(1) The matter involved in these petitions (Civil Writs Nos. 316-D to 318-D of 1958, 476-D to 481-D of 1958, 486-D and 487-D of 1958, 492-D and 493-D of 1958, 501-D to 504-D of 1958, 508-D to 510-D of 1958, 513-D to 515-D of 1958 and 40-D to 43-D of 1959) came up in the original instance before Bishan Narain, J. sitting singly. He was of the opinion that the petitions raised an important point and referred them to a larger Bench. In this manner they have come before us.
(2) The facts briefly are as follows: The petitioner-firm entered into an agreement with a firm in the United States of America for supplying 75,000 tons of Indian manganese ore during the period September, 1952, to March, 1958. In performance of this contract a number of shipments were made by the petitioner firm. Civil Writ petition No. 476-D of 1958 relates to two of these shipments, one of 7,500 tons which is referred to in the shipping bill dated 6-9-1952, and the other of 500 tons vide shipping bill dated 11-9-1952. The price which had to be paid to the petitioner-firm was fixed at 28 dollors per dry ton inclusive of Indian export duty. Since the qualify of manganese ore is variable, it was stipulated that a certain minimum percentage of manganese ore certain minimum percentage of manganese ore must form the content of the commodity shipped. The weight was to be taken of the dry commodity as it appears that in the commodity shipped there is a certain amount of moisture which evaporates after a time. The Indian export duty is 15 per cent to be computed in accordance with section 30 or 31 of the Sea Customs Act (Act No. 8 of 1878). The shippers have to declare the value at port of the commodity shipped and the Excise Department may or may not accept this valuation. If the valuation is not accepted, then export duty is assessed under section 30 or 31 as I have already stated. The petitioner-firm declared the value of the first shipment to be Rs. 8,70,130/6/11 and of the second instalment of 500 tons as Rs. 58,069/9/-. The total of these shipments was, therefore, declared at the figure of Rs. 9,28,200/-. This value was not accepted by the Customs Department and the Collector of Customs provisionally assessed the value at the rate of Rs. 127/9/06 per ton and valued the two consignments at Rs. 10,20,525/-. He, therefore, asked the petitioner-firm to pay an excess duty of Rs. 23,491/3/8. This amount was paid by the petitioners under protest and they filed an application for a refund of the excess duty paid. An appeal was preferred to the Collector of Central Excise. Hyderabad, under Section 188. This appeal was transferred for disposal to the Customs Collector, Visakhapatnam, who called upon the petitioners to file certain documents, in particular copies of the analysis certificates of the commodity supplied. The test results and the contract were also asked for. The petitioners were not given any personal hearing, nor were they told on what material the Collector was assessing the value of the consignments. On 21-8-1954 he informed the petitioners that he had finalised the price of the consignments and assessed it at Rs. 10,45,179/7/-. He demanded a further duty of Rs. 6,051/13/-. This amount was also paid under protest and the petitioners filed an appeal to the Central Board of Revenue claiming a refund of the two excess payments made by them. This appeal was dismissed on 18-5-1957. The petitioners then moved the Government of India for the revision of this order under Section 191 of the Sea Customs Act. This petition was summarily dismissed. The petitioners then filed the present petition under Article 226 of the Constitution challenging the order of the Central Board Visakhapatnam, the order of the Central Board of Revenue and also the final order of the Government of India dismissing the revision petition. It was urged on behalf of the petitioners that the matter came up before the various authorities in their quasi-Judicial capacity and that these authorities were bound to give a hearing to the petitioners, to state the material upon which they based their decision and also to give their reasons for arriving at the final assessments; and as these requirements of natural justice had not been observed, these orders were liable to be quashed.
(3) On the other hand, it was contended on behalf of the Union of India that the order was in the nature of an administrative order and, therefore, it was not necessary to give a hearing to the petitioners not to reveal to them the material upon which the assessment was based. It was argued before us that the assessment had been made under Section 30(b) of the Act, whereas the petitioners' claim is that the assessment should have been made under Section 31.
(4) The arguments advanced on behalf of the petitioners may be set out under the following four items:
(1) The assessment should have been made not under Section 30(b) but under Section 31.
(2) The Collector of Customs, Visakhapatnam, did not hear the petitioners. He did not give them an opportunity to explain or rebut the material upon which he had based his order and, in fact, did not even reveal what this material was. His order was not a speaking order, and since an appeal was provided for against his order, the absence of any reasons vitiated the order.
(3) When the matter came up before the Central Board of Revenue, the only evidence before it was the declaration of the petitioners regarding the value of the consignments. The Central Board of Revenue however, saw the report of the Collector and the records which were not available to the petitioners and which they, therefore, could not explain or rebut, and for this reason the order of the Central Board of Revenue was bad in law.
(4) The Central Government did not give a hearing to the petitioners before dismissing the revision petition.
I may mention here that at the time of shipments samples from the consignments were drawn and these were analysed in order to find out the amount of moisture and the percentage of manganese content. The actual value received by the petitioners from the firm in the United States of America was even less than the amount which they had declared originally. The amount received was only Rs. 8,48,225/15/2 plus 15 per cent duty, and it was argued before us that in all fairness it is this last figure upon which the duty should have been assessed.
(5) It is necessary to set out the orders which are being challenged before us. All the orders are very brief and may be quoted in extenso. The first of these is a communication sent to the petitioners by the Customs Collector of Visakhapatnam fixing the final value of the consignments at Rs. 10,45,179/7/-. This is in the following terms:
'Please refer to his office demands for Rs. 28702/4/- and Rs. 1913/7/- dated 6-9-52 and 11-9-52 respectively in respect of the above shipments.
2. Assessments have been finalised for 7877 tons actually shipped for Rs. 1,56,776/15/- on the value of Rs. 3/- /3 per unit. I, therefore, request you to kindly credit the differential amount of Rs. 6,051/13/- at an early date in terms of this office demands.
3. The assessments have been finalised under the orders of the Collector of Central Excise, Hyderabad, and if you are aggrieved over it, you may prefer an appeal to the Central Board of Revenue after paying the amount demanded.'
It will be seen that no reasons are given in this order or intimation, nor is it stated on what basis the value of the consignments was assessed. Before us it was urged that the value had been fixed on the basis of the price obtainable at Calcutta as quoted in the trade journal. The petitioners' case is that these quotations hold true for Calcutta only and not for Visakhapatnam from where the shipments were sent. The order of the Central Board of Revenue is even briefer and is in the following terms:
'The Board has carefully considered all the contentions raised by the appellants and has reached the conclusion that the assessable value of manganese ore should be price ruling at the time of shipment. Since the value on which the goods have been assessed by the Customs House is lower than the value on the above basis, the appeal is rejected.'
A note above the order states that the Collector's report and the records of the case were read and the appellants' counsel was heard. The contents of the Collector's report were not revealed to the petitioners, nor were those portions of the record upon which the Central Board of Revenue relied, shown to the petitioners. The final order of the Government of India dismissing the revision petition is to the following effect:
'The Government of India have carefully considered the revision application made by the petitioners and also all the facts and circumstances of the case but they see no reason to interfere with the order in appeal passed by the Central Board of Revenue New Delhi.'
Above this order also there is a note to the effect that the Collector's report and the records of the case were read.
(6) It will be seen at once that all the orders, which are being challenged, are not the sort of orders which ought to be passed in quasi-judicial proceedings. The contention of the respondents is that proceedings under the Sea Customs Act are not quasi-judicial proceedings and that, therefore, the orders, even though they do not discuss the material or give reasons for the conclusions arrived at, are perfectly valid. The general questions requiring our consideration, therefore, are two:
(1) Are proceedings under the Sea Customs Act in the nature of quasi-judicial proceedings and
(2) even if they are administrative proceedings, should the various authorities concerned give reasons for the conclusions arrived at?.
