IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.BALAKRISHNAN NAIR & THE HONOURABLE MR. JUSTICE C.T.RAVIKUMAR FRIDAY, THE 3RD JULY 2009 / 12TH ASHADHA 1931 OP.No. 13653 of 2002(A) ----------------------- PETITIONERS: --------------- 1. MALAYALA MANORAMA COMPANY LIMITED, MANORAMA BUILDINGS, POST BOX NO.26, KOTTAYAM-686 001 REPRESENTED BY ITS MANAGING DIRECTOR MR. MAMMEN MATHEW. 2. MR. JAYANT MAMMEN MATHEW, MANORAMA MANDIRAM, MANGANAM, KOTTAYAM-686 018. 3. MRS. GEETHA VARKEY GEORGE, KARIPURATHU, COLLECTORATE P.O., KOTTAYAM-686 002. BY ADV. SRI.M.PATHROSE MATTHAI, SENIOR ADVOCATE SRI.SAJI VARGHESE RESPONDENTS: --------------- 1. ASSISTANT COMMISSIONER OF CUSTOMS (IMPORTS) CUSTOM HOUSE, KOCHI-682 009. 2. UNION OF INDIA, REPRESENTED BY THE SECRETARY, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, NORTH BLOCK, NEW DELHI-1. ADV. SRI.JOHN VARGHESE, ASSISTANT SG FOR R1TO4 SRI.JOHN VARGHESE,SC,CEN.BOARD OF EXCIS FOR R1 TO 4 THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 03/07/2009 , THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: O.P.No.13653/2002 ORDER ON C.M.P.NO.22953/2002 IN O.P.No.13653/2002 DISMISSED & ORDER ON I.A.NO.13262/2004 IN O.P.No.13653/202 CLOSED SD/- K.BALAKRISHNAN NAIR, JUDGE. 3.7.2009 SD/- C.T.RAVIKUMAR, JUDGE. APPENDIX PETITIONER'S EXTS: EXT.P1: COPY OF NOTIFICATION NO.24(RE-96)92-97 DT.5.3.1997 ISSUED BY THE MINISTRY OF COMMERCE AND GUIDELINES. EXT.P2: COPY OF NOTICE DT.25.6.2000 ISSUED BY THE 1ST RESPONDENT TO THE 1ST PETITIONER. EXT.P3: COPY OF LETTER DT.10.7.2000 SENT BY THE 1ST PETITIONER TO THE 1ST RESPONDENT. EXT.P4: COPY OF LETTER DT.16.10.2001 SENT BY THE 1ST RESPONDENT TO THE 1ST PETITIONER. EXT.P5: COPY OF INDIAN STANDARD FOR METHOD OF SAMPLING AND TESTING FOR PAPER AND ALLIED PRODUCTS PART 1 (REVISED) ISSUED BY BUREAU OF INDIAN STANDARDS. EXT.P6: COPY OF INDIAN STANDARD ON NEWSPRINT SPECIFICATION (FIRST REVISION) ISSUED BY BUREAU OF INDIAN STANDARDS. EX.P7: COPY OF LETTER DT. FEBRUARY 8, 2002 ISSUED BY THE 1ST PETITIONER TO THE 1ST RESPONDENT FOR PERMISSION TO CROSS-EXAMINE CHEMICAL EXAMINER. EXT.P8: COPY OF WRITTTEN SUBMISSION DT.FEBRUARY 18, 2002 MADE BY THE 1ST PETITIONER AT THE TIME OF CROSS-EXAMINATION OF CHEMICAL EXAMINER. EXT.P9: COPY OF ORDER DT.28.3.2002 ISUED BY THE 1ST RESPONDENT REGARDING TEST BOND NO.111/99 AP(1) CUS. O.P.No.13653/2002 EXT.P10: COPY OF THE INDENT PLACED WITH THE AGENTS FOR THE NEWSPRINT DT.19.2.1999. EXT.P11: COPY OF THE LETTER DT.25.7.2006 ADDRESSED TP DORECTOR (REVENUE LABORATORIES), CENTRAL REVENUES CONTROL LABORATORY, NEW DELHI. EXT.P12: COPY OF THE LETTER DT.23.8.2006 ADDRESSED TP DORECTOR (REVENUE LABORATORIES), CENTRAL REVENUES CONTROL LABORATORY, NEW DELHI. EXT.P13: COPY OF REPLY DT.21.9.2006 TOGETHER WITH THE ANNEXURES GIVEN BY THE JOING DIRECTOR, CENTRAL REVENUES CONTROL LABORATORY. EXT.P14: COPY OF LETTER DT.25.7.2006 ADDRESSED TO THE COMMISSIONER OF CUSTOMS, COCHIN UNDER RIGHT TO INFORMATION ACT 2005 REQUESTING FOR INFORMATION REGARDING THE TEST OF THE NEWSPRINT. EXT.P15: COPY OF THE REPLY DT.6.9.2006 ISSUED BY THE COMMISSIONER OF CUSTOMS, COCHIN. EXT.P16: COPY OF THE INTERNATIONAL ORGANISATION FOR STANDARDISATION (ISO) OF THE WORLD CUSTOMS ORGANISATION. EXT.P17: COPY OF DIRETIVE FROM GOVERNMENT OF INDIA, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, CENTRAL BOARD OF EXCISE AND CUSTOMS DT.20.3.2007. //TRUE COPY// PA TO JUDGE K.BALAKRISHNAN NAIR & C.T.RAVIKUMAR, JJ. --------------------------------- O.P.No.13653 OF 2002 ---------------------------------- Dated, this the 3rd day of July, 2009 J U D G M E N T ~~~~~~~~~~~~ Balakrishnan Nair, J. The petitioners have approached this Court challenging Ext.P9 order of the Commissioner of Customs dated 28.3.2002, ordering that they are liable to pay an amount of Rs.32,22,220/- (Rupees thirty three lakhs twenty two thousand two hundred and twenty only) towards differential duty payable under the Customs Tariff Act and Central Excise Tariff Act. 2. The brief facts of the case are the following: The 1st petitioner Company imported newsprint from South Korea in May, 1999. Customs duty at the rate of 5.5.