Skip to content


Gemini Metal Works Vs. Union of India and ors. - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtChennai High Court
Decided On
Case NumberWrit Appeal No. 350 of 1978
Judge
Reported in1986(7)ECC51; 1985(5)LC2457(Madras); 1985(22)ELT27(Mad)
ActsCustoms Act, 1962 - Sections 111 and 112; Imports (Control) Order, 1955
AppellantGemini Metal Works
RespondentUnion of India and ors.
Appellant AdvocateNalini Chidambaram, Adv.
Respondent AdvocateNarasimhan, Additional Central Government Standing Counsel
Cases ReferredNawabkhan Abbaskhan v. State of Gujarat
Excerpt:
.....it is well established by now that an order which is found to be void for violation of the principles of natural justice can be attacked in a collateral proceeding initiated on the basis of such void order. as already stated we have held that the appellant can make a collateral attack of the order of cancellation dated 15-12-1970 in these proceedings and in fact the said order of cancellation is void for violation of not only the principles of natural justice clause 10 of the imports (control) order, 1955. since the sole basis for passing the impugned order is the cancellation of the licence and as we have held that the cancellation of the licence is bad not only for violating the principles of natural justice but also for violating clause 10 of the imports (control) order,..........the appellant's case was that since the order of confiscation and imposition of redemption fine passed by the third respondent on 19-8-1971 is based on the order dated 15-12-1970 passed by the fourth respondent cancelling the licence issued to the appellant and as the order of cancellation of the licence is in violation of not only the principles of natural justice but also the specific clause 10 of the imports (control) order, 1955, the order passed by the third respondent on 19-8-1971 should be taken to be invalid. with reference to this contention, mohan j., has found as a fact that no show cause notice was issued to the appellant before the order was issued by the fourth respondent on 15-12-1970 cancelling the licence and that in fact the order dated 15-12-1970 has been.....
Judgment:

Ramanujam, J.

1. This writ appeal is directed against the decision of Mohan, J., in W.P. No. 3554 of 1975 dismissing the writ petition filed by the appellant for the issue of a writ certiorari to quash the order of the first respondent confirming the order of the second respondent, in appeal subject to reduction of fine, which in turn confirmed, subject to reduction of fine, the original order confiscating the goods under Section 111 of the Customs Act and imposing a redemption fine Rs. 38,000/- in lieu of confiscation. The circumstances which led to the filing of the said writ petition by the appellant may briefly be noted. The appellant had been issued an actual users 'licence to import tin plates waste. The said licence was current upto 30-6-1970. On the basis of an order placed by the appellant with a foreign seller, goods had been shipped in August 1970 and they arrived in the Madras harbour in November 1970. Since the goods could not be cleared, unless there was a valid licence to import the same the appellant applied to the fourth respondent for revalidation of the licence which expired on 30-6-1970. The fourth respondent ordered revalidation of the licence from 12-11-70 being the dated of application to 31-12-1970. Since the licence as revalidated would not enable the petitioner-appellant to clear the goods, as the shipment itself was subsequent to the expiry of the period of the original actual users' licence the appellant applied to the fourth respondent for revalidation of the licence from 30-6-70 to 31-12-1970. The fourth respondent by his order dated 26-11-1970 revalidated the licence from 30-6-70 the date of expiry of the licence upto 31-12-1970. Thereafter the fourth respondent by a communication dated 7-12-1970 called upon the appellant to return the actual users' licence, as revalidated, on information from the Customs Department that as the entire quantity referred to in the actual users' licence had been imported, there was no question of revalidating the licence subsequent to 30-6-1970. The appellant returned the licence, as required by the fourth respondent and the fourth respondent by order dated 15-12-1970 cancelled the licence without any further notice to the appellant or without giving it any opportunity to put forward its case as against the proposed cancellation. Thereafter based on the cancellation of the actual users' licence on 15-2-1970 by the fourth respondent, the third respondent initiated proceedings against the appellant for violation of the provision in S. 111(d) of the Customs Act, 1962. After issuing a show cause notice and after hearing the appellant, the third respondent by his order dated 19-8-1971 directed confiscation of the goods and imposed a redemption fine of Rs. 38,000/- in lieu of confiscation. The appellant filed an appeal against the said order dated 19-8-1971 to the second respondent, who by his order dated 8th September, 1972 reduced the fine to Rs. 15,000/-, taking into account the peculiar facts of the case and also the request of the appellant to reduce the fine, even if the imposition of fine by the original authority was justified. Against the order of the second respondent dated 8-9-1972 the appellant filed an appeal before the first respondent and the first respondent has chosen to reduce the fine further from Rs. 15,000/- to Rs. 13,200/- by order dated 13-12-1973. The appellant thereafter filed W.P. No. 3554 of 1975 out of which the present writ appeal has arisen questioning the validity of the order of the first respondent dated 13-12-1973, confirming the order of the second respondent dated 8-9-1972, subject to reduction of fine, which in turn confirmed the order of the third respondent dated 19-8-1971 subject to reduction of fine.

