that the first case was dropped by the Customs Department, a fact admitted by the respondents. Regarding the second case, the petitioner had approached the settlement commission under Section 127B of the Customs Act and paid the differential duty and interest for all but one bill of entry, claiming exemption from liability on limitation grounds for the remaining one.

The petitioner further contended that the alleged wrongful availment was due to fabricated documents, for which they claimed no liability, and asserted no contravention of the Customs Act had occurred.

The Court observed that the respondents did not adequately consider these submissions and documents before rejecting the renewal application.

b) Consideration of petitioner's submissions and status of cases

The petitioner argued that since one case was dropped and the differential duty was paid in the other, the respondents ought to have considered these facts before concluding contravention. The Court found that the impugned communications failed to address these critical contentions.

Moreover, the petitioner emphasized their long-standing business presence of over 50 years and prior renewals of the licence, highlighting the significant impact of the rejection on their business activities.

The Court found the respondents' failure to engage with these points to be a procedural lapse.

c) Affordance of principles of natural justice - right to personal hearing

The Court examined whether the petitioner was given an opportunity for a personal hearing before issuance of the impugned communications. It was evident from the communications that no such hearing was granted.

The petitioner asserted that the absence of a personal hearing and failure to consider their explanations violated principles of natural justice, especially given the severe civil consequences of licence non-renewal.

The Court agreed, holding that the impugned communications were issued in violation of natural justice principles.

d) Quashing of impugned communications and directions for reconsideration

Given the above findings, the Court concluded that the impugned communications were unsustainable. The respondents were directed to reconsider the petitioner's renewal application on merits and in accordance with law, after affording a personal hearing and considering the petitioner's explanations.

The Court mandated that the final order be passed within eight weeks of receipt of the judgment copy.

3. SIGNIFICANT HOLDINGS

"The impugned communications have been issued in violation of principles of natural justice as no personal hearing was afforded to the petitioner and the contentions raised by the petitioner before this Court have not been considered in the impugned communications."

"Since one of the cases has been dropped by the Customs Department and in respect of the other case, the petitioner has paid the admitted differential duty along with interest and further having approached the settlement commission, it cannot be treated that the petitioner has contravened the provisions of the Customs Act."

"The respondents are directed to re-consider the petitioner's application seeking for renewal of the self sealing licence, on merits and in accordance with law, after affording one personal hearing to the petitioner and after giving an opportunity for the petitioner to submit their explanation and considering the same, on merits and in accordance with law."

Core principles established include the mandatory requirement of affording a personal hearing before adverse administrative action affecting significant civil rights, the necessity to consider all relevant facts and submissions before rejecting renewal applications, and that mere initiation of proceedings or allegations without final adjudication cannot justify denial of licence renewal.

Final determinations were that the impugned communications were quashed and the respondents were required to reconsider the renewal application after proper procedure, ensuring adherence to natural justice and fair consideration of the petitioner's position.