Delhi High Court reinforces this separation of power
A very basic concept of justice, world over, is that the person handing out a sentence cannot be the same person presiding over the adjudication of that case. That simple fact, however, seems to have been ignored in the case of show cause notices issued by investigative agencies such as the Directorate of Revenue Intelligence and the Directorate General of Central Excise Intelligence. As a result, very often the same officers who are booking cases and issuing notices running into hundreds of pages are also the ones who are also confirming these notices. In other words, once a person/company has been assessed for avoiding customs/excise duty, the charge is confirmed at the next level almost automatically—the result is harassment and years of legal tangles as the case weaves its way up the judicial system. A bunch of 20 companies, which included Bharat Sanchar Nigam Limited, Godrej & Boyce Manufacturing Company and Sony India, were granted relief from the Delhi High Court which reinforced this separation of powers earlier this week, but most likely the government will appeal this in the Supreme Court.
The story begins in the case of Sayed Ali, a partner in Handloom Carpet, a firm which manufactured and exported carpets. The firm was charged with selling some duty free imports in the open market and the Assistant Collector of Customs (Preventive) in Mumbai issued a show cause notice. When this was challenged, the same officer adjudicated over the matter and confirmed the original demand was correct. Another appeal was filed which Sayed Ali won, and even the appellate tribunal CEGAT ruled against the practice—the matter finally reached the Supreme Court which also ruled the same way. Immediately, all the show cause notices issued by the DRI became defunct. Unfortunately, with the DRI complaining to the government, the government amended the law to give back this power to it by amending the Customs Act in September 2011. Armed with this power, these agencies once again started issuing show cause notices to firms. While striking down 20 such orders issued under these new powers, the Delhi High Court observed last week that “The doctrine of comity of jurisdiction requires that for the proper administration of justice there should not be an overlapping of the exercise of powers and functions”.While it is certain that the government will appeal the matter in the Supreme Court since the DRI/DGCEI will raise the bogey of revenue loss, the finance minister would do well to ask his officers to keep in mind the very basic concept of justice. After all, if the investigation by the DRI/DGCEI is a strong one, surely letting another office handle the issuing of the notice—and the adjudication—is in the interests of natural justice? It will also go a long way in assuring those investing in India—both locals as well as foreigners —that the taxman and other revenue authorities are only raising genuine demands that are being vetted by a third party.