2003 PLP 2798 (PTD)

(1) Mr. Shamim Ahmed. (P. A.) (2) Mr. Sher Zain (E. O.) (3) Mr. Gohar Siddiqui (E. O) A draft letter may be put up to be issued under the signatures of the undersigned tomorrow positively in which the party would be directed to fully cooperate with the team as the exercise is being carried out at the orders of the Collector of Customs. Thereafter, the licensed bonded premises was inspected, several nothings were made and draft circular was prepared on 7‑7‑2003. However, several inquiries were made by the respondent No. 1 and on 12‑7‑2003, the respondent No. 1, sought approval for circulation of the suspension order of the licence. The approval was sought for issuance of show‑cause‑notice for the cancellation of licence. On 15‑7‑2003, the respondent No. 1, directed for issuance of circular intimating the suspension of licence and issuance of show‑cause notice for the cancellation thereof. On 15‑7‑2003 the circular was issued and draft show‑cause notice was prepared. On 6‑8‑2003, the show‑cause notice was issued to the petitioner calling upon to explain as to why the licence may not be cancelled. On 6‑8‑2003 the law consultant of the petitioner wrote a letter in response to the circular, dated 15‑7‑2003 and the respondent No. 1, prepared parawise comments to the effect that Private Bonded Warehouse licence was suspended under subsection (4) of section 13 of the Customs Act and the reasons for suspension were communicated on 15‑7‑2003. According to respondent No. 1, under sub rule (2) of rule 240 of the Customs Rules, the reasons to show cause were required to be communicated to the licensee after suspension of the bonded licence, and therefore, a show‑cause notice was issued on 6‑8‑2003. Subsequently Messrs Navin Merchant and associates. Addressed a letter to the respondent No.2 on 12‑8‑2003 and the respondent No.1, against submitted note that under sub‑rule (2) of rule 240, the reasons to show cause are to be communicated to the licensee after suspension of bonded licence and a show‑cause notice, dated 6‑8‑2003 was accordingly issued to the bonder. After narrating the facts it would be appropriate to reproduce the relevant law on the issue under consideration. Subsections (3) and (4) of section 13 of the Customs Act, 1969 read as follows:‑‑ "Section 13(3) A licence granted under this section may be cancelled by the Collector of Customs for infringement of any condition laid down in the licence or for any violation of any of the provisions of this Act or any rules made thereunder, after the licensee has been given proper opportunity of showing cause against the proposed cancellation. (4) Pending consideration whether a licence be cancelled under subsection (3), the Collector of Customs may suspend the licence. " Rules 239 and 240 of the Customs Rules, 2001 read as follows:‑‑ "(239) Cancellation of licence.‑‑‑The licence may be cancelled by the Collector of Customs on conviction of the licensee for any offence under the Act or non‑utilization of the licence, or for violation of any of the conditions specified in the licence or on the request, in writing by the licensee. (240) Suspension of lience. (1) Pending consideration whether a licence be cancelled under rule 4. the Collector of Customs may suspend the licence if he is of the opinion that it is expedient to do so and for the reasons to be recorded in writing, therefor by him. (2) In a case referred in sub‑rule (1) the reasons to show cause shall be communicated to the licensee within twenty four hours of such suspension." A perusal of subsection (4) of section 13 above, shows that the Collector of Customs is empowered to suspend the licence pending consideration whether a licence be cancelled under subsection (3) of section

13. A bare perusal of subsection (3) of section 13, shows that a licence granted by the Collector of Customs under section 13 may be cancelled for infringement of any conditions laid down in the licence or for any violation of any of the provisions of the Customs Act or any rules made thereunder, after the licensee has been given proper opportunity and showing cause against the proposed cancellation. It means that the proceedings to consider cancellation of licence granted under section 13 of the Customs Act, is to commence with the issuance of show‑cause notice to the licensee against the proposed cancellation. Thus, the condition precedent for exercise of jurisdiction under subsection (4) of section 13 is that there should be a pending proceeding for the consideration of the cancellation of licence. The expression pending consideration connotes the commencement of the proceedings and until it is concluded: The expression `pending consideration' further denotes the period between which cognizance is taken of a matter/issue by an Authority competent in law to pass an order. If an authority competent in law to pass an order has not performed an act which is sine‑qua‑non for passing an order of initiation of proceedings in that behalf the proceedings shall not be deemed to be pending. The condition precedent for initiation of proceedings for the cancellation of licence is the issuance of show‑cause notice and the licence can be suspended during the proceedings pending consideration whether a licence be cancelled or not. Under sub‑rule (1) of rule 240, the Collector of Customs may suspend the licence if he is of the opinion that it is expedient to do so and for the reasons to be recorded in writing therefor, by him. Thus, A pending proceedings for cancellation of licence under section 13(3) of the Customs Act, read with rule 239 of the Customs Rules, 2001, if the Collector of Customs thinks it expedient to do so, may suspend the licence but before exercising such power he has to record his opinion containing the reasons to do so, meaning thereby, that an objectivity is to be demonstrated in exercising this power of the suspension of licence. Under sub‑rule (2) of rule 240, the Collector of Customs is required to communicate the reasons recorded by him for suspension of licence calling upon the licensee to show cause against such order. The reasons recorded as required sub‑rule (1) of rule 240 are to be communicated to the licensee within twenty four hours of such suspension. A cumulative reading of the provisions contained in sub sections (3) and (4) of section 13 of the Customs Act, 1969 and rules 239 and 240 of the Customs Rules 2001, leads to the conclusion that the power of Collector of Customs to suspend the licence granted under section 13 of the Customs Act, 1969, is circumscribed with the following conditions:‑‑ (1) A proceeding considering the cancellation of licence under subsection (3) of section 13 must be pending, meaning thereby that a show‑cause‑notice for proposed cancellation is duly served on the licensee. (2) During the pendency of proceedings for the cancellation of licence as explained above, the Collector of Customs is of the opinion that it is expedient to suspend the licence. (3) The opinion is to be recorded in writing by the Collector of Customs himself and not by any subordinate or any superior official. (4) The opinion so recorded should reflect the application of mind by the Collector of Customs himself which is indicated by the expression "the reasons to be recorded in writing, therefor, by him (underlining is mine) appearing in sub‑rule (1) of rule

