Commissioner of Customs (General) vs Neptune Clearing Agency

This appeal of the Revenue challenges the order passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench dated 7-5-2012 [ , 2012 (286) E.L.T. 729 (Tri.-Mum.) ] allowing the appeal of the respondent. The respondent is a Customs House Agent and his licence was revoked by the Commissioner of Customs (General) by his order-in-original dated 15-10-2009. The revocation was pursuant to an inquiry alleging violation of Regulations 12, 18(1) and 13(n) of the Customs House Agents Licensing Regulations, 2004. The article of charges were supplied on 19-1-2007 to which a reply was filed on 27-8-2007. There was a hearing scheduled before the Inquiry Officer on 18th/19th March, 2008. But the representative/Advocate of the Agent was busy in some cases in Ahmedabad and he could not attend the proceedings. Therefore, an adjournment was requested. The matter was, then, adjourned to 26th/27th March, 2008. But the allegation is that no notice of this hearing was given to the agent. Thus, the inquiry concluded in gross violation of principles of natural justice.

The Tribunal found that these facts are uncontroverted and from the records it is revealed that on 19-3-2008 there was a hearing held and in the absence of the agent. Statements of some persons were recorded. They were asked to appear again. Further the agent was notified and informed that a personal hearing would be held later but on that date the persons whose statements were recorded could not attend and, therefore, they were not made available for cross examination. The Tribunal concluded that whether the notices of further hearing were given to those persons or not, has not been substantiated from the record.

After having heard Mr. Jetly, learned Counsel appearing for the Revenue and Mr. Shetty, learned Counsel appearing for the respondent at some length, we find a clear inconsistency in the order of the Tribunal. The fundamental error that the Tribunal has committed is that it did not note the difference between the charge-sheeted agent being not given an intimation or notice of the adjourned date of hearing and if that is the case, one can understand the conclusion that the inquiry was vitiated and, therefore, the order of revocation of the licence should be set aside. However, it is another thing to conclude that there was a notice of hearing but the agent or its representative could not remain present and the request for postponement was not accepted. The inquiry officer then proceeded to record statements of certain persons in support of the charges against the agent with the specific understanding given to the agent or his representative that those persons whose statements have been recorded would be made available at the further inquiry or copies of this statements would be handed over so that the charge-sheeted agent could adopt appropriate course in law. In the second eventuality the Law does not permit the inquiry itself to be set at naught and the revocation set aside following which the licence should be restored. In all such matters the breach of principles of natural justice or violation thereof by itself and without anything more, is not fatal. The Law is very clear inasmuch as the Court must conclude as to which principle of natural justice has been violated, whether this principle is so fundamental and basic going to the root of the case and its violation must vitiate the entire proceedings. The inquiry being held without any notice of hearing and concluded in the absence of charge-sheeted agent or employee, could be a case where inquiry proceedings can be held to be vitiated. However, during the course of inquiry and at various stages if there is breach of principles of natural justice alleged and held to be proved, it is open to the Court not to vitiate or nullify the whole inquiry but calling upon the aggrieved person to produce proof and establish prejudice caused to him. If that is proved, then, depending upon other circumstances the inquiry must be allowed to proceed with by correcting and rectifying the breach. The Inquiry can then proceed from the stage at which the breach caused is removed further.

If any judgment is required for these principles, we can usefully refer to the judgment of the Hon''ble Supreme Court in the case of Canara Bank and Others Vs. Shri Debasis Das and Others, ". The Hon''ble Supreme Court has laid down the following principles:-

"10. It is to be further noted that in the appeal before the Appellate Authority findings of the Inquiry Officer were challenged and, therefore, the question of any prejudice does not arise. Since employee had the opportunity to meet the stand of the Bank, it was to his advantage, and opportunity for personal hearing was also granted, though Regulation 6(18) does not even speak to grant such an opportunity. Keeping in view what was observed in B. Karunakara''s case (supra) there was no question of violation of principles of natural justice.

Natural justice is another name for commonsense justice. Rules of natural justice are not codified canons. But they are principles ingrained into the conscience of man. Natural justice is the administration of justice in a commonsense liberal way. Justice is based substantially on natural ideals and human values. The administration of justice is to be freed from the narrow and restricted considerations which are usually associated with a formulated law involving linguistic technicalities and grammatical niceties. It is the substance of justice which has to determine its form.

