1. The petitioner Sociedade de Fomento Industrial Pvt. Ltd. challenges in this petition under Articles 226 and 227 of the Constitution the validity of the Order dated 19th June, 1974, purportedly passed under Section 142 of the Customs Act, 1962 by the Assistant Collector of Customs and the demand on account of short levy of Export Duty referred to therein.
2. The admitted facts are as under : Petitioner, a private limited company duly registered under the Companies Act, 1956 carries on the business of mining iron, manganese and ferromanganese in the territory of Goa and of exporting the respective ores. On 25th June, 1974, petitioner submitted to the Customs Authorities a part Shipping Bill for loading 5,000 tonnes of lumpy iron ore in the vessel m.v. Jessica and by letter of the same date submitted a Bank Draft in the sum of Rs. 30,000/- to cover the export duty payable in respect of the said part shipment. Petitioner made reference in the same letter to the Notice No. 40.53/72-AP issued under Section 142 of the Customs Act regarding the recovery of Rs. 86,868/- from the petitioner towards different Shipping Bills of 1970 and submitted that the said recovery is illegal and irregular. Respondent No. 1 however, issued the notice dated 19th June, 1974 hereinafter called the impugned order, whereby it had been ordered that, in view of the failure of the petitioner to pay the said amount of Rs. 86,868/- being the export duty against four Shipping Bills of 1970, the aforesaid amount was to be deducted from any money owing to the petitioner. The four Shipping Bills referred to in the impugned order relate to the shipment of iron ore made by the petitioner by the vessel m.v. Schouwen which was despatched in November, 1970. The said shipment Bill were cleared on basis of ad hoc and provisional fee contents declared in the Continuity Bond executed by the petitioner. Samples or the iron ore had been taken both by the Customs Authorities and the petitioner and sent to the Government laboratory at Bombay and to the private laboratory of M/s. Italab (Goa) Pvt. Ltd. Petitioner submitted the report of M/s. Italab to the Customs Authorities. Although the shipment made by the m.v. Schouwen was on the 5th November, 1970, Respondent No. 1, after a lapse of almost two years, by letter dated 22.8.1972 demanded a further amount of Rs. 86,868/- by way of short levy of export duty. No show cause notice was given to the petitioner nor a copy of the report of the Government Laboratory at Bombay was supplied. Petitioner refuted the same as illegal and correspondence was exchanged between Respondent No. 1 and the petitioner, but Respondent No. 1 issued a notice dated 13th May, 1974 requiring the petitioner to show cause why action under Section 142 of the Customs Act, 1962 should not be taken in respect of the demand for the said amount. Petitioner submitted, in reply, that the demand was illegal, but Respondent No. 1 seeks to recover the aforesaid amount from the amount deposited by the petitioner by Bank Draft in respect of the part shipment Bill dated 25.6.1974 relating to the m.v. Jessica.
3. The case of the petitioner is that the demand contained in the letter dated 22nd August, 1972 is illegal, for Respondent No. 1 instead of relying on the report of the Government Laboratory, relied on the report of M/s. Italab submitted by the petitioner for the purpose of quality control and not for the purpose of assessment of the duty, and even then, misreading the said report. Indeed, the Customs Authorities had been consistently relying on the analysis report of the Government Laboratory for the purpose of determining the Fe content to levy Export Duty and had therefore, taken samples of the ore shipped in the m.v. Schouwen and sen them to the said Government Laboratory. In spite of this consistent procedure, Respondent No. 1 did not follow it in the case of the petitioner in respect of the shipment made in the m.v. Schouwen and without giving an opportunity to show cause against and without giving a copy of the Government Laboratory report, Respondent No. 1, after about two years, made the demand based on the report of M/s. Italab, which was not, however, read properly. It is further the case of the petitioner that the export duty is payable at different rates in accordance with the respective slabs prescribed in the second Schedule to the Indian Customs Tariff. These slabs are prescribed according to the Fe contents of iron ore in the condition it is exported. Such iron ore exported contains moisture and as such, it is necessary to determine the Fe contents in respect of the moist iron ore and it is not enough to rely on the analysis of only the dry ore. The percentage Fe contents determined on dry basis cannot be taken as percentage of Fe contents in respect of iron ore exported which is moist. The percentage of Fe content in the moist iron ore is necessarily lower than the percentage determined on dry basis. The assessment done by the Customs Authorities is based on the percentage of Fe contents on dry basis and therefore, incorrect and illegal. It is also the case of petitioner that the action of the Respondent No. 1 is not clearing the Shipping Bill submitted on 25th June, 1974 on basis of the impugned order is legal, as there was no money owing to the petitioner which could be adjusted by way of deduction as contemplated in Clause (a) a Section 142(1) of the Customs Act, 1962.
