* THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.26968 OF 2010 % 30.12.2010 # Flemingo (DFS) Private Limited ...Petitioner VERSUS $ The Commissioner of Customs, Custom House, Port Area, Visakhapatnam – 530 035. ...Respondent < GIST: > HEAD NOTE: !Counsel for Petitioner: Sri C.R.Sridharan ^Counsel for Respondent: Sri V.Gopala Krishna Gokhale, Standing Counsel for Customs & Excise ? Cases referred 1. AIR 1966 SC 1089 2. AIR 1969 SC 78 3. AIR 1999 SC 22 = (1998) 8 SCC 1 4. AIR 1961 SC 609 5. AIR 1957 AP 368 6. (1971) 3 SCC 20 = AIR 1970 SC 645 7. (1999) 9 SCC 17 8. AIR 1954 SC 207 9. AIR 1977SC 898 10. AIR 1961 SC 1615 11. (2010) 4 SCC 772 12. (2010) 8 SCC 110 13. (1985) AC 835 : (1985) 2 All E.R. 327 : (1985) STC 282 14. United States v Erika, Inc., (1982) 456 US 201 : 1972 L.Ed.2d 12 (1982) 15. (1983) 459 US 1205 : 75 L.Ed.2d 438 (1983) 16. AIR 1958 SC 86 17. AIR 1959 SC 308 18. (1978) 1 SCC 240 19. (1981) 1 SCC 80 20. (1989) 2 SCC 505 21. 1991 (56) ELT 15 (Guj) 22. 1999 (95) Comp Cas 537 23. (2006) 7 SCC 800 24. (2006) 8 SCC 103 25. (2007) 9 SCC 593 26. (2007) 10 SCC 88 27. (2010) 1 SCC 126 28. (1985) 3 SCC 398 : AIR 1985 SC 1416 29. (1985) 4 SCC 252 : AIR 1986 SC 555 30. AIR 2005 Madras 241 31. (1985) 1 All E.R. 842 : (1985) STC 144 32. (1986) STC 65 33. AIR 1966 SC 671 34. AIR 1971 SC 1093 35. (1988) 4 SCC 1 THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.26968 OF 2010 30.12.2010 Between: Flemingo (DFS) Private Limited …. Petitioner AND The Commissioner of Customs, Custom House, Port Area, Visakhapatnam. … Respondent THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.26968 OF 2010 ORDER: (per Hon’ble Sri Justice V.V.S.Rao) The petitioner is in the business of running duty free shops ‘Flemingo’ at airports and seaports. This writ petition is filed assailing the Order-in-Original (O-in-O) No.03/2010, dated 30.09.2010, (dispatched on 07.10.2010) of the respondent. By the said impugned O-in-O, the respondent in exercise of powers under various provisions of the Customs Act, 1962 ordered confiscation of sale proceeds of duty free goods diverted to local markets, imposed penalty and ordered cancellation of Private Bonded Warehouse licence (the licence, for brevity). The petitioner had obtained licence dated 10.09.2005 under Section 58(1) of the Customs Act issued by the Assistant Commissioner of Customs (Bonds), Visakhapatnam. The officers of revenue intelligence of customs house gathered information with regard to misuse of licence and improper/ unauthorized removal and sale of goods in the local market in the guise of sales to crew members of foreign going vessels. On 22.01.2008, the merchant vessel MV.Hope Star was searched and in it was found non-duty paid fifty cartons of Cigarettes and fifteen cases of beer, branded as ship stores on the master’s request. They were removed by the petitioner from the bonded warehouse. The Inspecting Officials recorded the statements of the local manager and, on further investigation, they found that the petitioner had allegedly removed the non-duty paid goods from the bonded warehouse without following prescribed procedures and in gross violation of the conditions of licence besides manipulating the documents by forging wrong/additional entries in the duplicate and triplicate copies of the sale vouchers so as to account for more quantities than what was actually shown as sold to the crew members of the vessel as per original copies. Therefore, summons were issued under Section 108 of the Customs Act to the sales executive, location manager and seaport operational manager. The depositions of the bond officers were also obtained. From all these the respondent, having come to an opinion that the petitioner had removed non-duty paid bonded goods without keeping account and had resorted to re-export, issued a show cause notice being F.No.CO1/2008-RI & I, dated 21.07.2008 to the petitioner and their location manager, operational manager and sales executive to show cause as to why customs duty on the non-duty paid bonded goods should not be demanded under Section 72(1) of the Customs Act, as to why interest should not be levied, as to why the non-duty paid bonded goods should not be confiscated and as to why penalty should not be imposed besides cancelling the licence. The petitioner sent reply on 18.10.2008 denying various allegations. They also sought personal hearing to the adjudication by the respondent. Another show cause notice dated 19.01.2009 was issued, this time invoking section 28(1) of the Act. The petitioner replied again on 08.10.2009 duly requesting