2011 (7) TMI 1090 - HC - Central Excise

Issues Involved:
1. Violation of Principles of Natural Justice
2. Procedural Irregularities and Unauthorized Procedure
3. Imposition of Restrictions Beyond the Show Cause Notice
4. Non-Supply of Relevant Documents
5. Justification and Legality of Imposed Restrictions

Issue-wise Detailed Analysis:

1. Violation of Principles of Natural Justice:
The petitioner argued that the impugned order was passed in gross violation of the principles of natural justice. The petitioner highlighted that numerous documents and statements relied upon in the proposal were not supplied to them. The court emphasized that the principles of natural justice require that any action of the State involving adverse civil consequences to a citizen must be preceded by a reasonable opportunity to be heard. The court found that the respondents failed to supply the necessary documents and materials to the petitioner, thus violating the principles of natural justice. The court cited the case of *Vinay Wires & Poly Products P. Limited v. Member (C.Ex.)*, where a similar order was quashed due to non-supply of documents.

2. Procedural Irregularities and Unauthorized Procedure:
The court noted that the procedure followed by the respondents was unauthorized and opposed to the principles of natural justice. The show cause notice proposed restrictions for a period of three months, but the final order imposed restrictions for six months without any further communication or corrigendum. The court held that the final order could not travel beyond the proposal contained in the show cause notice. The court stated, "To our mind such procedure is wholly unauthorized and opposed to principles of natural justice."

3. Imposition of Restrictions Beyond the Show Cause Notice:
The petitioner contended that the final order imposing restrictions for six months traveled beyond the show cause notice, which proposed restrictions for only three months. The court agreed with the petitioner, stating that the final order could not exceed the scope of the show cause notice. The court clarified, "When the petitioner is put to notice on certain aspects of the matter, final order cannot travel beyond such proposal."

4. Non-Supply of Relevant Documents:
The petitioner repeatedly requested the supply of documents relied upon by the respondents, including the Panchnama and statements recorded during the investigation. Despite these requests, the documents were not provided. The court found that the non-supply of documents was a clear violation of the principles of natural justice. The court emphasized that the petitioner was entitled to know the evidence against them to make an effective representation. The court observed, "Without referring to these documents, statements and other materials in the show cause notice, without supplying or permitting inspection thereof to the petitioners, the proposal was moved, recommendations made and finally accepted by the Board."

5. Justification and Legality of Imposed Restrictions:
The respondents argued that the restrictions were justified due to the petitioner's involvement in clandestine removal of goods and misuse of CENVAT credit. However, the court found that the respondents failed to follow the proper procedure and did not provide the petitioner with a fair opportunity to defend themselves. The court held that the impugned order imposing restrictions was not sustainable due to procedural irregularities and violation of natural justice. The court stated, "In the result, the impugned orders are quashed. Restrictions imposed are set aside."

Conclusion:
The court quashed the impugned order imposing restrictions on the petitioner for six months and modified it to operate for three months from the original date. The court emphasized the importance of following the principles of natural justice and proper procedure in administrative actions. The court allowed the petitions to the extent of modifying the duration of the restrictions and directed the respondents to supply necessary documents if they wished to proceed further. The court's decision reinforced the requirement of fair hearing and adherence to procedural fairness in administrative actions.

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