2013 (1) TMI 669 - HC - Customs

Recovery towards the duty drawback and a fiscal penalty of Rs.5 lakhs on the Director - assessee contested against breach of principles of natural justice as report submitted by the Office of the Commissioner of Central Excise and Customs, Nagpur not supplied inspite of demand on whose bases SCN was issued - Held that - The manner in which both the authorities have dealt with the case is thoroughly unsatisfactory, there being an apparent violation of the principles of natural justice. The charges against the Petitioner are serious involving a fraudulent claim of duty drawback, but that does not obviate the need to comply with either the principles of natural justice or for that matter, the need for the Appellate Authority to write a proper reasoned order. A failure to comply with the principles of natural justice results in a situation where, in a challenge under Article 226 of the Constitution, this Court is constrained to set aside the order and to remand the proceedings back to the adjudicating authority. The fact that the report has been disclosed in the affidavit in reply would indicate that there was no reason or justification not to do so at the earlier stage. Thus without this Court expressing any view on the merits of the allegations against the Petitioner set aside the impugned order of the Appellate Authority which in turn confirmed the order of the adjudicating authority - restore the proceedings back to the Development Commissioner, SEEPZ for passing a fresh order in accordance with law.

Summary

Issues:
Challenge to order imposing duty drawback recovery and fiscal penalty based on violation of natural justice principles.

Detailed Analysis:

1. Violation of Principles of Natural Justice:
The petitioner challenged an order imposing a recovery of Rs.88.33 lakhs towards duty drawback and a fiscal penalty of Rs.5 lakhs, contending that the notice to show cause was issued without providing the report submitted by the Office of the Commissioner of Central Excise and Customs, Nagpur, despite a demand. The Development Commissioner confirmed the order, and the Appellate Authority upheld it without proper reasoning. The petitioner argued that failure to disclose the report amounted to a breach of natural justice principles.

2. Unsatisfactory Handling by Authorities:
The High Court found the handling of the case by both authorities to be unsatisfactory, emphasizing the importance of complying with natural justice principles. Despite serious charges against the petitioner, including fraudulent duty drawback claims, the authorities failed to provide a reasoned order. The Court highlighted that non-compliance with natural justice principles necessitates setting aside the order and remanding the proceedings. The disclosure of the report in the affidavit later indicated an unjustifiable delay in providing crucial documents.

3. Court's Decision and Directions:
The High Court set aside the order of the Appellate Authority and directed the proceedings to be restored to the Development Commissioner for a fresh order in accordance with the law. The petitioner was instructed to appear before the adjudicating authority for further proceedings. The Court clarified that since the report had been disclosed, no additional disclosure was required. The petition was disposed of without any orders on costs, maintaining a neutral stance on the merits of the allegations against the petitioner.

In conclusion, the High Court's judgment primarily focused on the violation of natural justice principles in the issuance of the show cause notice and the subsequent orders. The Court emphasized the importance of procedural fairness and reasoned decision-making in administrative proceedings, leading to the setting aside of the orders and remanding the case for a fresh decision by the Development Commissioner.