The expressions "natural justice" and "legal justice" do not present a watertight classification. It is the substance of justice which is to be secured by both, and whenever legal justice fails to achieve this solemn purpose, natural justice is called in aid of legal justice. Natural justice relieves legal justice from unnecessary technicality, grammatical pedantry or logical prevarication. It supplies the omissions of a formulated law. As Lord Buckmaster said, no form or procedure should ever be permitted to exclude the presentation of a litigants'' defence.

The adherence to principles of natural justice as recognized by all civilized States is of supreme importance when a quasi-judicial body embarks on determining disputes between the parties, or any administrative action involving civil consequences is in issue. These principles are well settled. The first and foremost principle is what is commonly known as audi alteram partem rule. It says that no one should be condemned unheard. Notice is the first limb of this principle. It must be precise and unambiguous. It should appraise the party determinatively the case he has to meet. Time given for the purpose should be adequate so as to enable him to make his representation. In the absence of a notice of the kind and such reasonable opportunity, the order passed becomes wholly vitiated. Thus, it is but essential that a party should be put on notice of the case before any adverse order is passed against him. This is one of the most important principles of natural justice. It is after all an approved rule of fair play. The concept has gained significance and shades with time. When the historic document was made at Runnymede in 1215, the first statutory recognition of this principle found its way into the "Magna Carta". The classic exposition of Sir Edward Coke of natural justice requires to "vocate interrogate and adjudicate". In the celebrated case of Cooper v. Wandsworth Board of Works (1963 (143) ER 414), the principle was thus stated:

"Even God did not pass a sentence upon Adam, before he was called upon to make his defence. "Adam" says God, "where art thou has thou not eaten of the tree whereof I commanded thee that though should not eat".

Since then the principle has been chiseled, honed and refined, enriching its content. Judicial treatment has added light and luminosity to the concept, like polishing of a diamond.

Principles of natural justice are those rules which have been laid down by the Courts as being the minimum protection of the rights of the individual against the arbitrary procedure that may be adopted by a judicial, quasi-judicial and administrative authority while making an order affecting those rights. These rules are intended to prevent such authority from doing injustice.

Concept of natural justice has undergone a great deal of change in recent years. Rules of natural justice are not rules embodied always expressly in a statute or in rules framed thereunder. They may be implied from the nature of the duty to be performed under a statute. What particular rule of natural justice should be implied and what its context should be in a given case must depend to a great extent on the fact and circumstances of that case, the framework of the statute under which the enquiry is held. The old distinction between a judicial act and an administrative act has withered away. Even an administrative order which involves civil consequences must be consistent with the rules of natural justice. Expression ''civil consequences'' encompasses infraction of not merely property or personal rights but of civil liberties, material deprivations, and non-pecuniary damages. In its wide umbrella comes everything that affects a citizen in his civil life.

How then have the principles of natural justice been interpreted in the Courts and within what limits are they to be confined? Over the years by a process of judicial interpretation two rules have been evolved as representing the principles of natural justice in judicial process, including therein quasi-judicial and administrative process. They constitute the basic elements of a fair hearing, having their roots in the innate sense of man for fair-play and justice which is not the preserve of any particular race or country but is shared in common by all men. The first rule is ''nemo judex in causa sua'' or ''nemo debet esse judex in propria causa sua'' as stated in (1605) 12 Co. Rep. 114 that is, ''no man shall be a judge in his own cause''. Coke used the form ''aliquis non debet esse judex in propria causa quia non potest esse judex at pars'' (Co. Lift. 1418), that is, ''no man ought to be a judge in his own case, because he cannot act as Judge and at the same time be a party''. The form ''nemo potest esse simul actor et judex'', that is, ''no one can be at once suitor and judge'' is also at times used. The second rule is ''audi alteram partem'', that is, ''hear the other side''. At times and particularly in continental countries, the form ''audiatur et altera pars'' is used, meaning very much the same thing. A corollary has been deduced from the above two rules and particularly the audi alteram partem rule, namely ''qui aliquid statuerit parte in-audita alteram actquam licet dixerit, haud acquum facerit'' that is, ''he who shall decide anything without the other side having been heard, although he may have said what is right, will not have been what is right'' [See Bosewell''s case (1605) 6 Co. Rep. 48b, 52a] or in other words, as it is now expressed, ''justice should not only be done but should manifestly be seen to be done''. Whenever an order is struck down as invalid being in violation of principles of natural justice, there is no final decision of the case and fresh proceedings are left upon. All that is done is to vacate the order assailed by virtue of its inherent defect, but the proceedings are not terminated.