for personal hearing. Personal hearing was given on 19.03.2010. But the petitioner requested for adjournment. It was posted to 12.04.2010. Subsequently, at their request, it was advanced to 07.04.2010 and senior counsel for the petitioner appeared and argued before Sri M.Ponnusamy, IRS, the then Commissioner of Customs. On 19.05.2010, the Commissioner who heard the case on 07.04.2010 was transferred. Sri P.V.R.Reddy, IRS took charge. The petitioner alleges that they received notice dated 09.07.2010 on 12.07.2010, informing about another round of personal hearing, on 06.08.2010. The hearing was adjourned to 16.09.2010 on request of the petitioner. On that day, the location manager, the sales executive or the petitioner’s counsel did not appear. The adjudicating Commissioner considered the matter and passed O-in-O impugned in the writ petition. The petitioner contends that, after receiving notice dated 09.07.2010 granting personal hearing, they had requested to change the time for personal hearing from 3.00 p.m., to 11.00 a.m., on 06.08.2010, that in response thereto by communication, dated 21.07.2010, time of hearing was changed, and that on 02.08.2010 they sent a communication to the Assistant Commissioner of Customs seeking adjournment to any date after 15.09.2010 (except 20th September) on the ground that their senior counsel was advised bed rest as he was not well. The petitioner also contends that, without considering the same, the Commissioner Sri P.V.R.Reddy, IRS, passed the impugned order though the matter was heard by Sri Ponnusamy. This, according to the petitioner, is illegal and violative of principles of natural justice. The Deputy Commissioner of Customs in the office of the respondent filed counter affidavit denying petition averments. It is stated that the adjudicating authority had provided adequate opportunity under Section 122A of the Customs Act, and that the petitioner resorted to delays in the proceedings as a result of which, the respondent had no option but to adjudicate the case as it is pending since long. It is further averred that the adjudicating authority had given opportunity to the petitioner on two occasions, which were not utilized by him in a proper manner. Therefore, the written reply to the show cause notice as well as written arguments were considered and the impugned order was passed. There was sufficient material before the adjudicating authority to warrant cancellation of the licence under Section 58(2)(b) of the Customs Act. The writ petition is also opposed referring to Section 129A of the Customs Act which provides for an appeal to the appellate Tribunal. The counsel for petitioner submits that the impugned O-in-O is violative of principles of natural justice. He would urge that, under Section 122A of the Customs Act, the respondent is bound to grant three adjournments during the adjudication proceedings. In this case, the same is violated. He would urge that cancellation of the licence contravenes Section 58(2), in that reasonable opportunity was denied to petitioner. His submission is that though the Commissioner Sri Ponnusamy heard the matter, the order was passed by the Commissioner Sri P.V.R.Reddy, which itself is illegal. These contentions are refuted by the Senior Standing Counsel for Central Excise and Customs. The question of maintainability of the writ petition, having regard to Section 129A of the Customs Act and the question of violative of principles of natural justice, are interconnected. Therefore, both the issues need to be considered together. Articles 226 and 227 of Constitution confer power of judicial review on the High Courts. The power includes issuing writs in the nature of certiorari, habeas corpus, mandamus, prohibition and quo warranto, as well as directions and orders. These are writs, which were issued at the discretion of the King’s Courts in England to check excesses in the exercise of power by servants of the kingdom. The issue of writs; nay the exercise of judicial review power is subject to certain limitations, some imposed by the constitution or the statutes and others certain self-imposed limitations. One of these is the existence of alternative remedies. When the power conferred by the Constitution under Articles 226 and 227 of Constitution is exhaustive and wide enough, what is the justification for denying constitutional remedy? Clive Lewis ‘Judicial Remedies in Public Law’ Sweet & Maxwell 2004, at pp.410, explains “the rationale for exhaustion of alternative remedies’ as follows. A two-fold justification has been put