2010 (1) TMI 30 - HC - Central Excise

Facility of monthly payment of duty rule 8(2) of the Central Excise Rules, 2002 - Payment of excise duty by utilization of CENVAT credit as provided under rule 3(4) of the CENVAT Credit Rules, 2004, is ordered to be stopped with effect from 21.12.2009 to 30.06.2010. During this period, the assessees are required to pay excise duty without utilizing CENVAT credit. However, the assessees are permitted to take CENVAT credit on goods received at the respective factories during this period, which can be utilized for payment of duty on goods cleared from the respective factories after the aforesaid period is over held that - we are of the opinion that the impugned order has been passed without following the procedure prescribed in paragraph 4 of the said notification inasmuch as the petitioner has not been given an opportunity of hearing in the true sense. Consequently, we set aside the impugned order. Although we have set aside the impugned order, the respondent would be at liberty to proceed with the initial notice dated 03.09.2009, provided they supply copies of the relied upon documents to the petitioner within four weeks. Thereafter, the petitioner would have an opportunity of making a representation within four weeks.

Summary

Issues Involved:
1. Quashing of Order No. 51/2009-M (CX)/DA dated 16.12.2009.
2. Alleged non-compliance with principles of natural justice.
3. Authority and procedure under Rule 12CC of the Central Excise Rules, 2002 and Rule 12AA of CENVAT Credit Rules, 2004.
4. Supply of relied-upon documents to the petitioner.

Issue-wise Detailed Analysis:

1. Quashing of Order No. 51/2009-M (CX)/DA dated 16.12.2009:
The petitioner sought the quashing of the impugned order which imposed several restrictions on the petitioner, including the withdrawal of the facility of monthly payment of excise duty and the restriction on the utilization of CENVAT credit.

2. Alleged Non-Compliance with Principles of Natural Justice:
The petitioner argued that the impugned order was passed without giving a proper opportunity of hearing and without supplying the relied-upon documents. The court emphasized that the principles of natural justice were specifically spelt out in paragraph 4 of Notification No. 32/2006-CE (NT), which mandates an opportunity of being heard and consideration of the noticee's representation before forwarding recommendations to the Central Board of Excise and Customs.

3. Authority and Procedure under Rule 12CC of the Central Excise Rules, 2002 and Rule 12AA of CENVAT Credit Rules, 2004:
The court examined the provisions of Rule 12CC and Rule 12AA, which empower the Central Government to impose restrictions to prevent evasion of excise duty. The notification issued under these rules allows for the withdrawal of facilities and imposition of restrictions if a manufacturer is prima facie found to be involved in certain specified offences. The procedure requires that the Commissioner of Central Excise or the Additional Director General of Central Excise Intelligence must give the noticee an opportunity of being heard and consider any representation made before forwarding recommendations to the Board.

4. Supply of Relied-Upon Documents to the Petitioner:
The petitioner requested the supply of documents relied upon by the Director General of Central Excise Intelligence to make an effective representation. The court noted that despite the petitioner's request, the documents were not supplied, which was admitted in the impugned order itself. The court referred to the Supreme Court's decision in Kothari Filaments v. Commissioner of Customs, emphasizing that the principles of natural justice require the supply of documents to the noticee to furnish an effective reply.

Conclusion:
The court concluded that the impugned order was passed without following the prescribed procedure, as the petitioner was not given a true opportunity of hearing. Consequently, the impugned order was set aside. However, the respondent was given the liberty to proceed with the initial notice dated 03.09.2009, provided they supply the relied-upon documents to the petitioner within four weeks, allowing the petitioner to make a representation thereafter. The Director General was directed to proceed in accordance with the law.

Disposition:
The writ petition was disposed of, and the impugned order was set aside, with directions for compliance with the principles of natural justice.