2015 (10) TMI 2147 - HC - Central Excise

Denial of rebate claim - Suppression of production by the processor of textiles - Violation of principle of natural justice - Notification No.31/98, dated 16.2.1999 - Held that - Appellate authority has nothing but dissected from its own earlier order, dated 01.8.2006 wherein, as already stated, having discussed the issue in detail by following the rulings of the Apex Court in the matter of audi alteram partem, directed the lower authority to provide an opportunity to the petitioner to peruse the relied upon documents/personal hearing. It shows that the authorities were fully satisfied than the aggrieved party. It is pertinent to note that there was no change in the circumstances between the first round of orders of the authorities and the present impugned orders and it appears that what are all left to be considered, were considered and passed the present orders when the petitioner approached on second time. Therefore, it is not fair and appropriate for the appellate authority to dissect from its own earlier order and come to contrary conclusion, that too at first stage, giving relief to the aggrieved party and at later stage, taking away such relief and if it is allowed, in my opinion it would certainly lead to travesty of justice as it amounts to violation of principles of natural justice. - Impugned order is set aside - Decided in favour of assessee.

Issues Involved:
1. Rebate of duty claimed by the petitioner.
2. Suppression of production by the processor.
3. Non-supply of relied upon documents to the petitioner.
4. Violation of principles of natural justice.
5. Adjudication by lower authorities and appellate bodies.

Detailed Analysis:

1. Rebate of Duty Claimed by the Petitioner:
The petitioner, engaged in the import and export of textiles, claimed a rebate of duty amounting to Rs. 81,68,999/- for goods exported between January 1999 and March 2000 under Notification No.31/98. The Central Excise Preventive Group's investigation revealed that the processor, who handled the petitioner's fabrics, had suppressed the actual production in the statutory records. Consequently, the department proposed the recovery of the excess rebate sanctioned. The lower authority confirmed the demand for recovery of Rs. 30,73,604/- plus interest and penalty through Order-in-Original Sl.No.5/2006, dated 31.3.2006.

2. Suppression of Production by the Processor:
The processor, M/s. Erode Rana Textile Processors Ltd. (ERTP), admitted to suppressing production and clearance to various parties. This admission led to the confirmation of a demand of Rs. 4,00,72,500/- along with interest and penalties by the Commissioner of Central Excise, Salem. The processor did not appeal against this order, nor did they dispute the quantity of production unearthed by the department. Consequently, the petitioner/exporter was held accountable for claiming an excess rebate based on the suppressed production.

3. Non-supply of Relied Upon Documents to the Petitioner:
The petitioner argued that they were not provided with the relied upon documents, which was essential for their defense. Despite repeated requests through letters dated 31.5.2004, 24.06.2004, 11.09.2004, 14.02.2005, 01.12.2005, 19.01.2006, and 23.2.2006, the lower authority did not furnish the documents. The appellate authority, in its order dated 1.8.2006, set aside the lower authority's order and remanded the matter, directing the lower authority to supply the relied upon documents to the petitioner and provide an opportunity for a personal hearing.

4. Violation of Principles of Natural Justice:
The appellate authority found that the lower authority's failure to provide the relied upon documents violated the principles of natural justice. The doctrine of "audi alteram partem" was emphasized, asserting that the petitioner had the right to peruse the documents before giving any reply. The appellate authority's order highlighted that the lower authority's actions were not sustainable in law due to this violation.

5. Adjudication by Lower Authorities and Appellate Bodies:
Despite the appellate authority's clear directions, the lower authority, in its order dated 12.09.2008, reiterated that there was no necessity to provide the relied upon documents to the petitioner. This stance was confirmed by the Commissioner of Central Excise (Appeals), Salem, who held that the documents were not necessary for the petitioner's perusal as the processor had accepted their guilt. The revisional authority also upheld this view, leading to the dismissal of the petitioner's revision application.

Conclusion:
The High Court found that the appellate authority's initial order, which directed the lower authority to provide the relied upon documents and afford a personal hearing, was correct and in line with the principles of natural justice. The subsequent orders by the lower authority and the appellate body, which denied the petitioner access to the documents, were deemed inappropriate. The High Court set aside the impugned orders and directed the lower authority to allow the petitioner to peruse and take copies of the documents before proceeding afresh in accordance with law and on merits, ensuring an opportunity for a personal hearing. The writ petitions were allowed, and the connected miscellaneous petitions were closed.

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