Additionally there was no material placed by the employee to show as to how he has been prejudiced. Though in all cases the post-decisional hearing cannot be a substitute for pre-decisional hearing, in the case at hand the position is different. The position was illuminatingly stated by this Court in Managing Director, ECIL, Hyderabad and Ors. v. B. Karunakara and Ors. [1993 (4) SCC ''"H at para 31] which reads as follows:

"Hence, in all cases where the enquiry officer''s report is not furnished to the delinquent employee in the disciplinary proceedings, the Courts and Tribunals should cause the copy of the report to be furnished to the aggrieved employee if he has not already secured it before coming to the Court/Tribunal and give the employee an opportunity to show how his or her case was prejudiced because of the non-supply of the report. If after hearing the parties, the Court/Tribunal comes to the conclusion that the non-supply of the report would have made no difference to the ultimate findings and the punishment given, the Court/Tribunal should not interfere with the order of punishment. The Court/Tribunal should not mechanically set aside the order of punishment on the ground that the report was not furnished as is regrettably being done at present. The courts should avoid resorting to short cuts. Since it is the Courts/Tribunals which will apply their judicial mind to the question and give their reasons for setting aside or not setting aside the order of punishment, (and not any internal appellate or revisional authority), there would be neither a breach of the principles of natural justice nor a denial of the reasonable opportunity. It is only if the Court/Tribunal finds that the furnishing of the report would have made a difference to the result in the case that it should set aside the order of punishment. Where after following the above procedure, the Court/Tribunal sets aside the order of punishment, the proper relief that should be granted is to direct reinstatement of the employee with liberty to the authority/management to proceed with the inquiry, by placing the employee under suspension and continuing the inquiry from the state of furnishing him with the report. The question whether the employee would be entitled to the back-wages and other benefits from the date of his dismissal to the date of his reinstatement if ultimately ordered, should invariably be left to be decided by the authority concerned according to law, after the culmination of the proceedings and depending on the final outcome. If the employee succeeds in the fresh inquiry and is directed to be reinstated, the authority should be at liberty to decide according to law how it will treat the period from the date of dismissal till the reinstatement and to what benefits, if any and the extent of the benefits, he will be entitled. The reinstatement made as a result of the setting aside of the inquiry for failure to furnish the report, should be treated as a reinstatement for the purpose of holding the fresh inquiry from the stage of furnishing the report and no more, where such fresh inquiry is held. That will also be the correct position in law."

A Division Bench of this Court in the case of " Patel Engineering Ltd. Vs. Union of India, " followed the above principles and held as under: -

"15. In these circumstances, we are unable to accept the argument of Mr. Kantawala that any prejudice has been caused to the assessee by not permitting the panel members to be cross examined. The Tribunal did not commit any error in holding that right to defend the proceedings which are inherent in such adjudication are in no way prejudiced, leave alone the conclusion of the department. The assessee could have in the teeth of this material and which was placed by it before the department was in a position to defend itself effectively. It had in its possession several documents including from the suppliers abroad. It is in these circumstances and where several opportunities were given to the assessee/appellant to make submissions with regard to the findings of the report of the expert panel that refusal to permit cross-examination of some of the panel members was justified.

We do not see any violation of the principles of natural justice. We do not see that the assessee was prejudiced by refusal of the authorities to permit cross-examination of other panel members. In the light of the admitted factual position and finding that imported cranes were not within the permissible time limit but were more than 10 years old that the benefit of the license and of the notification was rightly denied.

We have not been addressed anything on the merits of the matter, save and except urging that the orders under challenge are vitiated for noncompliance with the principles of natural justice.