2. In the writ petition the appellant's case was that since the order of confiscation and imposition of redemption fine passed by the third respondent on 19-8-1971 is based on the order dated 15-12-1970 passed by the fourth respondent cancelling the licence issued to the appellant and as the order of cancellation of the licence is in violation of not only the principles of natural justice but also the specific Clause 10 of the Imports (Control) Order, 1955, the order passed by the third respondent on 19-8-1971 should be taken to be invalid. With reference to this contention, Mohan J., has found as a fact that no show cause notice was issued to the appellant before the order was issued by the fourth respondent on 15-12-1970 cancelling the licence and that in fact the order dated 15-12-1970 has been passed without giving an opportunity to the appellant to put forward its case and without hearing it. But the learned Judge has proceeded to observe as follows :-

'Certainly the principles of natural justice cannot be applied in a rigid way divorced from the realities of the situation. To me it appears on a careful analysis of all these that the petitioner (appellant herein) had used the revalidation for the purpose of producing the licence to Customs to obtain clearance from Customs against REP licence making use of the flexibility provision. Therefore, the petitioner was trying to play fraud. But before the petitioner could succeed, the mistake was found and it was rectified by the Department.'

The learned Judge also took the view that since the revalidation itself was incorrect, which came to be discovered only when the Customs Department pointed out the mistake, the appellant, even if it had been given a show cause notice regarding the proposed cancellation of the licence, would not have succeeded in resisting the cancellation. In that view, the learned Judge sustained the order of the third respondent dated 19-8-1971 as modified by the orders of the second and first respondents dated 8-9-1972 and 13-12-1973 resectively. The said view taken by Mohan, J., has been questioned by the appellant in this writ appeal.

3. It is unnecessary to refer to the various matters set out in the judgment of the learned single Judge, as we are of the view that the order of cancellation of the licence as revalidated is in violation of not only the principles of natural justice but also the statutory provision in Clause 10 of the Imports (Control) Order, 1955. Once it is found that the order of cancellation dated 15-12-1970 was passed without any notice to the appellant and without hearing it, admittedly the licence as ratified by the fourth respondent conferred a benefit on the appellant and if that benefit was sought to be taken away by the licensing authority by cancelling the licence, the appellant must be given a show cause notice regarding the proposed cancellation so that it may have an opportunity to put forward its case against such proposed cancellation. It is one of the basic principles of natural justice that a man cannot be condemned unheard. In this case since the benefit of the licence given to the appellant had been deprived by cancelling the licence without any notice to it and without hearing it, the order violates the principles of nataral justice. Further, Clause 10 of the Imports (Control) Order, 1955 makes a specific provision for giving an opportunity of being heard to a person sought to be affected. In this case revalidation of the licence is said to have been ordered due to a mistake or inadvertence. In such cases, Clause 10 referred to above provides for the issue of a show cause notice and giving of a reasonable opportunity of being heard to the person concerned. The said clause says that no action shall be taken under clause 7 or sub-clause (1) or sub-clause (3) of clause 8 or clause 8A or clause (1) of clause 9 against a licensee or an importer or any other person unless he has been given a reasonable opportunity of being heard. Clause 9 provides for cancellation of licences on various grounds. As per Clause 10, before a licence is cancelled in exercise of the powers under Clause 9(1), the licensee should be given a reasonable opportunity of being heard. In this cast no such opportunity was given to the appellant before the licence in its favour cancelled. Thus, there is a clear violation of not only the principles of natural justice but also the statutory provision in Clause 10 of the Imports (Control) Order, 1955. The learned counsel for the respondents contends that the appellant has not chosen to question the order of cancellation, dated 15-12-1970 at any time before the filing of the writ petition and as a matter of fact the appellant itself in the proceedings before the authorities below proceeded on the basis that the licence had been validly cancelled, and had been pleading only for leniency in the matter of imposition of fine and therefore it is not open to the appellant to question the validity of the order of cancellation in these proceedings which are directed against the subsequent order dated 19-8-1971 confiscating the goods imported and imposing a redemption fine of Rs. 38,000/-, which was later reduced to 13,200/- as a result of the revisional order passed by the first respondent on 13-12-1973. It is no doubt true that the order of cancellation of the licence passed on 15-12-1970 has not been directly canvassed by the appellant in these proceedings; nor did the appellant question the order of cancellation before the first, second and third respondents and it has chosen to attack the order of cancellation only collaterally while questioning the order of the first respondent dated 13-12-1973 by which the original order of the third respondent dated 19-8-1871 stood confirmed, subject to the reduction of fine.

