' UNION OF INDIA AND ANR. v.

MIS. JESUS SALES CORPORATION

MARCH 26, 1996

(N.P. SINGH AND K. VENKATASWAMI, JJ.]

Imports and Exports (Control) Act, 1947:

S.4-M( 1), Third Proviso-Imposition of penalty on importer-Ape peal-Appellate authority directing the importer to deposit 25% of the amount of penalry---Order challenged as violative of principle of natural justice since appellate authority did not give the importer an oral hearing-High Court quashing the order-Held, appellate authority' passed a reasonable order-Third proviso does not envisage an oral hearing to be given to importer before passing the order.

Administrative Law :

Principles of natural justice--Oral hearing-Held, order of appellate authority under the third proviso to s. 4-M(1) of Imports and Exports (Control) Act, 1947 directing the' importer to deposit 25% of amount of penalty E without affording him an opportunity of personal hearing is not violative of principles of natural justice.

A show cause notice was issued to the respondent under s.4-M of the Imports and Exports (Control) Act, 1947; and ultimately a penalty of Rs. 6 lakbs was imposed on it. The respondent filed an appeal alongwith an F application for dispensing with the pre-deposit. The appellate authority directed the respondent to deposit 25% of the penalty amount or furnish bank guarantee of the equal amount. The respondent challenged the said order by filling a writ petition before the High Court. which allowed the writ petition and quashed the order holding that the appellate authority G should have given an oral hearing to the respondent before taking a decision under the third proviso to sub-section (1) of s.4-M of the Act.

Aggrieved, the Revenue filed the present appeal.

Allowing the appeal, this Court

If HELD : 1.1. The Appellate authority by giving a direction to the 894

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U.0.1. v. ~ESUS SALES CORPORATION 895

respondent to deposit only 25% of the.amount ofthe .penalty imposed upon A it, passed a reasonable order which should not have been held to be invalid , by the High Court merely on the grund that before passing the said order the respondet was not given oral hearing. [902-G; 903-AJ . . . .

1.2. The third proviso to sub-section (1) of s.4-M which vests power in the appellate authority to dispense with the deposit of.the amount of.the B penalty unconditionally or on some conditions does not say specifically that the order has to be passed only after hearing the parties concerned. The appellate authority may dispense with such deposit in.its discretion taking into.consideration the undue hardship which sm:h deposit'may cause to the appellant. The discrel.ion is to be exercised in a reasonable and rational C manner free from whims, vagariennd arbitrariness. [90l'D'E; 900•E]

2.1. Under different situations and conditions the requirement of compliance of the principle of-natural justice vary. The courts cannot insist that under all circumstances arid under different siatutory provisions personal hearings have to be afforded to the persons concerned. [900-G] D 1 ... ' . . . ' . .

' Shyam Kisltore imd Oihers.v. Milnii:ipal Corporation of Delhi and . Another, [1993) 1 SCC 22; referred tO. . . .

. '.> ' .,.,, '2.2. Whn I'rincfpfesOfnatOrafjustice requie an opportuhityfo be ' ' ' :E heard before -an adverse order is , passed on any appilal, , or application, it. does. not .ht alf. drcumstances mean a personal hearin('.'The reqnirement is complied With by affording an opportunity to the person concerned tci . present his .case J1efore such quasi-judicial authority who is expected' to .apply his judicial mind. to the issu.es .involved. ;[901'8, G)

2.3. In the matters of taxation and revenue, the normal rule is that before :filing the appeal or before the appeal is heard, the person concerned shotild deposjtthe amount.which be has .been directed. to deposit as a tax or .Penalty .. The non-deposit of such amount .itself is an exception which has .been. Incorporated in different statutes Including the , present one

erein the statutory requlremnt as envisaged by second proviso to. s; 4- M(l), Is that beforj! an appeal is entertained, the amo.unt of penalty has to be deposited by the :appellant; .n order illspenslnl! with s.uch deposit shall amount to '8D exception to the said requirement Of deposit. 'Thel"j!• fore, tr. the appellate authority while passing .an order Under the third proViso .rejects the prayer of an appellant to dispense with the deposit

A unconditionally or dispenses with such deposit subject to some conditions

without hearing the appellant, on perusal of the petition filed on behalf of the appellant for the said purpose, it can not be said that the order itself is vitiated and liable to be quashed being violative of principles of natural justice. (901-F-H; 902-B-C]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3597 of 1995.

