APRIL 30, 2019

By Suhrid Bhatnagar, Advocate

WHAT is natural justice was beautifully explained in simple terms by Sir Mathew Hale, Chief Justice of King's Bench and a great English legal scholar, who set out 18 tenets in 1676 for dispensing justice. The sixth tenet was - "That I suffer not myself to be possessed with any judgment at all till the whole business of both parties be heard". Delving deeper into the wordings of this tenet, one finds that the same basically contained two basic principles of natural justice. The first one is nemo in propria causa judex esse debet  which means no one should be made a judge in his own case or the rule against bias. The second one is audi alteram partem  which means 'let the other side be heard as well' or no one should be condemned unheard. Therefore, in any quasi-judicial or even judicial proceeding, it is necessary to adhere to the principles of natural justice.

2. While at adjudication level, the first principle is restricted to the rule against bias only since the officer who decides the case has only one party before him and literally, he is the other party as well as judge in his own cause. Although, years back there used to be the procedure of issuance of show cause notice by the authority just lower in rank to the adjudicating authority decided by monetary limits; however, even then the authority issuing the show cause notice was not a party to the case. And the extent to which the rule against bias is followed need not be explained here.

3. The second principle - the right of being heard - constitutes the other essential pillar of principle of natural justice. That the person whose case is under adjudication or in appeal has a right of being heard in person and the case cannot be decided against him unheard is the essence of the second principle.

4. The various provisions in the Central Excise Act, 1944 provide for opportunity of being heard to the parties in the proceedings of adjudication and appeals. The relevant provisions are:

SECTION 33A. Adjudication procedure.  - (1) The Adjudicating authority shall, in any proceeding under this Chapter or any other provision of this Act, give an opportunity of being heard to a party in a proceeding, if the party so desires.

(2) ……………..

Section 35A. Procedure in appeal. -

(1) The Commissioner (Appeals) shall give an opportunity to the appellant to be heard, if he so desires.

(2) ……………..

…………………

Section 35C. Orders of Appellate Tribunal. -

(1) The Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against or may refer the case back to the authority which passed such decision or order with such directions as the Appellate Tribunal may think fit, for a fresh adjudication or decision, as the case may be, after taking additional evidence, if necessary.

(1A) ……………..

(2) ……………..

…………………

5. For adjudication of service tax cases, Section 33A of the Central Excise Act, 1944 is applicable by virtue of Section 83 of the Finance Act, 1994. In respect of service tax appeals with Commissioner (Appeals) and Tribunal, Section 85(5) and 86(7) of the Finance Act, 1994 respectively provide that the Commissioner (Appeals) and Tribunal shall exercise the same powers and follow the same procedure as is provided in respect of central excise appeals in the Central Excise Act, 1944.

6. The adjudicating authority or the appellate authority has to grant an opportunity of being heard as a necessity of natural justice. But the question is what happens when the person to whom the opportunity of hearing has been given seeks adjournment or does not turn up.

The above question has been answered in Sections 33A, 35 and 35C of the Central Excise Act, 1944 respectively for the adjudicating authority, Commissioner (Appeals) and CESTAT. The provisions read as under:

SECTION 33A. Adjudication procedure.

(1) ……………..

(2) The Adjudicating authority may, if sufficient cause is shown, at any stage of proceeding referred to in sub-section (1), grant time, from time to time, to the parties or any of them and adjourn the hearing for reasons to be recorded in writing:

Provided that no such adjournment shall be granted more than three times to a party during the proceeding.

Section 35. Appeals to Commissioner (Appeals). -

(1) ……………..

(1A) The Commissioner (Appeals) may, if sufficient cause is shown at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing:

Provided  that no such adjournment shall be granted more than three times to a party during hearing of the appeal.

Section 35C. Orders of Appellate Tribunal. -

(1) ……………..

(1A) The Appellate Tribunal may, if sufficient cause is shown, at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing:

Provided  that no such adjournment shall be granted more than three times to a party during hearing of the appeal.

7. In Customs Act, 1962 also, similar provisions exist in Section 122A, 128, 128A and 129. The provisions are as follows:

122A. Adjudication procedure. -

(1) The adjudicating authority shall, in any proceeding under this Chapter or any other provision of this Act, give an opportunity of being heard to a party in a proceeding, if the party so desires.

(2) The adjudicating authority may, if sufficient cause is shown, at any stage of proceeding referred to in sub-section (1), grant time, from time to time, to the parties or any of them and adjourn the hearing for reasons to be recorded in writing: Provided that no such adjournment shall be granted more than three times to a party during the proceeding.

128A. Procedure in appeal. - (1) The Commissioner (Appeals) shall give an opportunity to the appellant to be heard if he so desires.

……………..

128. Appeals to Commissioner (Appeals). - (1) ………………

(1A) The Commissioner (Appeals) may, if sufficient cause is shown at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing:

Provided that no such adjournment shall be granted more than three times to a party during hearing of such appeal.

(2) ……………….

129B. Orders of Appellate Tribunal. - (1) The Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against or may refer the case back to the authority which passed such decision or order with such directions as the Appellate Tribunal may think fit, for a fresh adjudication or decision, as the case may be, after taking additional evidence, if necessary.

(1A) The appellate Tribunal may, if sufficient cause is shown, at any stage of hearing of an appeal, grant time to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing:

Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal.

8. In Central Goods and Services Tax Act, 2017 also, similar provisions exist in Section 75, 107 and 133 for adjudicating authority, appellate authority and appellate tribunal. The provisions are as follows:

75. General provisions relating to determination of tax.

……………….