forward. First, that where Parliament has provided for a statutory appeals procedure, it is not for the courts to usurp the functions of the appellate body. The principle applies equally to bodies not created by statute which have their own appellate system. Secondly, the public interest dictates that judicial review should be exercised speedily, and to that end it is necessary to limit the number of cases in which judicial review is used. More generally, the courts now encourage parties to resolve disputes without resorting to the expense of litigation. To these reasons can be added the additional expertise that the appellate bodies possess. In tax cases, for example, the appellate body, the General or Special Commissioners, have wide experience of the complex and detailed tax legislation. In employment cases, for example, the system of employment and Employment Appeal tribunals may be better equipped to deal with industrial issues than the High Court. In the financial services field, specialist procedures and a specialist tribunal have been established to deal with certain matters. Similarly, where there is a further appeal to the courts, this may be to a division of the High Court particularly familiar with the area in question, as in tax cases, where the appeal is heard in the Chancery Division not the Queen’s Bench Division. (emphasis supplied) The decisions of Supreme Court of India and other High Courts are galore in this regard. The principle is well established that no writ would ordinarily lie if there is an effective and efficacious alternative remedy provided by the statute itself. This rule, however, has mainly four exceptions. These are (i) When Constitutional validity of the statute is challenged (K.S.Venkataraman and Company (P) Limited v State of Madras[1] and Dhulabhai v State of Madhya Pradesh[2]); (ii) Where the impugned action is in violation of fundamental right especially under Articles 14 and 19(1)(a) or (g) of Constitution; (iii) Where the impugned order/action is in breach of natural justice; and (iv) When challenge is to the action which is patently and ex facie without jurisdiction. In Whirlpool Corporation v Registrar of Trade Marks, Mumbai[3], the Supreme Court clarified this position. If a matter requires technical knowledge, which is available in the statutory appellate forum, ordinarily, the High Court would not be inclined to exercise discretion under Article 226 of Constitution of India. These principles are well settled. Further, in tax matters, ordinarily Courts have declined to exercise writ jurisdiction. In C.A.Abraham v I.T.Officer[4], the appellant along with another was partner in M/s.M.P.Thomas and Company engaged in food grains business. The firm submitted Returns to Income Tax Officer (ITO). On the ground that the firm was carrying transactions in fictitious names, and had suppressed income for AY 1948-1949, show cause notice was issued for imposing penalty under Section 28 of Income Tax Act, 1922. Explanation was submitted. ITO passed orders imposing penalty for AYs 1950-1951 and 1951-1952. Appeals were dismissed by the appellate authority. The same was assailed in Certiorari proceedings before the Kerala High Court. The Court rejected relying on a Judgment of the A.P.High Court in Mareddi Krishna Reddy v Income Tax Officer, Tenali[5]. In Appeal with Certificate of High Court, the Supreme Court considered two questions, namely, whether High Court could have entertained a writ petition ignoring alternative remedy provided by the Act and whether the provisions imposing penalty can be interpreted by pointing out deficiencies. On the first question, it was held that, “assessee cannot abandon to resort to machinery provided under the Act and directly invoke remedy under Article 226 of Constitution of India”. The observations are as follows (para 3). In our view, the petition filed by the appellant should not have been entertained. The Income Tax Act provides a complete machinery for assessment of tax and imposition of penalty and for obtaining relief in respect of any improper orders passed by the Income Tax authorities, and the appellant could not be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Tribunal. In Champalal Binani v The Commissioner of Income Tax, West Bengal[6] the Commissioner of Income Tax issued a notice to the appellant under Section 33-B of the Income Tax Act, 1922 to show cause as to why the orders of assessment for AYs 1953-1954 to 1960-1961 should not be revised. Copies of the notices were sent to the addresses disclosed in the IT Returns. On the date of hearing, none appeared for the assessee. The Commissioner set aside the orders and directed the ITO to make fresh assessment after enquiry and the investigation. Against the said order, the appellant moved the High Court of Calcutta by filing a writ petition. Holding that the notice under Section 33-B was not served on the assessee, the learned single Judge set aside the order of the Commissioner. The Division Bench reversed the order holding that notice was served. The Supreme Court dismissed the appeal and reiterated that when the Income Tax Act provides a complete and self- contained machinery for redressal of grievances, no party can be allowed to invoke the extraordinary remedy under Article 226 of Constitution of India. The relevant observations are as follows (para 5). We deem it necessary once more to emphasize that the Income Tax Act provides a complete and self-contained machinery for obtaining relief against improper action taken by the departmental authorities, and normally the party feeling himself aggrieved by such action cannot be permitted to refuse to have recourse to that machinery and to approach the High Court directly against the action. … A writ of certiorari is discretionary; it is not issued merely because it is lawful to do so. Where the party feeling aggrieved by an order of an Authority under the Income Tax Act has an adequate alternative remedy which he may resort to against the improper action of the authority and he does not avail himself of that remedy the High Court will require a strong case to be made out for entertaining a petition for a writ. Where the aggrieved party has an alternative remedy the High Court would be slow to entertain a petition challenging an order of a taxing authority, which is ex facie with jurisdiction. A petition for a writ of certiorari may lie to the High Court, where the order is on the face of it erroneous or raises question of jurisdiction or of infringement of fundamental rights of the petitioner. (emphasis supplied) Chanan Singh and Sons v Collector Central Excise[7] was a case where a writ petition was filed before the P&H High Court challenging the order of the CEGAT (now CESTAT) allowing the department’s appeal. The High Court dismissed the writ petition holding that there is a statutory alternative remedy available. Aggrieved by the same, appeal was carried to the Supreme Court. Confirming the order of the High Court, the Supreme Court observed (para 2) as under. The appellant challenged before the High Court an order of the Tribunal allowing the appeal of the Revenue. The High Court simply said that the appellant had a statutory alternative remedy and the appellant had to avail that statutory remedy instead of filing writ petition. Accordingly, the High Court dismissed the writ petition. The appellant instead of challenging the order of the Tribunal by availing the statutory alternative remedy, has filed this appeal by special leave challenging the order of the High Court. We are of the view that the High Court was right in dismissing the writ petition directing the appellant to avail the statutory alternative remedy. In K.S.Rashid & Son v ITI Commission[8], a Constitution Bench of the Supreme Court held as follows. So far as the second point is concerned, the High court relies upon the ordinary rule of construction that where the legislature has passed a new statute giving a new remedy, that remedy is the only one which could be pursued. It is said that the Taxation on Income (Investigation Commission) Act, 1947, itself provides a remedy against any wrong or' illegal order of the Investigating Commission and under section 8 (5) of the Act, the aggrieved party can apply to the appropriate Commissioner of Income-tax to refer to the High court any question of law arising out of such order and thereupon the provisions of S. 66 and 66-A of the Indian Income-tax Act shall apply with this modification that the reference shall be heard by a bench of not less than three Judges of the High court. We think that it is not necessary for us to express any final opinion in this case as to whether section 8 (5) of the Act is to be regarded as providing the only remedy available to the aggrieved party and that it excludes altogether the remedy provided for under article 226 of the Constitution. For purposes of this case it is enough to state that the remedy provided for in article 226 of the Constitution is a discretionary remedy and the High court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. (emphasis supplied) In Jai Singh v Union of India[9], the