From the Judgment and Order dated 29.9.93 of the Delhi High Court in C.W.P. No 2441 of 1993.

A. Subba Rao and Ms. A. Subhasini for the Appellants.

Atul Nanda and P. N. Puri for the Respondents.

The Judgment of the Court was delivered by

N.P. SINGH, J. This appeal has been filed on behalf of the Union of India against the judgment of a Full Bench of Delhi High Court holding that an oral hearing had to be given to the respondent by the Appellate authority before taking a decision under third proviso to sub-section (1) of Section 4-M of the Imports and Exports (Control) Act, 1947 (hereinafter E referred to as the 'Act'). On the aforesaid fmding the writ petition filed on behalf of the respondent was allowed and the order passed by the Appellate authority was quashed. A direction was giv.en to afford an opportunity to the said respondent to be heard on the question as to whether the appeal filed on behalf of the respondent should be entertained without deposit of F the penalty imposed.

The respondent obtained an advanced licence for import of brass scrap on certain conditions, under the Duty Exemption Scheme. The said licence was issued subject to the respondent's exporting 78 .MT Brass Artware for approximate FOB value of Rs. 14,00,420. A show cause notice G was issued to the respondent under Section 4-M of the said Act on basis of the report of investigation. Ultimately a penalty of Rs. 6 lakhs was imposed against the said respondent. An appeal was filed on behalf of the respondent along with an application for dispensing with the pre-deposit.

By a communication dated 18.2.1993 issued on behalf of the Appellate H authority,' the respondent was directed to deposit 25% of the penalty

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U.0.1. v. JESUS SALE? CORPORATION [N.P. SINGH, J.] 897

amount or bank guarantee for the same amount. The validity of this 'A communication was questioned before the High Court saying that before rejecting the prayer made on behalf of the respondent to dispense with the whole amount o_f penalty an opportunity should have been given to the said respondent of being heard in terms of the proviso to Section 4-M of the Act. Section 4-M of the Act provides : . . .

"(1) Any person aggrieved by any decision or order made under this Act may prefer an appeal, -

(a) where the decision or order has been made by the Chief

Controllr or Additional hief Controller, to the Central Govern- C ment; '.

(b) Where the. 'decision or order has been made by any officer below the rank of the Additional Chief Controller, to the Chief Controller or where. he so dircts, to the Additional Chief Controller, ·

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within a -period of forty-five days from the date on which the order is served on such.person,:

Provided that the Appellate authority may, if itis satisfied that the appellant was prevented by sufficient cause from preferring . E the appeal within the aforesaid period of forty-five days, allow such appeal to be preferred within a further period of forty-five days:

Provided further that in .the case of an appeal against an order imposing a penalty, no such appeal.shall be entertained unless the amount of the penalty has been deposited by the appellant: F

Provided also that, where ihe Appellate authority is of opinio~ that .the deposit to be made will cause u_nciue hardship to the appellant, it may, at its discretion, dispense with. such deposit either . unconditionally o} subject to such' conditions as it 'ro'ay impose. . . . .. '

.(2) The Appellate authority may, after giving to the appellant a reasonable opporttin1ty of being heard, if he so desires, atid after making such further inquiries, if any, as it may consider necesary, pass such orders as it thinks fit, confirming, modifying or reversing

the decision or order app_ealed against, or may send back the case, H

A with such directions as it may think fit, for a fresh adjudication or decisions, as the case may be, after taking additional evidence, if necessary:

Provided that an order enhancing or imposing a penalty or confiscating goods or materials of a greater value shall not be made under this section unless the appellant has had an opportunity of making a representation, and, if he so desires, of being heard in his defence."