4. Placing reliance in the case of 'K. T. Moopil Nair v. State of Kerala' : 3SCR77 ; Assistant Collector, Calcutta v. National Tobacco Co. of India Ltd 1978 ELT ( 416), Smt. Maneka Gandhi v. Union of India : 2SCR621 S. L. Kapoor v. Jagmohan : 1SCR746 , 'Swadeshi Cotton Mills v. Union of India' : 2SCR533 and 'A. K. Kraipak v. Union of India' : 1SCR457 , Mr. Ashok Desai, learned advocate appearing for the petitioner, contended before me that the order dated 19th August, 1972 is without authority of law, null and void and of no legal effect. In fact, he submitted, the assessment and levy of duty is quasi-judicial in character and must be done in accordance to the principles of natural justice. These principles were not at all observed by Respondent No. 1 for the assessment was done without an opportunity to show cause or of being heard, having been given to the petitioner.
5. After the rulings of the Supreme Court in the above mentioned cases of Moopil Nair and Assistant Collector, Calcutta it cannot be successfully contested that the assessment and levy of duty is quasi-judicial in character and that the principles of natural justice are to be applied in such cases. Indeed, in the K. T. Moopil Nair v. State of Kerala, their Lordships observed that 'The whole thing, from the beginning to the end, is treated as a purely administrative character, completely ignoring the legal position that the assessment of a tax on person or property is at least of a quasi-judicial character', and in Assistant Collector, Calcutta v. National Tobacco Co. of India Ltd., reiterating that the assessment of a tax on a person or property is at least of quasi-judicial character, they emphasized that the principles of natural justice have to be observed in matters of assessment and levy of a tax. Similarly, in the case of State of Kerala v. K. T. Shaduli : AIR1977SC1627 , the Supreme Court observed that 'Tax authorities entrusted with power to make assessment of tax discharge quasi-judicial functions and are bound to observe the principles of natural justice in reaching their conclusions. One of the rules which constitutes part of the principles of national justice is undoubtedly the rule of audi alteram partem which required that no man should condemned unheard, or as explained in the Kraipak's case, that no decision shall be taken against a party without affording him a reasonable hearing. Admittedly, petitioner was no given a notice to show cause against the order dated 19th August, 1972, nor was it given a hearing. Therefore, the irresistible conclusion is that, in fact, the said order was made in violation of the principles of natural justice the said order was made in violation of the principles of natural justice and consequently, null and void. In Swadeshi Cotton Mills case, their Lordships of the Supreme Court after observing that 'The further question to be considered is : What is the effect of non-observance of this fundamental principle of fair play Does the non-observance of the audi alteram rule, which in the quest of justice under the rule of law, has been considered universally and most spontaneously acceptable principle, under an administrative decision having civil consequences, void or voidable ?' concluded that the effect is to vitiate such a decision and to turn it null and void. Similarly, in the case of Maneka Gandhi : 2SCR621 and S. L. Kapoor v. Jagmohan : 1SCR746 , it was observed that the Supreme Court had consistently taken the view that a quasi-judicial or an administrative decision rendered in violation of the audi alteram partem rule, wherever it can be read as an implied requirement of law, is null and avoid. I have, therefore, no doubt in accepting as correct the above submission of Mr. Desai, and in holding as a result that the order dated 19th August, 1972 made by the Respondent No. 1 is indeed without the authority of law, null and void.
6. The next contention of Mr. Desai has been that the liability to pay duty arises on the date of the export and it is essential to find out the iron contents on that date only, i.e. with the moisture. Similar question fell for consideration before Pendse, J. in the Bombay High Court while dealing with the Misc. Petition No. 1120/74 Gangadhar Narsingdas Agrawal v. A. C. Martins. In that case, the claim of the petitioners was that on the date of export the lumpy iron ore and iron ore fines were in moisture condition and therefore, the duty had to be levied on basis of the iron content in the moist ore which was exported and on basis of percentage of iron content in dry ore samples. This claim has been contested by the respondents on the ground that, though the liability to pay the duty arises on the date of the export and as such it is essential to find out the iron contents on that date, the fact remains that there is no method of scientific test to determine the iron contents in iron ore while in moist conditions, being a fact that the customs duty is leviable on export goods after the same are examined and tested by the proper officer. The exporter is required to secure a certificate that the exportable goods are according to the specifications mentioned in the contract with the foreign buyer and it is on basis of this certificate that the duty is levied. Petitioners, however, countered that the aforesaid certificate gives the percentage of iron ore after the sample is dried at 105 degree C and does not reflect, therefore, the true iron content in the exported iron ore. It is was further contended by the petitioners that, though the analysis is done on basis of a dried sample, the iron contents in the ore in natural or moist condition is determined in accordance with the recognised practice prevalent all over the world. After considering the above rival contentions in the light of the arguments advanced, particularly that there exists a recognised practice prevalent all over the world. After considering the above rival contentions in the light of the arguments advanced, particularly that there exists a recognised practice to ascertain the iron contents in the ore in moist condition, that the ore is weighed in moist condition and that the duty is paid on such weight, Pendse, J. held that 'the Customs Authorities were not right in binding down the petitioners to the certificate issued by Italab Pvt. Ltd. on the strength of analysis of sample dried at 105 degree C'. It was not denied by Mr. R. Sardesai, learned Central Government Standing Counsel, that there is a recognised practice throughout the world to ascertain the iron contents in ore in moist condition and that the duty is paid on the ore weighed in moist condition. Therefore, it appears to me that the contention of Mr. Desai to the effect that for calculating the liability to pay duty arising on the date of the export, it is essential to find out the iron contents on that dated and in moist condition is entirely correct.
