By TIOL News Service

CHANDIGARH, AUG 20, 2013: DURING the course of transit checking in the month of September, 1998, the Preventive staff of Central Excise, Division-I, Ludhiana intercepted a tempo loaded with processed man-made fabrics. The driver could not produce any invoice evidencing payment of duty and, therefore, the factory where he was working and wherefrom he had loaded the goods was visited, further investigations were conducted and statements were recorded. All this culminated into issuance of a SCN demanding C.E duty of Rs.12 lakhs.

The assessee addressed a letter to the adjudicating authority seeking copies of all the relied upon documents. The Addl. Commissioner vide a letter directed the assessee to visit his office, inspect the file and take copies of the documents. The assessee, however, did not come forward to inspect or receive copies of the documents and instead addressed letters requesting that they be supplied the relevant documents.

Noting the dilatory tactics being adopted, the Additional Commissioner passed an o-in-o in June 2004 confirming the demand and upholding the allegations leveled.

The Commissioner (A) set aside this order on the ground that failure to supply relevant documents, relied by the Adjudicating Officer, is a violation of the principles of natural justice.

Revenue went in appeal before the CESTAT but their appeal was dismissed in July, 2010. An application for restoration of appeal also met the same fate in June 2011.

So, the CCE, Ludhiana moved the High Court by filing an appeal u/s 35G of the CEA, 1944.

The High Court made the following observations-

"We have heard counsel for the parties, perused the impugned order as well as the order passed by the Adjudicating Officer and are sanguine, in the correctness of our opinion, that the case in hand may disclose collusion, or to put it politely, negligence on the part of certain officers. It is rather surprising that an officer of the rank of Additional Commissioner, was not aware that he is 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 does 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 has dismissed the appeal and the application for restoration, on the ground of violation of principles of natural justice."

The High Court further held -

"While we find no error in the impugned orders as far as violation of principles of natural justice are concerned, we cannot ignore the fact that negligence or collusion by officers, enjoined with duty to collect taxes, detect evasion and/or to impose penalties etc., cannot 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 fine, the High Court directed the adjudicating authority to furnish all relevant documents to the respondent and after granting adequate opportunity to present its defence on September, 9, 2013 decide the matter within three months.

(See 2013-TIOL-630-HC-P&H-CX)