2011 (7) TMI 1173 - HC - Central Excise

Issues Involved:
1. Legality of the order dated 20th June 2011 by the Central Board of Excise & Customs (CBEC).
2. Compliance with principles of natural justice.
3. Adequacy of opportunity provided to the petitioner to defend against the allegations.
4. Procedural requirements under Rule 12AA of the CENVAT Credit Rules, 2004, and Rule 12CC of the Central Excise Rules, 2002.
5. Impact of the restrictions imposed on the petitioner.

Issue-Wise Detailed Analysis:

1. Legality of the order dated 20th June 2011 by the Central Board of Excise & Customs (CBEC):
The petitioner challenged the order dated 20th June 2011, which imposed restrictions on the availment of CENVAT credit and other facilities for a specified period. The operative portion of the order included:
- Withdrawal of the facility of monthly payment of excise duty.
- Stopping the payment of excise duty by utilization of CENVAT credit.
- Requirement to maintain records of receipt, disposal, consumption, and inventory of principal inputs.
- Intimation to the jurisdictional Superintendent of Central Excise within 24 hours of receipt of principal inputs.

2. Compliance with principles of natural justice:
The petitioner argued that the order was passed without supplying any documents, statements, or other materials, thus violating the principles of natural justice. The court emphasized that any action of the State involving adverse civil consequences to a citizen requires adherence to the principles of natural justice. The court cited the case of Smt. Maneka Gandhi v. Union of India & Anr., which established that even in the absence of specific statutory provisions, the duty to provide a reasonable opportunity to be heard is implied.

3. Adequacy of opportunity provided to the petitioner to defend against the allegations:
The petitioner contended that no basis or evidence supporting the allegations was disclosed, denying them an adequate opportunity to defend themselves. The respondents claimed that adequate opportunity was granted, but the court found that none of the documents relied upon by the Department were supplied to the petitioner. The court observed that the procedure envisages giving an opportunity of being heard and taking into account any representation made by the affected person.

4. Procedural requirements under Rule 12AA of the CENVAT Credit Rules, 2004, and Rule 12CC of the Central Excise Rules, 2002:
The court examined the provisions under Rule 12AA and 12CC, which allow for the imposition of restrictions based on prima facie findings of irregularities. The Notification issued on 30th December 2006 outlines the procedure and types of restrictions that can be imposed. The court noted that the procedure involves multiple stages of examination and requires giving an opportunity of being heard to the affected person. The court found that the Department failed to follow the procedural requirements, as the documents were not supplied to the petitioner.

5. Impact of the restrictions imposed on the petitioner:
The court recognized that the restrictions imposed have adverse civil consequences and are not permanent but temporary deterrence measures. However, the court emphasized that even temporary measures require compliance with natural justice principles. The court found that the Department's failure to supply documents and provide a fair hearing resulted in prejudice against the petitioner.

Conclusion:
The court quashed the impugned order dated 20th June 2011, setting aside the restrictions imposed on the petitioner. The court allowed the respondents to proceed further in accordance with the law, provided they supply the necessary documents to the petitioner within four weeks and permit the petitioner to file a further reply. The court emphasized the importance of adhering to the principles of natural justice and providing a fair opportunity to the affected party.

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