S.R. Sale and Co. Vs. Union of India and Others - Court Judgment

Oral Judgment: (Dr. D.Y. Chandrachud, J.)

The Petitioner has challenged an order dated 12 September 2012 passed by the Commissioner of Customs (General), Mumbai under Regulation 21 of the Customs House Agent Licensing Regulations, 2004, prohibiting the Petitioner from transacting CHA business in Zones I, II and III of the Mumbai Commissionerate on the ground that its continuance was considered prejudicial to the interest of the Revenue warranting immediate action. The allegation relates to the export of cheap material such as soap stone powder in the names of exporting firms by misdeclaring it as high value bulk drugs and their intermediates. A person by the name of Manoj Gore is alleged to have attended to the clearance of the export consignments on the strength of a CHA licence of the Petitioner. It is alleged that an employee of the Petitioner allowed the said Manoj Gore to attend to the clearance of export consignments on behalf of the CHA firm.

2. Regulation 21 empowers the Commissioner of Customs to prohibit any Customs House Agent from working in one or more sections of the Customs Station if he is satisfied on the existence of grounds as enunciated in Regulation 13 in relation to the work of that section or sections (Regulation 21 provides as follows: “Prohibition.- Notwithstanding anything contained in regulation 22, the Commissioner of Customs may prohibit any Customs House Agent from working in one or more sections of the Customs Station, if he is satisfied that such Customs House Agent has not fulfilled his obligations as laid down under regulation 13 in relation to work in that section or sections.”). The grievance of the Petitioner is that there was no compliance with the principles of natural justice before the prohibitory order was passed.

3. Regulation 21 does not exclude the requirement of complying with the principles of natural justice. As a matter of first principle, even when a statute or statutory regulation is silent in regard to compliance with the principles of natural justice, natural justice is to be read into the provision. However, it is equally well settled that in a case where urgent action is required, particularly in public interest, it may not always be appropriate or efficacious to furnish a pre-decisional hearing. Where immediate action is required, the authority can be directed to give an opportunity to the person who is affected by the order an opportunity of a hearing after passing a protem order for a limited period. In the case of a suspension, Regulation 20(2) contemplates immediate action being taken, where it is required, after which an opportunity has to be given to the agent whose licence is suspended within fifteen days from the date of the suspension. In our view, Regulation 21 has to be so interpreted so as to balance the requirement of fairness to the Customs House Agent on the one hand, which would warrant compliance with the principles of natural justice together with the need, on the other hand to protect the public interest essentially where immediate action is warranted. Hence, where immediate action is warranted, to prevent a customs house agent from carrying out activities which are prejudicial, a prohibitory order can be passed under Regulation 21 for a limited period. During that period an opportunity of a hearing can be afforded in compliance with the principles of natural justice. Where immediate action is necessary, a pre decisional hearing can be dispensed with if such a hearing will defeat the requirement of public interest in the orderly and proper functioning of the Customs Station. On the other hand, where immediate action is not required, a prohibitory order can await compliance with the requirements of natural justice. Ordinarily, a pre decisional hearing must be the rule. Dispensation is to be an exception.

4. Counsel appearing on behalf of the Petitioner relied upon a report of the Committee on Subordinate Legislation dated 8 March 2007 in the Rajya Sabha. The Committee considered the provisions of Regulation 21. The relevant extract from the report of the Committee is as follows:

“Point referred

Regulation 21 provides that the Commissioner of Customs may prohibit any agent for working in one or more section of the Customs stations if he is satisfied that the agent has not fulfilled his obligation under regulation 13.

Can the regulation not be modified so as to prescribe that such order of prohibition should carry the reasons recorded in writing in order to avoid arbitrariness in such decisions?

Ministry's reply

Through it is not specially mentioned in regulation 21, the general principles of natural justice have to be observed and any curtailment or suspension of rights of any person can be done only after offering the person to present his case and after passing a reasoned order. If the Committee recommend these provisions could be made more explicit in the Regulation itself.

Committee's observations (25/10/2004)

The Committee noted that the Ministry were agreeable to make the provisions of the regulation more explicit in order to allay any apprehension of arbitrary action.

Committee's Observations (9/11/2005)

The Committee noted the position as explained by the representatives of Bangalore Commissionerate.”

Regulation 21 has not been amended thereafter. The report inter alia contains a reference to the fact that the Committee was satisfied with the explanation furnished by the Ministry. The reply furnished by the Ministry to the Committee on Subordinate Legislation can, at the highest, be an interpretative guide in construing the provisions of Regulation 21. As a matter of first principle, where as in the present case, the subordinate legislation is silent in regard to compliance with the principles of natural justice, the requirement of compliance with those principles has to be read into the provision. However, in a situation where urgent or immediate action is necessary, and waiting for the outcome of a pre-decisional hearing will defeat the public interest and obstruct or impede the proper functioning of a Customs Station, it would be open to the Commissioner under Regulation 21 to pass an immediate prohibitory order for a limited period and to afford to the CHA, in the meantime, an opportunity of being heard. Pursuant to that opportunity, it is open to the CHA to place facts on record in support of the plea that the prohibitory order ought not to have been passed. This would balance both the need to observe the principles of natural justice on the one hand and the necessity of protecting the public interest in appropriate cases where immediate action is warranted and where delay would be prejudicial to the public interest.

5. In the facts of this case, the Commissioner of Customs (General) was satisfied that immediate action was warranted to prevent a further misuse of the CHA licence. Counsel appearing on behalf of the Petitioner states that a representation has already been submitted on 24 January 2012 for the lifting of the prohibition. The Commissioner of Customs (General) is directed to pass orders on the representation after furnishing to the Petitioner an opportunity of being heard within a period of four weeks from today.

6. The Petition is accordingly disposed of. There shall be no order as to costs.