4. The question is, whether the appellant is entitled to attack the validity of the order of cancellation of the licence dated 15-12-1970 collaterally in these proceedings which are directed against the order passed by the first respondent on 13-12-1973. It is well established by now that an order which is found to be void for violation of the principles of natural justice can be attacked in a collateral proceeding initiated on the basis of such void order. A casual reference to the decision of the Supreme Court in Nawabkhan Abbaskhan v. State of Gujarat AIR 1974 SC 1479. is sufficient to sustain the above proposition. The Supreme court, while meeting the contention that there should be a direct attack against an order said to violat the principles of natural justice and there cannot be an collateral attack, observed as follows:

'But we do hold that an order which is void may be directly and collaterally challenged in legal proceedings. An order is null and void if the statute clothing the administrative tribunal with power conditions it with the obligation to hear, expressly or by implication. Beyond doubt, an order which infringes a fundamental freedom passed in violation of audi alteram partem rule is a nullity. When a competent Court holds such official act or order invalid, or sets it aside, it operated from nativity, i.e, the impugned act or order was never valid.'

It is unnecessary to refer to other authorities and multiply citations in support of the statement that an order passeed in violation of the principles of natural justice is void and it should be taken to be a nullity. Though the said order dated 15-12-1970 cancelling the licence in violation of the principles of natural justice and without observing the statuory provision in Clause 10 of the Imports (Control) Order, 1955 has not been made the subject matter of direct attack in the writ proceeding, since however that order had given rise to the subsequent order passed by the third respondent on 19-8-1971, the appellant while questioning the validity of the order of the third respondent dated 19-8-1971 can make a collateral attack against the order of cancellation dated 15-12-1970. We find that the impugned order dated 19-8-1971 has been passed on the basis that the appellant had no valid licence on the date of the import of goods and therefore the import was unauthorised. If there was no cancellation of the lincence, we cannot say whether the impugned order would have been passed by the authorities. The learned counsel for the respondents would contend that even if there has been no cancellation of the licence, since the quantity referred to in the licence had already been exhausted by actual user, the appellant cannot import any goods in pursuance of the said licence. However, the learned counsel for the appellant refers to a notification dated 13-5-1970 which proceeds on the basis that the actual users' licence, of which the period of validity has not expired, has not expired, but the value has been exhausted, will be treated as a valid licence. According to the learned counsel for the appellant, if the licence has not been cancelled, it can form the basis for import notwithstanding the value mentioned in the licence having been exhausted. However this position is controverted by the learned counsel for the respondents by contending that the said provision will apply only till the currency period of the licence had not after its expiry and that in this case the licence had expired by 30-6-70 and even though the same had been revalidated, the revalidated licence cannot have the benefit of the said provision. It is unnecessary for us to decide the question as to whether the revalidated licence, if it has not been cancelled, will make the import unauthorised, in view of the order we propose to make in this case.

As already stated we have held that the appellant can make a collateral attack of the order of cancellation dated 15-12-1970 in these proceedings and in fact the said order of cancellation is void for violation of not only the principles of natural justice Clause 10 of the Imports (Control) Order, 1955. Since the sole basis for passing the impugned order is the cancellation of the licence and as we have held that the cancellation of the licence is bad not only for violating the principles of natural justice but also for violating Clause 10 of the Imports (Control) Order, 1955, the impugned order dated 19-8-1971 and the subsequent order dated 8-9-72 passed by the second respondent and the revisional order passed by the first respondent dated 13-12-1973 cannot have any valid basis and therefore all the orders originating from the order dated 19-8-1971 will stand quashed. We also hold that the order of cancellation dated 15-12-1970 passed by the fourth respondent is void. The fourth respondent is, however, given the liberty to issue a show cause notice to the appellant against the proposed cancellation of the licence and pass final orders after hearing its objections regarding the proposed cancellation of the licence. Fresh proceedings, if any, for cancellation of the licence should be initiated and completed by the fourth respondent within four months from this date. Any further proceedings contemplated by the third respondent will depend upon the final orders to be passed by the fourth respondent on the proposal to cancel the licence. In the event of the fourth respondent cancelling the licence of the appellant, it is open to the third respondent to initiate proceedings afresh under Sections 111(d) and 112 of the Customs Act.

6. The writ appeal is allowed accordingly and there will be no order as to costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //