IN THE HIGH COURT OF KERALA AT ERNAKULAM
OP.No. 13653 of 2002(A)
1. MALAYALA MANORAMA COMPANY LIMITED,
... Petitioner
2. MR. JAYANT MAMMEN MATHEW,
3. MRS. GEETHA VARKEY GEORGE,
Vs
1. ASSISTANT COMMISSIONER OF CUSTOMS
... Respondent
2. UNION OF INDIA, REPRESENTED BY
For Petitioner :SRI.M.PATHROSE MATTHAI (SR.)
For Respondent :SRI.JOHN VARGHESE, ASSISTANT SG
The Hon'ble MR. Justice K.BALAKRISHNAN NAIR
The Hon'ble MR. Justice C.T.RAVIKUMAR
Dated :03/07/2009
O R D E R
K.BALAKRISHNAN NAIR & C.T.RAVIKUMAR, JJ.
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O.P.No.13653 OF 2002
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Dated, this the 3rd day of July, 2009
J U D G M E N T
~~~~~~~~~~~~
Balakrishnan Nair, J.
The petitioners have approached this Court challenging
Ext.P9 order of the Commissioner of Customs dated
28.3.2002, ordering that they are liable to pay an amount of
Rs.32,22,220/- (Rupees thirty three lakhs twenty two thousand
two hundred and twenty only) towards differential duty
payable under the Customs Tariff Act and Central Excise
Tariff Act.
2. The brief facts of the case are the following:
The 1st petitioner Company imported newsprint from
South Korea in May, 1999. Customs duty at the rate of 5.5.%
was paid and the goods were cleared on executing a bond for
payment of any balance amount found due. The Customs
Officer concerned took samples of the newsprint imported for
chemical analysis to find out whether the paper imported
answers the definition of newsprint. On analysis, it was found
that the paper imported contained wood fibres below 65% and
O.P.No.13653/2002 2
therefore, the duty payable was at the rate of 67.3%. The
1st petitioner was served with Ext.P2 notice informing about
the results of the Chemical Analysis. The 1st petitioner
replied by Ext.P3 dated 10.7.2000 calling for the details of the
test results. The Assistant Commissioner of Customs (Imports)
furnished Ext.P4 reply dated 16.10.2001, giving the details
and also enclosing the analysis report by the department’s
laboratory at New Delhi. Ext.P4 contained the working sheet
concerning the assessment of differential duty also. After
considering Exts.P7 and P8 objections filed by the 1st
petitioner, the 1st respondent passed Ext.P9 order holding that
the paper imported by the petitioners was not newsprint and
therefore, they were liable to pay differential duty of
Rs.33, 22,220/-.
3. In Exts.P7 and P8 representations, the 1st petitioner
prayed for a chance to cross-examine the Customs Officer,
who took the samples, and also the Chemist, who conducted
the chemical analysis. But, the said request was considered
and rejected by Ext.P9. Challenging Ext.P9, mainly, on the
ground of violation of principles of natural justice, the Original
Petition was filed. Under the provisions of the Act, the
O.P.No.13653/2002 3
petitioners had a right of appeal to the Commissioner of
appeals, then a further appeal to the Appellate Tribunal and
thereafter, a further appeal to this Court on substantial
question of law. The bypassing of those statutory remedies
was justified by the petitioners taking the plea that the order
of assessment was passed in violation of principles of natural
justice, in as much as they were not given a chance to cross-
examine the Officer, who took the samples, and the Chemist,
who did the analysis. This Court entertained this Original
Petition and granted stay of Ext.P9 on 30.5.2002 for one
month. Later, on 28.6.2008, the stay was extended until
further orders. When the matter came up for final hearing,
the learned Single Judge felt that substantial questions arise
for decision and therefore, referred the matter to the Division
Bench.
4. We heard the learned senior counsel Sri. Pathros
Matthai for the petitioners and Sri. John Varghese, learned
counsel for the Revenue. Though the validity of the definition
of ‘Newsprint’ was challenged in the writ petition, that point
was not argued before us. The learned senior counsel Sri.
Pathros Matthai took us through Exts.P7 and P8, wherein
O.P.No.13653/2002 4
there was a specific request made to give a chance to cross-
examine the Officers concerned. Learned senior counsel also
took us through Ext.P9, wherein the said claim of the
petitioners were dealt with. The learned senior counsel
submitted that when they contested the procedure followed
for taking samples and also the genuineness of the analysis
made, it was obligatory for the 1st respondent to make the
Officers concerned available for cross examination. The
refusal to give such a chance, caused very serious prejudice to
them. The duty will be shooting up from 5.5% to 67.3%, as a
result of the decision of the 1st respondent. The learned
counsel relied on various decisions of the High Courts and the
Apex Court to support the claim of the writ petitioners for a
chance to cross-examine the Officers concerned. Special
reference was made in State of Kerala v. K.T.Shaduli [AIR
1977 SC 1627] and Swadeshi Polytex Ltd. v. Collector of
Central Excise, Meerut [2000(122)E.L.T.641(SC). In
K.T.Shaduli’s case, the Apex Court held as follows:
“5. The second part of the proviso lays
down that where a return has been submitted,
the assessee should be given a reasonable
opportunity to prove the correctness or
completeness of such return. ThisO.P.No.13653/2002 5
requirement obviously applies at the first
stage of the enquiry before the Sales Tax
Officer comes to the conclusion that the
return submitted by the assessee is incorrect
or incomplete so as to warrant the making of a
best judgment assessment. The question is
what is the content of this provision which
imposes an obligation on the Sales Tax
Officer to give and confers a corresponding
right on the assessee to be afforded, a
reasonable opportunity ‘to prove the
correctness or completeness of such return.’
Now, obviously ‘to prove’ means to establish
the correctness or completeness of the
return by any mode permissible under law.
The usual mode recognised by law for proving
fact is by production of evidence and evidence
includes oral evidence of witnesses. The
opportunity to prove the correctness or
completeness of the return would, therefore,
necessarily carry with it the right to
examine witnesses and that would include
equally the right to cross-examine witnesses
examined by the Sales Tax Officer. Here, in
the present case, the return filed by the
assessee appeared to the Sales Tax Officer
to be incorrect or incomplete because certain
sales appearing in the books of Hazi
Usmankutty and other wholesale dealers were
not shown in in the books of account of the
assessee. The Sales Tax Officer relied on
the evidence furnished by the entries in the
books of account of Hazi Usmankutty and
other wholesale dealers for the purpose of
coming to the conclusion that the return filed
by the assessee was incorrect or incomplete.
Placed in these circumstances, the assesseeO.P.No.13653/2002 6
could prove the correctness and completeness
of his return only by showing that the entries
in the books of account of Hazi Usmankutty
and other wholesale dealers were false, bogus
or manipulated and that the return submitted
by the assessee should not be disbelieved on
the basis of such entries, and this obviously,
the assessee could not do, unless he was given
an opportunity of cross-examining Hazi
Usmankutty and other wholesale dealers with
reference to their accounts. Since the
evidentiary material produced from or
produced by Hazi Usmankutty and other
wholesale dealers was sought to be relied
upon for showing that the return submitted
by the assessee was incorrect and incomplete,
the assessee was entitled to an opportunity to
have Hazi Usmankutty and other wholesale
dealers summoned as witnesses for cross-
examination. It can hardly be disputed that
cross-examination is one of the most
efficacious methods of establishing the truth
and exposing falsehood. Here, it was not
disputed on behalf of the Revenue that the
assessee in both cases applied to the Sales
Tax Officer for summoning Hazi Usmankutty
and other wholesale dealers for cross-
examination, but his application was turned
down by the Sales Tax Officer. This act of
the Sales Tax Officer in refusing to summon
Hazi Usmankutty and other wholesale dealers
for cross-examination by the assessee clearly
constituted infraction of the right conferred
on the assessee by the second part of the
proviso and that vitiated the orders of
assessment made against the assessee.”
(emphasis supplied)
O.P.No.13653/2002 7
5. In support of the submission that the petitioners
are entitled to approach this Court directly, when the order
impugned has been passed in violation of principles of natural
justice, reliance was placed in Whirlpool Corportion v.
Registrar of Trade Marks [1998 (8) SCC 1]. In the said
decision, the Apex Court held as follows:
“15. Under Article 226 of the Constitution,
the High Court, having regard to the facts of
the case, has a discretion to entertain or not
to entertain a writ petition. But the High
Court has imposed upon itself certain
restrictions one of which is that if an
effective and efficacious remedy is available,
the High Court would not normally exercise its
jurisdiction. But the alternative remedy has
been consistently held by this Court not to
operate as a bar in atleast three
contingencies, namely, where the writ petition
has been filed for the enforcement of any of
the Fundamental Rights or where there has
been a violation of the principle of natural
justice or where the order or proceedings are
wholly without jurisdiction or the vires of an
Act is challenged.”
