MUMBAI, JAN 28, 2013: A show-cause notice dated 10.08.2004 was issued to the petitioner by the Development Commissioner based on the report submitted by the Commissioner of Central Excise & Customs, Nagpur.

The Show-cause notice expressly referred to the same thus –

“This Show Cause Notice is issued on the basis of the report submitted by the Office of the Commissioner of Central Excise & Customs, Nagpur and also is without prejudice to any other action that may be taken against you under any other Law for the time being in force in the Union of India.”

The petitioner had sought a copy of the said “report” but it was not given to him.

In paragraph 8 of the order of adjudication, the Development made a mention of this request but chose not to elaborate on the same. In his order dated 9.10.2007 the Development Commissioner, SEEPZ SEZ held that Rs.88.33 lakhs is recoverable towards the duty drawback and also imposed a fiscal penalty of Rs.5 lakhs on the Director.

The order of the adjudicating authority was confirmed in appeal by the Joint Secretary to the Government of India in the Ministry of Commerce and Industry on 8 September 2010. Incidentally, in their written submissions the petitioner had mentioned about the non-availability of the copy of the report of the CCE&C, Nagpur despite their request.

The petitioner is, therefore, before the High Court against this order and their principal challenge is that there has been a breach of the principles of natural justice.

The High Court observed that a copy of the report which is in the form of a communication dated 21 November 2003 of the Commissioner of Central Excise and Customs to the Joint Development Commissioner is annexed to the affidavit in reply and, therefore, there was no reason or justification on the part of the Department to withhold documentary material upon which specific reliance was placed in the notice to show cause during the course of adjudication.

The High Court, therefore, held that the failure to disclose the report would amount to a breach of the principles of natural justice.

Thereafter, the High Court observed -

“...That apart, upon perusing the order of the adjudicating authority, it is evident that in paragraph 11 which contains the discussion on merits, the only observation is as follows:

“I have carefully considered the facts of the case and I have also gone through records of the unit and found the unit guilty of violating the provisions para 6.8(b) of FT/Exim Policy by effecting DTA sale without obtaining the prior permission of the Development Commissioner, SEEPZ SEZ. It is also proved beyond doubt that the unit has fraudulently filed the DBK claim and obtained the duty draw back of Rs.88.33 lakhs.”

The Appellate Authority has similarly disposed of the entire appeal with only the following discussion:

“The Committee enquired from the firm whether they have complied with the orders of Appellate Committee dated 20.07.2010 directing the firm to submit its accounts to DC SEEPZ. The representative of DC SEEPZ clarified that the firm has not complied with the same. Hence the Committee concluded that the firm was guilty of violating the provision of para 6.8(b) of FT/EXIM Policy by effecting DTA sale without obtaining the prior permission of the DC, SEEPZ SEZ. The Committee also noted that the firm has fraudulently filed the duty drawback claim and obtained the duty drawback of Rs.88.33 lakhs. Accordingly, the appeal was dismissed by the committee and the orders passed by the DC, SEEPZ SEZ, Mumbai dated 9.10.2007 was upheld.”

4. In our view, the manner in which both the authorities have dealt with the case is thoroughly unsatisfactory, there being an apparent violation of the principles of natural justice. The charges against the Petitioner are serious involving a fraudulent claim of duty drawback, but that does not obviate the need to comply with either the principles of natural justice or for that matter, the need for the Appellate Authority to write a proper reasoned order. A failure to comply with the principles of natural justice results in a situation where, in a challenge under Article 226 of the Constitution, this Court is constrained to set aside the order and to remand the proceedings back to the adjudicating authority. The fact that the report has been disclosed in the affidavit in reply would indicate that there was no reason or justification not to do so at the earlier stage.”

In fine, without expressing any view on the merits of the allegations levelled against the petitioner, the High Court set aside the order of the Appellate Authority and resultantly restored the proceedings back to the Development Commissioner, SEEPZ for passing a fresh order in accordance with law.

The High Court also observed that since the “report” had been annexed to the affidavit in reply, no further disclosure on that count was necessitated.

The petition was accordingly disposed of.

(See 2013-TIOL-65-HC-MUM-CUS)