(5) The proper officer shall, if sufficient cause is shown by the person chargeable with tax, grant time to the said person and adjourn the hearing for reasons to be recorded in writing:

Provided that no such adjournment shall be granted for more than three times to a person during the proceedings.

……………….

107. Appeals to Appellate Authority-

……………………..

(8) The Appellate Authority shall give an opportunity to the appellant of being heard.

(9) The Appellate Authority may, if sufficient cause is shown at any stage of hearing of an appeal, grant time to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing:

Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal.

……………………...

113. Orders of Appellate Tribunal. - (1) The Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against or may refer the case back to the Appellate Authority, or the Revisional Authority or to the original adjudicating authority, with such directions as it may think fit, for a fresh adjudication or decision after taking additional evidence, if necessary.

(2) The Appellate Tribunal may, if sufficient cause is shown, at any stage of hearing of an appeal, grant time to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing:

Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal.

……………………….

9. In this regard, Para 14.3 of Circular No. 1053/2/2017-CX dated 10.03.2017, the Master Circular on 'Show Cause Notice, Adjudication proceedings, Closure of proceedings and Recovery of duty' reads as under:

14.3 Personal hearing: After having given a fair opportunity to the noticee for replying to the show cause notice, the adjudicating authority may proceed to fix a date and time for personal hearing in the case and request the assessee to appear before him for a personal hearing by himself or through an authorised representative. At least three opportunities of personal hearing should be given with sufficient interval of time so that the noticee may avail opportunity of being heard. Separate communications should be made to the noticee for each opportunity of personal hearing. In fact separate letter for each hearing/extension should be issued at sufficient interval. The Adjudicating authority may, if sufficient cause is shown, at any stage of proceeding adjourn the hearing for reasons to be recorded in writing. However, no such adjournment shall be granted more than three times to a noticee.

The words 'at least three opportunities of personal hearing' in the above paragraph clearly indicate that there can further be given a fourth opportunity which shall result from the third adjournment.

10. However, if a party does not seek adjournment and simply does not turn up (and in some such cases even the reply may not have been filed), what option the adjudicating or appellate authority is left with. The reasons for this may also be non-receipt of letter for hearing sent by department or the letter being issued for a very short notice. The practice being followed by the adjudicating authorities and Commissioner (Appeals) is that they provide three opportunities of hearing and if these three go unattended, the case is decided unheard on the basis of evidences available on record.

11. The question being raised here is as to how many opportunities for hearing should the adjudicating or appellate authority grant before adjudication or deciding the appeal. How many opportunities may be termed as fair opportunity and constitute or satisfy the natural justice of opportunity of being heard - one, two, three or four or even more?

12. In the opinion of the author, the adjudicating or the appellate authority should do the maximum permissible to show that he has done everything to be done for the natural justice. The number of opportunities that he was capable of providing has been exhausted by him and the case has now reached a stage where it has to be decided unheard.

13. In the above sense, the grant of three hearings and then deciding the case unheard does not constitute fulfillment of natural justice or fair opportunity, because the authority still had opportunity to grant a fourth hearing which would have resulted from the third adjournment. Simply speaking, every adjournment shall result into another opportunity of hearing. Therefore, the first adjournment shall lead to second opportunity, the second adjournment to third opportunity and the third opportunity shall lead to a fourth opportunity of hearing.

14. In the case of Prakash Industries Ltd. Versus Commissioner of Central Excise, Raipur - 2009-TIOL-2093-CESTAT-DEL, the Hon'ble Tribunal has gone to the extent of holding that if the circumstances demand and leave no other choice, even a fourth adjournment may be granted. This actually translated into fifth opportunity of being heard to be granted.

15. It is also worth mention that for the cases where the principle of natural justice has not been followed, the Board has issued an I nstruction F.No. 390/CESTAT/69/2014-JC dated 22.12.2015 regarding imposition of cost by CESTAT on grounds of quality of adjudication order. The relevant contents of the Instruction are given below:

During the recent past there have been certain decisions of the CESTAT wherein cost was imposed either on department or on the adjudicating officer/appellate officers. The cost so imposed was ordered to be paid to the assessee or to the Registry of the Tribunal.

2. On examination of such orders it is found that the cost has been imposed on the officers/department for ignoring; (i) the directions and principles laid down made de novo order while Hon'ble Tribunal directing the original adjudicating authority to re-examine the duty liability only, (ii) Principles of natural justice, (iii) the pleadings and evidences on record before deciding the matter or (iv) non-application of mind.

16. Therefore, what is fair in giving opportunities of being heard is very subjective. While for one, giving two opportunities may be fair, for the other it may be three and yet for another it may be four. Also, how the adjudicating and appellate authority perceive fairness in giving opportunity of hearing is never known to the noticee or appellant. Therefore, the perception of the authority that fair opportunity has been given and the principle of natural justice has been followed by giving three opportunities of hearing to the noticee or appellant, is wrong. This misconceived notion of having given fair opportunity of being heard and having followed the principle of natural justice by giving three opportunities for hearings strongly needs to be clarified by the Board or the Courts because the third opportunity is never the last opportunity possible in adjudication of appeal process. And any authority cannot be said to have given fair opportunity till he has given all the possible opportunities and time that he can, and then and only then shall the natural justice be said to be fulfilled.

(The author is Co-founder and Partner at Acumen Tax Consultants, Jaipur and the views expressed are strictly personal.)