Validity of Order passed in violation of principles of natural justice

PJ/Case Laws/2011-12/1391

Case: Ganesh Polytex Ltd. v/s Union of India

Citation: 2011 (23) S.T.R. 417 (All.)

Issue:- If principles of natural justice violated then the order will become illegal.

Brief Facts:- Petitioner claims to manufacture Recycled Polyester Staple Fibre since 2000. According to them it is neither an excisable goods nor any excise duty is leviable on the same. The petitioner has also been filing returns showing them as non-excisable goods.

Department issued notice under Section 11-A of the Central Excise Act to the petitioner for charging excise duty on the said goods. Petitioner filed its reply. The Adjudicating Authority confirmed the demand against the petitioner.

The appeal was allowed by the Commissioner (Appeals) on 31-5-2004. Department then filed an appeal before the Tribunal and petitioner filed his cross objection in support of the order of the Commissioner (Appeals).

Appeal of the department was dismissed by the order dated 1-2-2005 upholding the order of the Commissioner (Appeals) and the cross-objection were disposed of accordingly. The Tribunal held that the goods manufactured by the petitioner were non-excisable goods in view of Note 1 of Chapter 54 of the Schedule of Central Excise Tariff Act.

The Government of India, Ministry of Finance issued instructions dated 29-6-2010 under Section 37-B of the Act wherein certain goods were explained to be excisable goods. In pursuance of these instructions, the jurisdictional Superintendent issued notices on 14-7-2010, 27-7-2001 and 2-8-2010 demanding excise duty from petitioner before clearance of the goods.

Petitioner replied to the said show cause notices, but the Superintendent instead of passing an order, seized the goods of the petitioner along with the truck.

Against this action, Petitioners filed writ petition wherein the prayer for challenging the notices were deleted and the petitioner was asked to file its reply before the competent authority. Revenue was restrained from interfering with the functioning of the petitioner’s factory.

Thereafter, a notice dated 13.08.2010 was issued to the petitioner asking them to execute a bond for the amount of assessable value likely to be cleared during the month. Petitioner executed the bond but also filed another writ petition challenging the notices.

In second write petition, interim order was granted on 27.08.2010. However, it was clarified that it would be open to the respondents to decide the question of classification of the goods manufactured by the petitioner.

During the pendency of the writ petitioners, Revenue again issued notice dated 03.09.2010 to the petitioner asking them to show cause on the same day for classification of the product manufactured by them. It was submitted by the petitioner that the notice was received at 5.30 in the evening and till that time it was not possible to file any objections. On the following day order was passed by the Assistant Commissioner holding that the goods will fall under heading 5503 20 00, 5506 20 00, 5505 10 90 and 5503 40 00 respectively and are chargeable to duty.

Petitioner filed an application in the second writ petition for annexing these orders and notices. The first WP has 1% become in fructuous and he does not wish to press it. It is dismissed as not pressed. The second writ petition has not been formally amended challenging the order dated 4-9-2010 but the Counsel for the parties agreed that the writ petitions be decided finally and the validity of the order dated 4-9-2010 may be considered. High Court accordingly proceeded to decide the writ petitions including validity of the order dated 4-9-2010.

Petitioner’s Contention:- Petitioner submitted that no reasonable opportunity was given before passing the order dated 4-9-2010. The notice dated 3-9-2010 was received late in the evening asking them to appear and show cause on the same day. No objection could also be filed as the case was decided next day. The instructions issued by the Board can neither override the statutory provisions contained in Note 1 Chapter 54, a part of the Tariff Act;

The judgment of the Tribunal is in favour of the petitioner. The instruction of the Board can neither override it nor nullify it; The Note 1 of Chapter 54 applies to all Chapters and is also applicable to Chapter 55; If Note 1 of Chapter 54 is taken into account then the goods manufactured by the petitioner are not excisable goods and this was also so held by the Tribunal in its order dated 1-2-2005.

Respondent’s Contention:- The counsel for the respondents did not dispute the first two submissions of the petitioner but submitted that the instructions merely explain the statutory provisions and do not contravene them; the principles of res-judicata are not applicable in taxing statutes.

It was not disputed that the notice dated 3-9-2010 or classifying the petitioner's goods was served on the same day in the late evening;

Reasoning of Judgement:- The High Court held that the issue involved was not of such a nature that could be decided in such a shoddy manner without affording reasonable opportunity to the petitioner. It was held that the order was against the principles of natural justice and is illegal and is set aside.

To protect the interest of Revenue, it was held that the bond executed by petitioner is sufficient and if it is exhausted then another bond may be furnished. Petitioner would be entitled to remove their goods without payment of any excise duty and the Revenue will not interfere in the functioning of petitioner’s factory or clearing of goods unless orders classifying the goods are passed against the petitioner.

Accordingly, impugned order dated 04.09.2010 set aside. Petitioner may filed objections against notice dated 03.09.2010 before the Assistant Commissioner. This interim relief directed to continue till classification issue not decided.

Decision:- Petitions disposed off accordingly.

Comment:- The violation of natural justice renders any order as void abinito and such an order are liable to be set aside. But we always come across the situation when the department always violates the principle of natural justice. In one recent judgement, the appellant pleaded for a date after a particular date as he was out of station. But the adjudication has given all three dates before such date and decided the matter. Further, the dates given were four days prior to date demanded by assessee. Such an act on the part of judicial authorities renders the order liable to quashed.

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PJ/Case Laws/2011-12/1391

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