Prior to this decision in the case of Aligarh Muslim University and Others Vs. Mansoor Ali Khan, held as under:

As pointed out recently in M.C. Mehta Vs. Union of India (UOI) and Others, there can be certain situations in which an order passed in violation of natural justice need not be set aside under Article 226 of the Constitution of India. For example where no prejudice is caused to the person concerned, interference under Article 226 is not necessary. Similarly, if the quashing of the order which is in breach of natural justice is likely to result in revival of another order which is in itself illegal as in Godde Venkateswara Rao Vs. Government of Andhra Pradesh and Others, it is not necessary to quash the order merely because of violation of principles of natural justice.

In M.C. Mehta Vs. Union of India (UOI) and Others, it was pointed out that at one time, it was held in Ridge v. Baldwin [ 1964 AC 40 : (1963) 2 All ER 66 (HL)] that breach of principles of natural justice was in itself treated as prejudice and that no other "de facto" prejudice needed to be proved. But, since then the rigour of the rule has been relaxed not only in England but also in our country. In S.L. Kapoor Vs. Jagmohan and Others, Chinnappa Reddy, J. followed Ridge v. Baldwin [ 1964 AC 40 : (1963) 2 All ER 66 (HL)] and set aside the order of supersession of the New Delhi Metropolitan Committee rejecting the argument that there was no prejudice though notice was not given. The proceedings were quashed on the ground of violation of principles of natural justice. But even in that case certain exceptions were laid down to which we shall presently refer.

S.L. Kapoor Vs. Jagmohan and Others, laid down two exceptions (at SCC p. 395) namely, if upon admitted or indisputable facts only one conclusion was possible, then in such a case, the principle that breach of natural justice was in itself prejudice, would not apply. In other words if no other conclusion was possible on admitted or indisputable facts, it is not necessary to quash the order which was passed in violation of natural justice. Of course, this being an exception, great care must be taken in applying this exception.

The principle that in addition to breach of natural justice, prejudice must also be proved has been developed in several cases. In K.L. Tripathi Vs. State Bank of India and Others, Sabyasachi Mukharji, J. (as he then was) also laid down the principle that not mere violation of natural justice but de facto prejudice (other than non-issue of notice) had to be proved. It was observed, quoting Wade''s Administrative Law (5th Edn., pp. 47275), as follows: (SCC p. 58, para 31)

"[I]t is not possible to lay down rigid rules as to when the principles of natural justice are to apply, nor as to their scope and extent.... There must also have been some real prejudice to the complainant; there is no such thing as a merely technical infringement of natural justice. The requirements of natural justice must depend on the facts and circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject matter to be dealt with, and so forth."

Since then, this Court has consistently applied the principle of prejudice in several cases. The above ruling and various other rulings taking the same view have been exhaustively referred to in State Bank of Patiala and others Vs. S.K. Sharma, . In that case, the principle of "prejudice" has been further elaborated. The same principle has been reiterated again in Rajendra Singh Vs. State of Madhya Pradesh and others,

Thus, the consistent view is that may be and only in case of want of Notice to the affected party in all other cases it is not enough to allege breach of principles of natural justice but also demonstrate that prejudice is caused by such breach. This is for the simple reason that any departure or every breach does not necessarily result in miscarriage of justice or gross failure of justice. Further, the principles of natural justice are not a strait-jacket formula. Which principles of natural justice or which facet of the same is applicable, depends upon the nature of the lis, the statute under which an adjudication is undertaken and several other factors. This has been now firmly established in the decision of Bar Council of India Vs. High Court of Kerala, . In that case, in the SCC report, this is what is held:

"49. In N.K. Prasada Vs. Government of India and Others, this Court observed: (SCC p. 308, paras 24, 25)

"24. The principles of natural justice, it is well settled, cannot be put into a straitjacket formula. Its application will depend upon the facts and circumstances of each case. It is also well settled that if a party after having proper notice chose not to appear, he at a later stage cannot be permitted to say that he had not been given a fair opportunity of hearing. The question had been considered by a Bench of this Court in Sohan Lal Gupta (Dead) thr. L.Rs. and Others Vs. Smt. Asha Devi Gupta and Others, of which two of us (V.N. Khare, C.J. and Sinha, J.) are parties wherein upon noticing a large number of decisions it was held: (SCC p. 506, para 29)

''29. The principles of natural justice, it is trite, cannot be put in a straitjacket formula. In a given case the party should not only be required to show that he did not have a proper notice resulting in violation of principles of natural justice but also to show that he was seriously prejudiced thereby.''