(7) With regard to the first point, the learned counsel for the petitioners relied upon certain observations made by Bishan Narain J. in a case which came up before him. While considering Sita Ram Gurdas Mal v. Collector of Central Excise , Bishan Narain under Section 182 of the Act were of a quasi-judicial nature. Bishan Narain j., while discussing the facts of that particular case and the various rulings cited before him observed-
'The act permits the importer to file an appeal and then a revision. This, to my mind, is a very strong indication that the legislature intended adjudication by the customs authorities under S. 182 and similar provisions to be of quasi judicial nature.'
He went on to point out that the Calcutta High Court had also held that the
'proceedings before the customs authorities are quasi-Judicial in nature and it is incumbent on the customs authorities to follow the elementary rules of natural justice and to given an aggrieved party an opportunity of being heard before an order under Section 182 of the Act is passed. My conclusion therefore is that the proceedings under Section 182 of the Act are of quasi-judicial nature'.
Bishan Narain J. was considering whether it was necessary to give an aggrieved party a hearing before an order under Section 182 of the Act was passed. In the present case before us such a hearing was no doubt given. Bishan Narain J.'s opinion, however, extends further than the mere matter of hearing, for he gave his considered opinion that the proceedings were of a quasi-judicial nature and from this, other consequences follow, namely, that the assessee should be given an opportunity to see the material upon which a decision adverse to him is being made, so that he can have an opportunity of explaining and rebutting this evidence. Also the order of assessment and the order of the appellate authority should contain reasons upon which the decision is based because it is only by challenging these reasons that an appeal can be filed. In the present case neither the Customs Collector of Visakhapatnam nor the Central Board of Revenue gave any reasons at all for arriving at their assessment'. Reliance was also placed upon two decisions relating to Section 23(3) of the Income-tax Act. The first of these is Gunda Subbayya v. Commissioner of Income-tax, Madras : 7ITR21(Mad) , in which the following principles were laid down:
'Though there is nothing in the Act which imposes a duty on an Income-tax Officer who makes an assessment under Section 23(3) in such circumstances to disclose to the assessee the material on which he proposes to act, natural justice requires that he should draw the assessee's attention to it and give him an opportunity to show that the officer's information is wrong. He should also indicate in his order the material on which he has made his assessment as an order under Section 23(3) is appealable.'
(8) The same opinion was expressed in a somewhat more elaborate form in Gurmukh Singh v. Commissioner of Income-tax, Punjab . Headnote (2) of the report contains the decision of a Full Bench of the Lahore High Court accurately and may be quoted-
'While proceeding under sub-section (3) of Section 23 the Income-tax Officer is not bound to rely on such evidence produced by the assessee as he considers to be false. If he proposes to make an estimate in disregard of the evidence oral or documentary, led by the assessee, he should in fairness disclose to the assessee the material on which he is going to found that estimate. He is not, however debarred from relying on private sources of information, which sources he may not disclose to the assessee at sources he may not disclose to the assessee at all. In case he proposes to use against the assessee the result of any private inquiries made by him he must communicate to the assessee the substance of the information so proposed to be utilised to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and should further give him ample opportunity to meet it, if possible.'
(9) The Bombay High Court sought to distinguish proceedings under Section 23(3) of the income-tax Act from proceedings under the Sea Customs Act. The matter came up before a Division Bench of the Bombay High Court in Glaxo Laboratories (India) Private Ltd. v. A.V. Venkateswaran : AIR1959Bom372 , and the argument raised before the Division Bench was that since proceedings under Section 23(3) of the Income-tax Act were quasi-judicial, because in the latter case, too, there was the question of assessment to be made in respect of a commodity exported or imported and there was a provision for appeals. The Division Bench came to the conclusion that proceedings under the Sea Customs Act were of an administrative nature, but Coagula, C. J. who wrote the judgment went on to say that even under the Sea Customs Act the Collector was bound to give his reasons. He observed-
'It is well settled law * * * that when a law confers a right of appeal the Legislature intends that that right should be an effective right and that right can only be an effective right if the officer or authority from whose order an appeal lies gives reasons for his decision. It is only then that the appellate Court can properly discharge its function. It is only then that the appellate Court could consider whether the decision of the lower authority was correct or not.'