% was paid and the goods were cleared on executing a bond for payment of any balance amount found due. The Customs Officer concerned took samples of the newsprint imported for chemical analysis to find out whether the paper imported answers the definition of newsprint. On analysis, it was found that the paper imported contained wood fibres below 65% and O.P.No.13653/2002 2 therefore, the duty payable was at the rate of 67.3%. The 1st petitioner was served with Ext.P2 notice informing about the results of the Chemical Analysis. The 1st petitioner replied by Ext.P3 dated 10.7.2000 calling for the details of the test results. The Assistant Commissioner of Customs (Imports) furnished Ext.P4 reply dated 16.10.2001, giving the details and also enclosing the analysis report by the department's laboratory at New Delhi. Ext.P4 contained the working sheet concerning the assessment of differential duty also. After considering Exts.P7 and P8 objections filed by the 1st petitioner, the 1st respondent passed Ext.P9 order holding that the paper imported by the petitioners was not newsprint and therefore, they were liable to pay differential duty of Rs.33, 22,220/-. 3. In Exts.P7 and P8 representations, the 1st petitioner prayed for a chance to cross-examine the Customs Officer, who took the samples, and also the Chemist, who conducted the chemical analysis. But, the said request was considered and rejected by Ext.P9. Challenging Ext.P9, mainly, on the ground of violation of principles of natural justice, the Original Petition was filed. Under the provisions of the Act, the O.P.No.13653/2002 3 petitioners had a right of appeal to the Commissioner of appeals, then a further appeal to the Appellate Tribunal and thereafter, a further appeal to this Court on substantial question of law. The bypassing of those statutory remedies was justified by the petitioners taking the plea that the order of assessment was passed in violation of principles of natural justice, in as much as they were not given a chance to cross- examine the Officer, who took the samples, and the Chemist, who did the analysis. This Court entertained this Original Petition and granted stay of Ext.P9 on 30.5.2002 for one month. Later, on 28.6.2008, the stay was extended until further orders. When the matter came up for final hearing, the learned Single Judge felt that substantial questions arise for decision and therefore, referred the matter to the Division Bench. 4. We heard the learned senior counsel Sri. Pathros Matthai for the petitioners and Sri. John Varghese, learned counsel for the Revenue. Though the validity of the definition of 'Newsprint' was challenged in the writ petition, that point was not argued before us. The learned senior counsel Sri. Pathros Matthai took us through Exts.P7 and P8, wherein O.P.No.13653/2002 4 there was a specific request made to give a chance to cross- examine the Officers concerned. Learned senior counsel also took us through Ext.P9, wherein the said claim of the petitioners were dealt with. The learned senior counsel submitted that when they contested the procedure followed for taking samples and also the genuineness of the analysis made, it was obligatory for the 1st respondent to make the Officers concerned available for cross examination. The refusal to give such a chance, caused very serious prejudice to them. The duty will be shooting up from 5.5% to 67.3%, as a result of the decision of the 1st respondent. The learned counsel relied on various decisions of the High Courts and the Apex Court to support the claim of the writ petitioners for a chance to cross-examine the Officers concerned. Special reference was made in State of Kerala v. K.T.Shaduli [AIR 1977 SC 1627] and Swadeshi Polytex Ltd. v. Collector of Central Excise, Meerut [2000(122)E.L.T.641(SC). In K.T.Shaduli's case, the Apex Court held as follows: “5. The second part of the proviso lays down that where a return has been submitted, the assessee should be given a reasonable opportunity to prove the correctness or completeness of such return. This O.P.No.13653/2002 5 requirement obviously applies at the first stage of the enquiry before the Sales Tax Officer comes to the conclusion that the return submitted by the assessee is incorrect or incomplete so as to warrant the making of a best judgment assessment. The question is what is the content of this provision which imposes an