7. It was further submitted by the learned advocate for the petitioner that Respondent No. 1 based the assessment on the certificate Exh. D wherein it is started inter alia that the analysis done on a sample dried at 105 degree C showed the iron contents at the percentage of 63.60%. It was also urged that the said certificate was totally misconstrued, discarding relevant factors such as the moisture. Exh. D is the certificate issued by M/s. Italab (Goa) Pvt. Ltd. It shows that on analysis of the sample of the iron ore to be exported by the m.v. Schouwen, it was found that the average moisture determined at 105 degree C was of 6.85% and the contents of iron found in the sample dried at 105 degree C was 63.60%. The assessment made considered that the iron ore content of the shipment of ore made by the vessel m.v. Schouwen was 63.60%. The average moisture of 6.85% was not at all considered, as necessarily ought to have been on account of the circumstance that the duty is paid per tonne of exported ore. The iron contents in the moist iron ore which was exported ought to have been calculated following the well recognised international practice and the duly calculated on basis of the said iron contents in the moist ore exported. By ignoring the moisture contends in the exported ore, the Customs Authorities arrived at a manifestly erroneous conclusion that cannot be sustained, as they were bound to consider all the relevant circumstances. [Hochtieft Gamman v. State of Orissa, : (1975)IILLJ418SC and Binod Rao v. M. R. Masani : (1976)78BOMLR125 ].
8. Mr. Desai next submitted that, admittedly, the Customs Authorities obtained a report of their own Government Laboratory, but no copies of such report were submitted to the petitioner in violation of the principles of natural justice, although the unilateral assessment has been done with a delay of two years suggesting that the said report was found unsuitable. Therefore, considering also that the Customs Authorities obtained a report from the Government Laboratory, and admitted that the said report was not relied upon for the assessment and that the aforesaid assessment was done with a delay of two years. Copy of the said report was not supplied to the petitioner, nor was the report produced in Court. This non-supply of the copy amounts to a violation of the principles of natural justice, as observed in the case of Chimanlal Desaibhai Patel v. B. K. Garg 1979 ELT ( 135) and the non-production of the report in Court makes it permissible to draw an adverse inference, namely that the said report is not supporting the basis of assessment made by the Customs Authorities. In any case, as observed by the Supreme Court in Dy. Commr. of Agricultural Income-tax & Sales Tax, Quilon v. Travancore Rubber and Tea Company (1967) 20 STC 520 and by the Bombay High Court in Sanghi Non-ferrous Metal Industries v. Union of India 1979 ELT 543, it was the duty of the Customs Authorities to show that the ore exported was taxable in the manner claimed by them, and this was not done. The assessment done by the Customs Authorities was not in accordance with the law and is, as such void. Consequently it cannot be the foundation and basis of an order made under Section 142 of the Customs Act, 1962. I, therefore, find myself in agreement with Mr. Desai and hold that the Order dated 19th June, 1974 is unsustainable, null and void.
9. The last contention of Mr. Desai was that on the face of the said order itself, Section 142(a) and (b) cannot apply, for no money is owing from the Government in connection with the exports made on the m.v. Jessica. Though this connection was not much pressed, it appears to me that, in fact, it is correct to say that the provisions of Section 142 are not applicable. Section 142(1) provides that where any duty demanded from any person or any penalty payable by any person under the Act is not paid (1) the proper officer may deduct or require any other officer of customs to deduct the amount so payable which may be under the control of the proper officer or such other officer of customs and (ii) the Assistant Collector of Customs may recover or may require any other officer of customs to recover the amount so payable by detaining the selling any goods belonging to such person which are under the control of the Assistant Collector of Customs or such other officer of customs. The retention of the Bank Draft of Rs. 30,000/- does not appear to fall within the four corners of the aforesaid provisions of law.
10. In this view of the matter, the petitioner succeeds. The rule is, therefore, made absolute in terms of prayers (b) and (c) of Paragraph 14 of the petition. There will be no other as to costs in the circumstances of the case.