6. Learned senior counsel further submitted that
action taken in violation of principles of natural justice will
make it arbitrary and therefore, violative of the fundamental
right of the petitioners under Article 14 of the Constitution of
India.
O.P.No.13653/2002 8
7. The learned counsel for the respondent brought to our
notice the hierarchy of the authorities available under the statute for the
redressal of the grievance of the writ petitioners. The learned counsel
pointed out that the Commissioner of appeals has power to hold further
enquiry and if found necessary, to take further evidence also.
Therefore, the main grievance canvassed by the petitioners could have
been redressed by filing the statutory appeal itself. So, the learned
counsel prayed that the Original Petition may be dismissed.
8. We considered the rival submissions made at the Bar and
also the decisions cited before us. Since the Writ Petition was pending
before this Court for the last seven years, we are inclined to hear the
Writ Petition on merits. Chapter 48 of the Schedule of the Customs
Tariff Act deals with paper and paperboard; articles of paper pulp, of
paper or of paperboard. In the said Chapter, newsprint is defined as
follows:
“Newsprint means uncoated paper of a kind used
for the printing of newspapers, of which not less
than 65% by weight of the total fibre content
consists of wood fibres obtained by a mechanical
or chemi-mechanical process, unsized or very
lightly sized, having a surface roughness Parker
Print Surf (1 Mpa) on each side exceeding 2.5
micrometres (microns), weighing not less than
40g/m2 and not more than 65 g/m2.”
O.P.No.13653/2002 9
9. In this case, on analysis it was found that the
percentage of wood fibre content was below 65%. The
petitioners would say that a large consignment of newsprint,
packed in several containers, were imported in May, 1999.
But, samples were taken from only one reel in one container.
The sampling was not done in accordance with the procedure
prescribed for the same. Having regard to the wood used,
there may be change in the wood fibre content. So, the
sampling from all the containers should have been taken to
ascertain the correct wood fibre content. The petitioners also
disputed, the method employed for arriving at the wood fibre
content. For the above reasons, they wanted to cross-examine
the Customs Officer, who took samples and the Chemist, who
did the analysis. We notice that the analysis report is a
document relied on against the petitioners. Therefore, if they
request to make available the author of that report for their
cross-examination, the assessing officer was bound to do
that. Regarding the samplings, if the records are produced, it
could be found out whether for sampling the proper
procedure has been followed or not. It may not be necessary
to examine the Officer, who took the samples. But, the
chemical analysis report, which alone decided the fate of the
O.P.No.13653/2002 10
case, is a vital document against the petitioners. Therefore,
we feel that they should have been given a chance to cross-
examine the Chemist, who did the analysis. For denying that
opportunity, we feel that the impugned order is vitiated,
especially, in view of the enormity of the prejudice caused to
them.
10. In the result, Ext.P9 is quashed and the matter is
remitted to the 1st respondent for fresh determination in
accordance with law. The records relating to taking of the
samples shall be made available to the petitioners for their
perusal. If the Officer, who did the analysis, is not available,
his successor-in office along with the records concerned shall
be made available for the cross-examination of the petitioners.
11. If the petitioners invoked the appellate remedy,
normally, they would have paid the amount levied. Because
this Court entertained this Original Petition and granted
unconditional stay for the last 7 years, the petitioners were
saved from paying any amount. We take note of the maxim
that ‘act of Court shall prejudice none’. By the Act of this
Court, the Revenue also cannot be prejudiced. So, in case
O.P.No.13653/2002 11
after reconsideration, any amount is found due, the Revenue
can demand the same with interest from the date, the amount
under Ext.P9 became payable by the petitioners. Learned
senior counsel for the petitioners pointed out that since Ext.P9
was a void order, it never had any legal effect and quashing
the same obliterated it from day one. So, the direction to pay
interest may not be justified, it was submitted. This case
happened to be pending before this Court because of docket
explosion. Going by the above maxim, Revenue cannot be
asked to suffer. Because of the delay from the part of this
Court, the petitioners were able to keep the money with them
so long. So, the contention of the learned senior counsel
concerning payment of interest cannot be accepted.
The Original Petition is disposed of as above.
(K.BALAKRISHNAN NAIR, JUDGE)
(C.T.RAVIKUMAR, JUDGE)
ps
O.P.No.13653/2002 12
K.BALAKRISHNAN NAIR &
C.T.RAVIKUMAR, JJ.
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O.P.NO.13653/2002
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JUDGMENT
DATED 3RD JULY, 2009
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