In view of the aforesaid Section any person aggrieved by any decision or C order made under the said Act may prefer an appeal before the authority prescribed there in and within the time fixed. The first proviso to sub-section (1) of Section 4-M vests power in the Appellate authority if it is satisfied that appellant was prevented by sufficient cause from preferring the appeal within the period prescribed to allow such appeal to be D preferred within a further period of forty-five days. The second proviso prescribes a condition that an appeal against an order imposing a penalty shall not be entertained .unless the amount of the penalty has been .., deposited by the appellant. Having said so, the third proviso says that where the Appellate authority is of the opinion that the deposit to be made will cause undue hardship to the appe:Iant, it may at its discretion dispense E with such deposit either unconditionally or subject to such conditions as it may impose .. Neither the first proviso which vests power in the Appellate authority for condonation of delay in filing the appeal nor the third proviso which vests power in the Appellate authority to dispense with the deposit of the amount of the penalty unconditionally or on some conditions say p specifically that such orders have to be passed only after hearing the parties concerned. The Appellate authority in its discretion may condone the delay in filing the appeal. Same is the position so far the question of pre-deposit of the amount of penalty is concerned. The Appellate authority may dispense with such deposit in its discretion. The proviso relating to the condonation for d6lay in filing the appeal is more or less on the pattern of G Section 5 of the Limitation Act. Some how, a practice has grown throughout the country that before rejecting the prayer for. condonation of delay in filing the appeal or application, opportunities are given to the appellants or petitioners, as the case may be, to be heard on the question whether such delay be condoned. Opportunities to be heard are also given H to the contesting respondents in snch appeals. In different statutes where

. :u.o.I. v. JESUS SALES CORPORATION (N.P. SINGH, J.] 899

power has been vested in the Appellate auihority io coiidone the' de.lafit\. A'

~ filing si\cli appeals or applicatioris; th.ere are nospecific provisions in those statutes saying that before such delays are condoned the appel\allts or the applicants shall be heard, but on basis of practice which has grown during the years the courts and quasijudicial authorities have been hearing the appellants and applicants before dismissing such appeals or appHcations J3t as barred by limitaiions. It can b~ said that courts have read the.requirement~ of hearing the appellants: or the applicants before dismissing their appeals or. applications filed beyorid time on principie of iiaturai justice, although the concerned statute does not prescribesuch requirement specifically. rJ.

A. ', ' c

Now the question is as to whether the sanie requirement has to be read as an irripHcit condition whil<fronstruing the scope 6f third proviso tci sub-section (l)'toSection 4-M, i.e. the Appellate authority-before' reflising to entertain an appeal on. the ground that no. deposit of'the amotlht of penalty imposed had been made, should hear the appellant ort the question DJ of dispensing with such deposit unconditionally or subject to •conditions. It may be mentioned at the outset that the provisfons 'requiring pre-deposit of the amount of pealty or tax imposed befpre the appeals are heard are of two types.· .There are sortie statutory provisions which specifically prescribe and provide'that b'efore the appeals are heard, the amount 'of the E < or penalty imposed have fo be deposited. Nd. discretion has been ieft by the statute in. question in the .Appellate authority to \vaive 'such deposit taking lt'ito consideration the hardships of the appellants concerned.One ·

such provision was considered by this Court in the 'case of Shyam Kislwre and Othe1~ v. Municipal Co1poratioi1 'of Delhi dhd Ai1dther, [1993l 1 SCC 22 Under Delhi.Municipal Corporation Ac!, 1957. In that 'Act, pre-deposit' is· F a'must before an appeal can be heard.This.Court hddtliat the Appellate' authority has'no jurisdictiorito".vaive the condition or stay Ccillection of tax• pending disposal of the appeal. The grievance that'the' said prcivisiori' in that-event shall be deemedio be 'violativeof article 14.bf'the C6nstitutioii; being harsh i~ nature was rejected. But there are statutes which vest power'• G' in the Appellate aqthorities to waive deposit unconditionally or With con: ditions'. So far tlie present case With which we are concerneil, as already .. pointed out above, the third proviso vests power in ihe Appellate •authority to dispense with the. amount of the penalty iincondiiionally or tubje~Ho conditions." As such it is different from the provision undet the Delhi' Jcf!

A Municipal Corporation Act referred to above. Here the discretion has been vested specifically in the Appellate authority to dispense. with such deposit either unconditionally or subject to such conditions as it may impose taking into consideration the undue hardship which such deposit may cause to the appellant.

The learned counsel appearing on behalf of the Union of India took a stand that when aforesaid proviso requires the Appellate authority to exercise discretion taking into consideration the facts and circumstances of each case, it does not flow from the said provision that before exercising such discretion, the Appellate authority should hear the appellant; this discretion can be exercised by the Appellate authority as the said authority may deem think proper. Now it is too late to urge that when a statute vests discretion in an authority to exercise a statutory power such authority can exercise the same in an unfettered manner. Whenever an unfettered discretion has been exercised, courts have refused to countenance the same.

D That is why from time to time courts have 'woven a network of restrictive principles' which the statutory. authorities have to follow while exercising the discretion vested in them. This principle has been extended even. when the authorities have to exercise administrative discretions under certain situations. Another well settled principle which has emerged during the E years that where a statute vests discretion in the authority to exercise a particular power, there is an implicit requirement that it shall be exercised in a reasonable and rational manner free. from whims, vagaries and arbitrariness. .,.

The High Court has primarily considered the question as to whether denying an opportunity to the appellant to be heard before his prayer to dispense with . the deposit of the penalty is rejected, violates and contravenes the principles of natural justice. Jn that connection, several judgments of this Court have been referred. It need not be pointed out that under differensituations and conditions the requirement of compliance of G the principles of natural justice vary. The courts cannot insist that under all circumstances and under different statutory provisions personal hearings have to b_e afforded . to the persons concerned. If this principle of affording personal hearing is extended whenever statutory authorities are vested with the power to exercise discretion in connection with statutory H appeals, it shall lead to chaotic conditions. Many statutory appeals and

U.O.i.v. JESUS SALES CORPORATION [N.P. SINGH, J.] 901

applications are dispoed of by the competent authorities who 'have bee~ A i vested "1ith powers to dispose of the same. Such auth6rities which shali be deemed to be quasijudicial authorities "are expected to apply their'judicial. mind over the grievances made by the appellants" or applicants 1'cbncerned, . but it cannot be lield that before dismissing such appeals or application~ in all events the quasijudicial authorities musr hear the appellants or the B,

applicants, as the case rtiliy be. When principles of natural jstice require an opportunity to be heard before an adverse order is passed o\n\rty'appe'al; or application, it does not in all circumstances mean' a personal he"afing.

The requirement is complied with by affording, an opportunity 'io the' > person concerned to present his case before such quasi-judicial authority C who is expected to apply his judicial mind to the issues involved .. Of course, if in his OWn discretioiJ. lf he equires the appellant 'br the appli'cant to be . herd because of speial facts nd circumstance~ of the case; then certainly •. ; \ . ' • . . ' ,• • . . . ' ... ,,.,1, ir is always open to such authority to decide the appeal or the apphcat10n

• - . ·. ,-. . . -

J - . . ..., ...• 'f - .. • . ,,- oiily after affording a personal hearing. But any order passed after taking inio consideratibn the points 'raised in the appel or the appiiation shali D '

• , • • • t • I. . · : - ; t. • not be held to be invalid merely on the ground that no persona_! hearing . had bei:n afforded. This is'all the moe-importanfiii the'context ofiaxation

,-.., -1 ' . t t ' •· , .

I _ . -· · and revenue matters. When an authority has determined. a tax liability or . . . • . . . .,·. ' . ' , r .·. . has imposed a penalty, then the requirement that before the appeal. is E • heard such tax or penalty should b~· ~p'oited 'cannot be held io bd

~' ' • ' < . . ' ' ; f . • . •'11 unreasonable as already pointed out above.· In the case of Shyam Kishore

v. Municipal C01porati01i of Delhi, (supra) it has .been, hdd by'this cci1f

, ' • • > • ' •• ,, < 1' . '• ,, that such requirement cannot be held to be harsh or Violative of article 14 of the Constittion so s to declare the ; eqtiir'n{ent of pre-dbposit itself as 'unconstitutional. I~ thiS baJkgfOud, it ~n be said iha.i' norinal r'i~ is

F ' " ·• .· .. ' . ;"/ . -• ' '.· ' ~.·. that before filing the appeal or before the appeal is .heard,· the person concerned should deposit tlie -amount which he has1 been. directed 'to •

' • : . ' ' • • ... ) ·- i

I - • .-. ' - . . ' . ;, '

, J. -· •. __ ., •• . ·• l ... ; deposit as a tax or penalty. The non-deposit of such amount itself is an

l'" 1 . ' . , · • · . r , ... , t, . ·. -r ' ·; ex2eption which hasbeeii incorp?raied in different Statutes including the one witb.'which are cocerned.' Second povisci'io sub-section (1) of.Setion 1 G , 4-M says in clear .and unambiguous words that'~;{ appal against an c:icter imposing a penalty shall not be entertained unless the amom1t of the ' • . . • y . ' .

- ' . . ' . • .. .. ·. . i : (· • pe.nalty has been deposited by the appellant. Thereafter the thi_rd provis9., vests a discretion i~ such Appellate authority io dispense. with sch deposit , . uncndiiionally or subjet to' sue~ .conditions "as it may i;;, pse in its . H

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A discretion taking into consideration the undue hardship which it is likely to cause to the appellant. As such it can be said that the statutory requirement is that before an appeal is entertained, the amount of penalty has to be deposited by the appellant; an order dispensing with such deposit shall amount to an exception to the said requirement of deposit. In this back- B ground, it is difficult to hold that if the Appellate authority has rejected the prayer of the appellant to dispense with the deposit unconditionally or has dispensed with such deposit subject lo some conditions without hearing the appellant, on perusal of the petition filed on behalf of the appellant for the said purpose, the order itself is vitiated and liable to be quashed being C violative of principles of natural justice.

It shall not be out of place to m.ention that sub-section (2) of Section 4-M provides specifically that appellant shall be given reasonable opportunity of being. heard if he so desires before final order is passed on his appeal. That requirement according to us cannot be read impliedly as an D implicit condition in the third proviso to sub-section (1) of Section 4-M.

But it need noi be'impressed that when the Appellate authority has been vested with th~ discretio~.ti"dispense with such deposit unconditionally or on conditions, then it. ha;, fo apply its mind on that question like a . ' , ; Jc quasi-judicial authoiity. taking into'. consideration all the facts and cir- E cumstances of the case including the undue hardship which has been pointed out on behalf of the appellant. In that proviso the two xpressions 'opinion' and .:discretion' both have have been used.Jn vie~ of the settled position that ;., henever a statutory athority has to form an opinion on a qt1estion, it does not mean that it has io be formed in a subjective or casual manner. Thaf opinion must be formed objetively on'relevant considerations. Same i.s the position in respect of the exercise of discretion. The framers of the Act require such appellate authority to exercise its discretion in a reasonable and. rational manner taking. into consideration the relevant facts and circumstances of a particular appeal while considering the question as to whether the deposit of the amount of the penalty be

G dispensed with unconditionally or subject to the conditions.

In the. present case on the application filed by the respondent, a direction wds given to deposit only 25% of the amoun.t of the penalty which had been iffiposed against the said respondent. According to us, the H Appellate authority passed a reasonable order which should not have been

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U.0.1. v. JESUS SALES CORPORATION [N.P. SINGH, J.] 903

held to be invalid by the High Court merely on the ground that before A passing the said order the respondent was n?t given oral hearing, which amounted to 'violation of the .principles of natural justice.

The appeal is accordingly allowed. The impugned order is set aside.

In the facts and circumstances of the case, there shall be no order as to cost. . ' B

R.P.

Appeal allowed.

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