CX - Copies of reports relied upon not supplied by AA while passing order - Post facto so called compliance thereof will not cure proceedings which stands already vitiated: HC
By TIOL News Service
KOLKATA, NOV 07, 2017: THE assessee filed a Writ Petition against an order dated February 9, 2017 passed by the Chief Commissioner, Central Excise, Kolkata Zone.
Alleging that the petitioner had availed CENVAT Credit on the strength of invoices which are doubtful, an order was apparently passed in terms of rule 12CCC of the CER, 2002 r/w rule 12 AAA of the CCR, 2004 and which rule(s) reads –
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12CCC. Power to impose restrictions in certain types of cases.-
Notwithstanding anything contained in these rules, where the Central Government, having regard to the extent of evasion of duty, nature and type of offences or such other factors as may be relevant, is of the opinion that in order to prevent evasion of, or default in payment of duty of excise, it is necessary in the public interest to provide for certain measures including restrictions on a manufacturer, a registered importer, first stage and second stage dealer or an exporter may, by notification in the Official Gazette, specify the nature of restrictions including suspension of registration in case of an importer or a dealer, types of facilities to be withdrawn and procedure for issue of such order by the Principal Chief Commissioner of Central Excise or Chief Commissioner of Central Excise, as the case may be.
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12AAA: Power to impose restrictions in certain types of cases.
- Notwithstanding anything contained in these rules, where the Central Government, having regard to the extent of misuse of CENVAT credit, nature and type of such misuse and such other factors as may be relevant, is of the opinion that in order to prevent the misuse of the provisions of CENVAT credit as specified in these rules, it is necessary in the public interest to provide for certain measures including restrictions on a manufacturer registered importer, first stage and second stage dealer provider of taxable service or an exporter, may by notification in the Official Gazette, specify the nature of restrictions including restrictions on utilization of CENVAT credit and suspension of registration in case an importer or of a dealer and type of facilities to be withdrawn and procedure for issue of such order by the Principal Chief Commissioner of Central Excise or Chief Commissioner of Central Excise, as the case may be.
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The petitioner submits that the impugned order records that the last hearing took place on December 29, 2016. Nonetheless, the order relies upon a report dated February 2, 2017. In addition to such report, the order records that, there are two other reports dated December 20, 2016 and December 21, 2016 but copies of all the three reports were not made available to the petitioner at the time of hearing. Inasmuch as the adjudicating authority had acted in breach of the principles of natural justice and,therefore,the proceedings are vitiated. Reliance is placed on the decision in Kothari Filaments - 2008-TIOL-237-SC-CUS.
The counsel for the Revenue submitted that the writ petition is premature since the impugned order only seeks to put restrictions as noted therein, however, the final proceedings have not been undertaken and that the respondents will be entitled to copies of such documents once the show cause notice is issued; that, in the event, documents relied are made available to the petitioner then, there is a possibility of the petitioner taking steps so as to render the entire proceedings infructuous.
The High Court extracted the procedure to be followed in such proceedings as laid down by notification 16/2014-CX(NT) dated 21.03.2014 and issued in pursuance of rules 12CCC of CER, 2002 and 12AAA of CCR, 2004 and observed -
+ The procedure requires an adjudicating authority to satisfy that the records and relevant documents are sufficient to arrive at a reasonable belief so as to take a measure. It also allows the delinquent an opportunity of hearing.
+ To my mind, an opportunity of hearing to a delinquent would encompass within its wake the materials sought to be relied upon against him in the proceeding to be made over to him so that the delinquent is in a position to make an effective representation on the charges levelled against him.
+ That being the position in law, in the facts of the present case, admittedly copies of the report dated December 20, 2016 and December 21, 2016 have not been made over to the petitioner in the proceedings resulting in the impugned order. [Kothari Filaments - 2008-TIOL-237-SC-CUS relied upon]
+ I am of the view that, the adjudicating authority did not comply with the requirement of the adherence of the principles of natural justice as prescribed by the notification.
+ The contention of the department that, subsequently if and when, a show cause notice will be issued, the petitioner will be made available the copies of the reports spoken of, does not cure a violation of the principles of natural justice already occurring. The impugned order stands vitiated since the procedure prescribed has not been followed. The impugned order stands vitiated by the non-adherence of the principles of natural justice.
+ A post facto so called compliance thereof will not cure the proceedings which stands already vitiated. The petitioner should have been afforded the copies of the investigation report in the proceeding which has resulted in the impugned order. A subsequent making over of such document will not cure the illegality.
The impugned order was set aside. Nonetheless, the High Court mentioned that this would, however, not prevent the authority from proceeding against the petitioner in accordance with law on the basis of the self-same materials.
The Writ Petition was disposed of.
(See 2017-TIOL-2326-HC-KOL-CX)