The principles of natural justice, it is well settled, must not be stretched too far."

(See also Mardia Chemicals Ltd. Vs. Union of India (UOI) and Others Etc. Etc., and Canara Bank and Others Vs. Shri Debasis Das and Others, .)

In Union of India and Another Vs. Tulsiram Patel and Others, whereupon reliance has been placed by Mr. Reddy, this Court held: (SCC p. 477, para 97)

"97. Though the two rules of natural justice, namely, nemo judex in causa sua and audi alteram partem, have now a definite meaning and connotation in law and their content and implications are well understood and firmly established, they are nonetheless not statutory rules. Each of these rules yields to and changes with the exigencies of different situations. They do not apply in the same manner to situations which are not alike. These rules are not cast in a rigid mould nor can they be put in a legal straitjacket. They are not immutable but flexible. These rules can be adapted and modified by statutes and statutory rules and also by the constitution of the Tribunal which has to decide a particular matter and the rules by which such Tribunal is governed."

The Hon''ble Supreme Court followed and applied this rule in the case of Ajit Kumar Nag Vs. General Manager (P.J.), Indian Oil Corporation Ltd., Haldia and Others, .

Therefore, we are of the opinion that it will not be correct to hold that irrespective of the facts and circumstances and in all inquiries, the right of cross examination can be asserted. Further, as held above which rule or principle of natural justice must be applied and followed depends upon several factors and as enumerated above. Even if there is denial of the request to cross examine the witnesses in a inquiry, without anything more, by such denial alone, it will not be enough to conclude that principles of natural justice have been violated. Therefore, the judgments relied upon by Shri Kantawala must be seen in the factual backdrop and peculiar circumstances of the assessee''s case before this Court."

We had specifically put to Mr. Shetty, learned Counsel appearing on behalf of the respondent, during the course of arguments that if the respondent-agent admits the violation and breach of the regulations based on which the licence is issued, then, being out of business and from 15-10-2009 till date instead of inquiry being held de novo or further from such stage it was held to be vitiated, the permanent revocation can be set aside, but by maintaining the same for specific period or restricting it to the period already undergone namely from 15-10-2009 till today. Mr. Shetty has no clear instructions in that regard. Hence, we do not adopt this course, else the Court would be accused of extending misplaced sympathy and which is likely to be misused in future cases by others.

In these circumstances the Tribunal was justified in finding fault with the inquiry but it could not have allowed the appeal of the original appellant in its entirety. The Tribunal''s conclusion that the final order of revocation cannot have any existence in the eyes of law because the inquiry was held in breach of principles of natural justice without any proof of prejudice being caused to the respondent, cannot be sustained. The non-observance of the principles of natural justice in this case would not mean the whole inquiry is wiped out or the inquiry cannot be held from the stage at which the breach is committed and after rectifying it. That wrong is capable of being remedied. After all the adverse material are disclosed to the Agent and the persons whose version is proposed to be relied upon are made available for questioning by the Appellant, the inquiry can proceed and be concluded. That would be a fair course to adopt so as to protect both sides. Since Mr. Jetty agrees that the Inquiry Officer will allow all the opportunities in accordance with the Regulations and principles of natural justice that we direct the Inquiry Officer to hand over copies of the statements of the persons recorded on 19-3-2008 and if requested by the Agent-respondent, make those persons available for cross examination by the agent. The Inquiry officer shall proceed from that stage and thereafter, the Inquiry Officer to endeavour and conclude it as expeditiously as possible and within a period of three months from the date notified by him for the agent and the persons to remain present. We clarify that till the inquiry is concluded and which must be concluded within the time stipulated above, the order of suspension of licence stands, but without prejudice to the rights and contentions of both sides. After the Inquiry Officer submits a report, it would be open for both sides to take such steps as are permissible in law. We clarify that we have not expressed any opinion on the rival contentions as far as charges and their merits are concerned, each of them are kept open.