2016 (5) TMI 566 - HC - Central Excise

Waiver of pre-deposit - Classification - Whether the product manufactured and sold by the petitioner company was liable to be regarded as a textile or merely as a plastic product - Principle of natural justice - Held that - It appears from the order impugned that the petitioners may have been handicapped in their consultant not being able to present the arguments before the commissioner. It must be appreciated that for whatever written pages are worth, there can scarcely be a substitute for oral submission in course of a hearing. It would be in the best interest of justice to set aside the order impugned, subject to the petitioner company being required to make a pre-deposit of ₹ 5 lakh before the concerned commissioner for the concerned commissioner to revisit the matter within four weeks of the receipt of a copy of this order upon affording the petitioners a chance to be represented at a hearing. In the event the substance of the order is maintained after the matter is heard afresh, the deposit to be made pursuant to this order will stand forfeited. In the event the commissioner passes a different order and accepts the petitioner company s claim for the product to be regarded under Chapter 56 of the Schedule, the deposit will be refunded without interest. - Petition disposed of

Summary

Issues: Challenge to order-in-original regarding classification of product as textile or plastic under Central Excise Tariff Act, 1985; Violation of principles of natural justice in reliance on report without providing copy to petitioners; Statutory pre-deposit for appeal under Section 35B of Central Excise Act.

Classification Issue: The petitioners contested the classification of their product as either textile or plastic under Chapter 56 of the Central Excise Tariff Act, seeking duty exemption. The commissioner's order relied on a report related to another party, Pratap Synthetics Limited, without providing the petitioners a copy or notice, breaching natural justice principles. The High Court emphasized the importance of fair procedures and adequate opportunity for presenting arguments, setting aside the order for reconsideration by the commissioner after a pre-deposit.

Natural Justice Violation: The petitioners argued that the reliance on the report without disclosure violated natural justice principles. The High Court noted that the petitioners were not given a chance to address the report's content, emphasizing the need for transparency and fairness in administrative proceedings. The court directed the commissioner to rehear the matter after the petitioners' representation and pre-deposit, ensuring a just process.

Statutory Pre-Deposit: The department contended that the petitioners should follow the appellate remedy under Section 35B of the Central Excise Act, requiring a pre-deposit of ?97 lakh. The petitioners argued that such a pre-deposit would be burdensome, rendering the appeal remedy illusory for a manufacturing unit. The High Court balanced the need for pre-deposit with access to justice, mandating a lower pre-deposit of ?5 lakh for the commissioner's reconsideration, refundable based on the outcome of the rehearing.

This judgment highlights the significance of procedural fairness, the right to be heard, and the duty of administrative bodies to provide a transparent and just process. It underscores the court's role in safeguarding natural justice principles and ensuring access to legal remedies without undue financial burden.