240. The opinion must contain the reasons for entertaining such view. (5) The reasons contained in the opinion recorded by the Collector of Customs himself, under sub‑rule (1) of rule 240 shall be communicated to the licensee within twenty‑four hours of such suspension. Now we proceed to examine the admitted facts in the present case. We find that, admittedly the proceedings, for cancellation of licence under subsection (3) of section 13 of Customs Act, 1969, commenced with the issuance of show‑cause notice, dated 6‑8‑2003. Prior to the issuance of this show‑cause notice there was no proceedings pending consideration for the cancellation of licence. Thus, the respondent No. 2, has suspended the licence of the petitioner on 29‑6‑2003 when no proceeding was pending consideration for the cancellation of licence. Although the perusal of record shows that the Collector of Customs cancelled, the petitioner's licence on 29‑6‑2003 but even if contention of Mr. Raja Muhammad Iqbal, learned counsel for the respondent is accepted that the licence was cancelled with the issuance of circular issued by respondent No.1, dated 15‑7‑2003, even then the suspension of licence is not during the pendency of proceedings for cancellation of licence which commenced with the issuance of show cause notice, dated 6‑8‑2003. The contention that the licence was suspended from 15‑7‑2003 when the respondent No.1. Assistant Collector of Customs issued a circular letter is not tenable because the Assistant Collector of Customs has no authority to pass any such order. The order of suspension of licence is to be made by Collector of Customs only which is indicated from a bare reading of subsection (4) of section 13 and sub‑rule (1) of rule

240. The order passed by the Collector of Customs on 29‑6‑2003 reproduced in the earlier part of this judgment shows that, he has not assigned any reason in his order for the suspension of licence and 'the reasons have beer, subsequently communicated in the circular, issued by the Assistant Collector of Customs on 15‑7‑2003. The order of suspension of licence is not sustainable in law, first, for the reason that, the Collector of Customs has not recorded any opinion as to why it was expedient to suspend the licence and secondly he has not recorded the reasons in writing himself required under the law. The reasons contained in the letter of Assistant Collector, dated 15‑7‑2003 cannot be deemed to be the compliance of law as an officer competent to pass an order is required to do so himself and the recording of reasons by his subordinate in a subsequent communication is not warranted in law. It is also pertinent to observe that if an order passed by a competent Authority is not in accordance with the law then the subsequent compliance of the conditions prescribed in law even by himself shall not cure the defect and the recording of reasons by subordinate Authority has no legal validity. The reasons for the suspension of licence are to be communicated to the licensee within twenty‑four hours of such suspension but according to the note in the file of respondent No.1, the compliance of sub‑rule (2) of rule. 240 has been made by issuance of show‑cause notice on 6‑8‑2003. According to Mr. Raja M. Iqbal, the compliance has been made by issuance of reasons contained in Circular, dated 15‑7‑2003 issued by the Assistant Collector of Customs. However, C there is no communication of reasons to the petitioner/licensee within twenty‑fours of the suspension order as required under the law and consequently, the suspension order impugned in this petition is not in accordance with the law and is liable to be struck down which we do accordingly. Before parting with this order, we would like to observe that Mrs. Navin Merchant, learned counsel for the petitioner has stated that after suspension of licence the respondents may continue with the proceedings, for cancellation of the licence in accordance with the law. It is directed accordingly. After hearing the learned Advocates for the parties and perusal of record, the petition was allowed on 2‑9‑2003 by a short order as follows:‑‑‑ "After hearing both learned counsel at length, this petition is disposed of in the following terms:‑‑‑ (1) The order, dated 29‑6‑2003 passed by the Collector and the Circular, dated 15‑7‑2003 issued by Assistant Collector Customs, Manufacturing Bond (Export) are hereby set aside. (2) Notwithstanding the setting aside of the suspension order the proceedings initiated by the respondents under Show‑cause notice, dated 6‑8‑2003 shall continue and be decided in accordance with law." These are the detailed reasons in support thereof. M.B.A./A‑484/K Order accordingly.