Supreme Court observed that, when there are serious questions of disputed facts, this Court need not exercise jurisdiction under Article 226 of the Constitution of India. The following passage from the said judgment needs excerption. The High court dismissed the writ petition on the ground that it involved determination of disputed questions of fact. It was also observed that the High court should not in exercise of its extraordinary jurisdiction grant relief to the appellant when he had an alternative remedy. After hearing Mr. Sobhagmal Jain on behalf of the appellant, we see no cogent ground to take a view different from that taken by the High court. There cannot, in our opinion, be any doubt on the point that the extent of purity of the gypsum won by the appellant is a question of fact. It has also been brought to our notice that after the dismissal of the writ petition by the High court, the appellant has filed a suit, in which he has agitated the same question which is the subject-matter of the writ petition. In our opinion, the appellant cannot pursue two parallel remedies in respect of the same matter at the same time. In Carl Still G.M.B.H. v State of Bihar[10], another Constitution Bench considered the question whether this Court can exercise jurisdiction under Article 226 of the Constitution even though authorities are constituted by special enactments to decide disputes. In paragraph 11 of the said judgment, it was observed thus: It is next contended for the respondents that, whatever the merits of the contentions based on the construction of the contract, the proper forum to agitate them would be the authorities constituted under the Act to hear and decide disputes relating to assessment of tax, that it was open to the appellants to satisfy those authorities that there have been no sales such as are liable to be taxed, that indeed they were bound to pursue the remedies under the Act before they could invoke the jurisdiction of the court under Art. 226 and that the learned Judges of the High court were, therefore, right in declining to entertain the present petitions. It is true that if a statute sets up a tribunal and confides to it jurisdiction over certain matters and if a proceeding is properly taken before it in respect of such matters, the High court will not, in the exercise of its extraordinary jurisdiction under Art. 226, issue a prerogative writ so as to remove the proceedings out of the hands of the tribunal or interfere with their course before it. But it is equally well settled that, when proceedings are taken before a tribunal under a provision of law, which is ultra vires, it is open to a party aggrieved thereby to move the court under Art. 226 for issuing appropriate writs for quashing them on the ground that they are incompetent, without his being obliged to wait until those proceedings run their full course. In a recent judgment, in Raj Kumar Shivhare v Directorate of Enforcement[11], the Supreme Court observed as under (paras 30 and 31). The argument that writ jurisdiction of the High Court under Article 226 of the Constitution is a basic feature of the Constitution and cannot be ousted by parliamentary legislation is far too fundamental to be questioned especially after the judgment of the Constitution Bench of this Court in L.Chandra Kumar v Union of India ((1997) 3 SCC 261). However, that does not answer the question of maintainability of a writ petition which seeks to impugn an order declining dispensation of pre-deposit of penalty by the Appellate Tribunal. … When a statutory forum is created by law for redressal of grievance and that too in a fiscal statute, a writ petition should not be entertained ignoring the statutory dispensation. In this case the High Court is a statutory forum of appeal on a question of law. That should not be abdicated and given a go-by by a litigant for invoking the forum of judicial review of the High Court under writ jurisdiction. In United Bank of India v Satyawati Tondon[12], the Supreme Court again recalled the settled law observing thus: Unfortunately, the high Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must enhaust the remedies available under the relevant statute. (emphasis supplied) The position in English Courts is also well accepted. In R v IRC Ex parte Preston[13], Lord Scarman summed up the position in English Administrative Law, thus: My fourth proposition is that a remedy by way of judicial review is not to be made available where an alternative remedy exists. This is a proposition of great importance. Judicial review is a