obligation on the Sales Tax Officer to give and confers a corresponding right on the assessee to be afforded, a reasonable opportunity 'to prove the correctness or completeness of such return.' Now, obviously 'to prove' means to establish the correctness or completeness of the return by any mode permissible under law. The usual mode recognised by law for proving fact is by production of evidence and evidence includes oral evidence of witnesses. The opportunity to prove the correctness or completeness of the return would, therefore, necessarily carry with it the right to examine witnesses and that would include equally the right to cross-examine witnesses examined by the Sales Tax Officer. Here, in the present case, the return filed by the assessee appeared to the Sales Tax Officer to be incorrect or incomplete because certain sales appearing in the books of Hazi Usmankutty and other wholesale dealers were not shown in in the books of account of the assessee. The Sales Tax Officer relied on the evidence furnished by the entries in the books of account of Hazi Usmankutty and other wholesale dealers for the purpose of coming to the conclusion that the return filed by the assessee was incorrect or incomplete. Placed in these circumstances, the assessee O.P.No.13653/2002 6 could prove the correctness and completeness of his return only by showing that the entries in the books of account of Hazi Usmankutty and other wholesale dealers were false, bogus or manipulated and that the return submitted by the assessee should not be disbelieved on the basis of such entries, and this obviously, the assessee could not do, unless he was given an opportunity of cross-examining Hazi Usmankutty and other wholesale dealers with reference to their accounts. Since the evidentiary material produced from or produced by Hazi Usmankutty and other wholesale dealers was sought to be relied upon for showing that the return submitted by the assessee was incorrect and incomplete, the assessee was entitled to an opportunity to have Hazi Usmankutty and other wholesale dealers summoned as witnesses for cross- examination. It can hardly be disputed that cross-examination is one of the most efficacious methods of establishing the truth and exposing falsehood. Here, it was not disputed on behalf of the Revenue that the assessee in both cases applied to the Sales Tax Officer for summoning Hazi Usmankutty and other wholesale dealers for cross- examination, but his application was turned down by the Sales Tax Officer. This act of the Sales Tax Officer in refusing to summon Hazi Usmankutty and other wholesale dealers for cross-examination by the assessee clearly constituted infraction of the right conferred on the assessee by the second part of the proviso and that vitiated the orders of assessment made against the assessee.” (emphasis supplied) O.P.No.13653/2002 7 5. In support of the submission that the petitioners are entitled to approach this Court directly, when the order impugned has been passed in violation of principles of natural justice, reliance was placed in Whirlpool Corportion v. Registrar of Trade Marks [1998 (8) SCC 1]. In the said decision, the Apex Court held as follows: “15. Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in atleast three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged.” 6. Learned senior counsel further submitted that action taken in violation of principles of natural justice will make it arbitrary and therefore, violative of the fundamental right of the petitioners under Article 14 of the Constitution of India. O.P.No.13653/2002 8 7. The learned counsel for the respondent brought to our notice the hierarchy of the authorities available under the statute for the redressal of the grievance of the writ petitioners. The learned counsel pointed out that the Commissioner of appeals has power to hold further enquiry and if found necessary, to take further evidence also. Therefore, the main grievance canvassed by the petitioners could have been redressed by filing the statutory appeal itself. So, the learned counsel prayed that the Original Petition may be dismissed. 