There, although Coagula, C. J., was of the opinion that proceedings under the Sea Customs Act are not quasi-judicial in nature he quite unequivocally stated that the Collector must give reasons, and in the absence of reasons the order was liable to be quashed. The orders, which were being impugned before the Division Bench of the Bombay High Court were, in fact, quashed and the Collector was directed to make a fresh statement in the light of the observations made by Chagla, C. J. Therefore, a distinction in form was made by the Bombay High Court between proceedings under section 23(3) of the Income-tax Act and proceedings under the Sea Customs Act; in substance, the requirements of natural justice were to be observed in both cases.
(10) I may also refer to a decision of the King's Bench Division in a matter which arose out of the Housing Act of 1930--Errington v. Minister of Health (1935) 1 KB 249. It was held-
'If the Minister holds a private inquiry to which the owners are not invited or takes into consideration ex parte statements with which the owners have had no opportunity of dealing he is not acting in accordance with correct principles of justice, and his confirmation of the clearance order would not be within the powers conferred upon him by the Act, and the owners would be entitled as being persons aggrieved to have the confirmation order quashed.'
(11) A mere perusal of the three orders which are being impugned in this case shows that they do not comply with the requirements of natural justice. We are concerned here more with the first two orders than with the last one, because as far as the last order is concerned, it is not open to appeal. It was, however, imperative that the Customs Collector at Visakhapatnam should have given his reasons for assessing the value of the property at a much higher figure than that which had been declared by the petitioners, and the Central Board of Revenue should have also given its reasons or at any rate, should have referred to the material upon which the decision to dismiss the appeal was based. It was stated before us, as I have already observed that the material consisted of the evidence contained in a trade journal, but even this fact was not mentioned in either of the two orders and the contention of the petitioners is and, no doubt, would have been before the Customs Collector of Visakhapatnam and the Central Board of Revenue that this evidence was irrelevant and should not have been made the basis of the assessment.
Before us it was contended that the Calcutta prices may will be higher than the Visakhapatnam prices, and if under section 30 the prices at Visakhapatnam cannot be calculated, then the obvious course to adopt is the procedure laid down in section 31 which is in the following terms:-
'Goods chargeable with duty upon the value thereof, but for which a specific value is not fixed by law for the purpose of levying duties thereon, shall, without unnecessary delay, be examined by an officer of Customs. If it appears that the real value of such goods is correctly stated in the bill of entry or shipping bill, the goods shall be assessed in accordance therewith.'
In the present case an examination of the goods was undoubtedly made, for samples were drawn and sent for analysis. The analysis and the test reports were called for from the petitioners and they were supplied. No reason was given for not accepting this evidence and it is not clear why neither the declared value nor the evidence of these reports was made the basis of the final assessment. It may again be mentioned that the actual value received by the petitioners was much less than even their declared value.
(12) It seems to me, therefore, that the assessments were not made in accordance with law. The orders of the Customs Collector, Visakhapatnam and of the Central Board of Revenue are not speaking orders upon which a memorandum of appeal can be based. There is no indication of the material upon which these two authorities acted. Furthermore, the Collector of Customs, Visakhapatnam,did not give the petitioners a hearing or an opportunity of representing their case and rebutting or explaining the material upon which he acted. There appears to me to be no adequate reason why the quotations given in the trade journal for Calcutta should be accepted as the final word in determining the prices available at Visakhapatnam. I would therefore, accept these petitions and direct that reassessment should be made in the light of the observations made in the judgment. In the Bombay case referred to above a direction was given by Chagla, C. J., that the petitioners would have an opportunity of filing appeals against the reassessment and the limitation would start from the date upon which reassessment was made. I would make a similar order in this case also. The petitioners will recover costs of these petitions which we assess at a consolidated figure of Rs. 500/-.
(13) Petition allowed.