Can officer adjudicate SCN without providing relevant documents to the noticee?

PJ/CASE LAW/2015-16/2629

Case:-COMMISSIONER OF C. EX., LUDHIANAVERSUS GULAB INDUSTRIES (P) LTD.

Citation:- 2015 (316) E.L.T. 657 (P & H)

Brief facts:- M/s. Gulab Industries (P) Ltd., Ludhiana, is engaged in the business of processing man-made fabrics. During the course of checking by preventive staff of the Central Excise Division-1, Ludhiana, a vehicle (tempo), loaded with processed man-made fabrics was apprehended at Link Road, Ludhiana. Surjit Singh, driver of the tempo could not produce any bill, invoice or other document, evidencing payment of Central Excise Duty. The driver of the tempo, recorded his statement, dated 26-9-1998, under Section 14 of the Central Excise Act, 1944 (hereinafter referred to as the Act), stating that he was working as a driver with M/s. Gulab Industries (P) Ltd. The preventive staff thereafter visited the factory and upon scrutiny of the record, further investigation into the matter and recording of statement, dated 24-3-1999, made by Shri Surjit Kumar, Director, etc., issued a notice to show cause why recovery of duty to the tune of Rs. 12,00,481/-, along with penalty, etc., be not effected. The notice was served upon the respondent on 3-6-2004. The respondent addressed a letter to the adjudicating officer, praying that all relevant documents be furnished. The adjudicating officer, addressed a letter to the respondent, asking it to visit his office, inspect the file and take copies of the documents. The respondent, however, did not come forward to inspect or receive copies of the documents and instead addressed letters, requesting that it be supplied the relevant documents. The adjudicating officer, vide order dated 3-6-2004, confirmed the demand and ordered charging of interest and imposition of penalty, as detailed in his order. Aggrieved by this order, the respondent filed an appeal before the Commissioner (Appeals). Vide order dated 30-12-2004, the appeal was allowed and order dated 3-6-2004 passed by the adjudicating officer was set aside, on the ground that failure to supply relevant documents, relied by the adjudicating officer, is a violation of the principles of natural justice. The appellant thereafter filed an appeal before the Tribunal, which was dismissed on 6-7-2010. The appellant filed an application for restoration of appeal, which was dismissed on 3-6-2011.

Appellant’s contention:- Counsel for the appellant submitted that it is true that there was an error on the part of the adjudicating officer in failing to furnish relevant documents along with the notice but as letters were repeatedly addressed to the respondent to come forward and inspect records and receive copies of relevant documents but the respondent did not come forward, the appellate authority and the Tribunal have erred in holding that principles of natural justice have been violated. It is further submitted that the Department is a large organization, where errors are likely to creep into its functioning, and as the appellant had appended all relevant documents before the Tribunal, a wholesome view should have been taken, particularly, as evasion of duty is writ large on the facts of the case or at least the matter should have been remanded to the adjudicating officer to decide the matter afresh.

Respondent’s contention:-Counsel for the respondent submitted that the appellate authority as well as the Tribunal have not committed any error of jurisdiction or law. It was not denied by the appellant that relevant documents were not appended with the show cause notice. The violation of the principles of natural justice was writ large on the facts of the case and as there was no error of jurisdiction or law in the impugned order, the appellant cannot hide behind the negligence of its officers. It was further submitted that, as obligation to furnish relevant documents lay upon the appellant, the mere fact that the respondent did not come forward to inspect the records, did not absolve the appellant of its duty to furnish documents to the respondent.
Reasoning of judgement:- They heard counsel for the parties, perused the impugned order as well as the order passed by the adjudicating officer and were sanguine, in the correctness of their opinion, that the case in hand may disclose collusion, or to put it politely, negligence on the part of certain officers. It was rather surprising that an officer of the rank of Additional Commissioner, was not aware that he was required to append all relevant documents with the show cause notice, and if not appended, to provide copies to the noticee within reasonable time, before proceeding to adjudicate the show cause notice. Admittedly, documents were not supplied to the respondent. The negligence did not end here. The appellate authority granted time to the Department to furnish documents to the respondent so that it could reply to the show cause notice but this opportunity also did not elicit any response, compelling the appellate authority to reverse the order passed by the adjudicating officer for violation of principles of natural justice. The Tribunal had dismissed the appeal and the application for restoration, on the ground of violation of principles of natural justice. While they found no error in the impugned orders as far as violation of principles of natural justice were concerned, they could not ignore the fact that negligence or collusion by officers, enjoined with duty to collect taxes, detect evasion and/or to impose penalties, etc., could not be a ground to allow a delinquent to go scot-free. Where an order discloses violation of principles of natural justice, it is incumbent, while setting aside such an order, to remand the matter instead of allowing a defaulting party to go scot-free. The appellate authority as well as the Tribunal, while holding that principles of natural justice have been violated, should have remanded the matter to the adjudicating officer after serving all relevant documents upon the respondent to decide the matter afresh. In view of what has been stated hereinabove, they allowed the appeal in part and while affirming that order passed by the adjudicating officer is vitiated for violation of principles of natural justice, modified order passed by the Tribunal by directing that the matter shall be taken up by the adjudicating officer from the stage of issuance of show cause and after furnishing all relevant documents to the respondent and granting adequate opportunity to present its defence, decide the matter within three months of parties putting in appearance before him, on 9-9-2013.

Decision:- Appeal partly allowed.

Comment:- The crux of the case is that any officer issuing show cause notice is required to append copies of all the relevant documents to the noticee with the show cause notice. If not appended, it is his duty to provide the copies within a reasonable time before adjudicating the show cause notice otherwise it will tantamount to violation of the principles of natural justice. At the same time, the case also lays down ratio that where an order discloses violation of principles of natural justice, it is incumbent, while setting aside such an order, to remand the matter instead of allowing the defaulting party to go scot-free.

Prepared by:- Sharad Bang

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PJ/CASE LAW/2015-16/2629

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