2015 (4) TMI 565 - HC - Central Excise

Penalty u/s 11AC - Violation of principle of natural justice - Opportunity of hearing not granted - Application of Section 33A - Held that - Section 33A of the Act, 1944 and particularly the proviso to sub- Section(2) does not come into operation. Clearly, the petitioner had been denied his right under law to make his defence prior to the adjudication of the proceeding. We have no hesitation in coming to hold that rules of the natural justice have not been complied with and Section 33A (2) proviso of the Act, 1944 has been brought into play, without the necessary circumstances available in the present case to reach the said conclusion. It is clear that Section 33A of the Act, 1944 and particularly the proviso to sub- Section(2) does not come into operation. Clearly, the petitioner had been denied his right under law to make his defence prior to the adjudication of the proceeding. We have no hesitation in coming to hold that rules of the natural justice have not been complied with and Section 33A (2) proviso of the Act, 1944 has been brought into play, without the necessary circumstances available in the present case to reach the said conclusion. - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
Challenge to order confirming penalty under Section 11AC of the Central Excise Act, 1944 without adequate opportunity for representation.

Analysis:

Issue 1: Violation of Natural Justice and Central Excise Act
The petitioner challenged the order confirming a penalty of Rs. 3,77,43,227 under Section 11AC of the Central Excise Act, 1944. The petitioner's counsel argued that there was a violation of natural justice as the petitioner was not given adequate opportunity to represent his case before the imposition of the penalty. The impugned order indicated that the petitioner had requested adjournments for the personal hearing, and the final date was communicated orally during another case hearing. However, the formal communication was sent after the date of the hearing, leading to the petitioner not being present. The counsel contended that the impugned order was erroneous regarding the scope of Section 33A of the Act, 1944, which provides for adjournments. It was argued that the petitioner was denied the right to present his defense before the adjudication, thus violating natural justice.

Issue 2: Compliance with Adjudication Procedure
The petitioner's counsel argued that the impugned order incorrectly applied Section 33A of the Act, 1944, regarding adjournments. It was contended that the petitioner had not been granted three adjournments as claimed in the order. The counsel highlighted that the statutory notice of hearing was served on the petitioner after the date of the hearing, rendering the hearing ineffective. It was concluded that the petitioner's right to make a defense before adjudication was denied, and the provisions of Section 33A were not correctly applied in the case.

Judgment:
The High Court quashed the impugned order and directed the Commissioner to issue a fresh notice to the petitioner for a re-adjudication of the matter. The Court noted that the petitioner had already deposited Rs. 1 Crore during the proceeding, and no further deposit was deemed necessary. The Court instructed the petitioner to cooperate with the department for the fresh adjudication process and not cause unnecessary delays. The writ application was disposed of with these directions, allowing the petitioners to request necessary documents from the Commissioner for the show-cause reply.