8. We considered the rival submissions made at the Bar and also the decisions cited before us. Since the Writ Petition was pending before this Court for the last seven years, we are inclined to hear the Writ Petition on merits. Chapter 48 of the Schedule of the Customs Tariff Act deals with paper and paperboard; articles of paper pulp, of paper or of paperboard. In the said Chapter, newsprint is defined as follows: “Newsprint means uncoated paper of a kind used for the printing of newspapers, of which not less than 65% by weight of the total fibre content consists of wood fibres obtained by a mechanical or chemi-mechanical process, unsized or very lightly sized, having a surface roughness Parker Print Surf (1 Mpa) on each side exceeding 2.5 micrometres (microns), weighing not less than 40g/m2 and not more than 65 g/m2.” O.P.No.13653/2002 9 9. In this case, on analysis it was found that the percentage of wood fibre content was below 65%. The petitioners would say that a large consignment of newsprint, packed in several containers, were imported in May, 1999. But, samples were taken from only one reel in one container. The sampling was not done in accordance with the procedure prescribed for the same. Having regard to the wood used, there may be change in the wood fibre content. So, the sampling from all the containers should have been taken to ascertain the correct wood fibre content. The petitioners also disputed, the method employed for arriving at the wood fibre content. For the above reasons, they wanted to cross-examine the Customs Officer, who took samples and the Chemist, who did the analysis. We notice that the analysis report is a document relied on against the petitioners. Therefore, if they request to make available the author of that report for their cross-examination, the assessing officer was bound to do that. Regarding the samplings, if the records are produced, it could be found out whether for sampling the proper procedure has been followed or not. It may not be necessary to examine the Officer, who took the samples. But, the chemical analysis report, which alone decided the fate of the O.P.No.13653/2002 10 case, is a vital document against the petitioners. Therefore, we feel that they should have been given a chance to cross- examine the Chemist, who did the analysis. For denying that opportunity, we feel that the impugned order is vitiated, especially, in view of the enormity of the prejudice caused to them. 10. In the result, Ext.P9 is quashed and the matter is remitted to the 1st respondent for fresh determination in accordance with law. The records relating to taking of the samples shall be made available to the petitioners for their perusal. If the Officer, who did the analysis, is not available, his successor-in office along with the records concerned shall be made available for the cross-examination of the petitioners. 11. If the petitioners invoked the appellate remedy, normally, they would have paid the amount levied. Because this Court entertained this Original Petition and granted unconditional stay for the last 7 years, the petitioners were saved from paying any amount. We take note of the maxim that 'act of Court shall prejudice none'. By the Act of this Court, the Revenue also cannot be prejudiced. So, in case O.P.No.13653/2002 11 after reconsideration, any amount is found due, the Revenue can demand the same with interest from the date, the amount under Ext.P9 became payable by the petitioners. Learned senior counsel for the petitioners pointed out that since Ext.P9 was a void order, it never had any legal effect and quashing the same obliterated it from day one. So, the direction to pay interest may not be justified, it was submitted. This case happened to be pending before this Court because of docket explosion. Going by the above maxim, Revenue cannot be asked to suffer. Because of the delay from the part of this Court, the petitioners were able to keep the money with them so long. So, the contention of the learned senior counsel concerning payment of interest cannot be accepted. The Original Petition is disposed of as above. (K.BALAKRISHNAN NAIR, JUDGE) (C.T.RAVIKUMAR, JUDGE) ps O.P.No.13653/2002 12 K.BALAKRISHNAN NAIR & C.T.RAVIKUMAR, JJ. =========================== O.P.NO.13653/2002 =========================== JUDGMENT DATED 3RD JULY, 2009 ==============================