2018 (2) TMI 1403 - HC - Central Excise

Validity of SCN - the reply given by the petitioner to the Audit objections dated 16.12.2016 have not even been referred to, much less considered - principles of natural justice - Held that - Circular dated 21.12.2015 stipulates that Pre show cause notice consultation with the Principal Commissioner and Commissioner is being made mandatory prior to issue of show cause notice in the case of demands duty above ₹ 50 lakhs (except for preventive / offence related SCN's). Admittedly, the above referred procedure, which has been held to be a mandatory by CBEC, has not been adhered to in the instant case. That apart, when the petitioner had been given an opportunity to submit the reply to the Audit Slip, which they had submitted by reply dated 16.12.2016, the same ought to have been considered by the fourth respondent prior to issuance of the SCN. Matter is remanded to the fourth respondent, for fresh consideration - petition allowed by way of remand.

Summary

Issues:
Challenge to show cause notice based on non-consideration of reply to audit objections and violation of mandatory consultation process before issuing show cause notice.

Analysis:
The Writ Petition was filed challenging a show cause notice issued by the fourth respondent, based on audit objections raised by the third respondent. The petitioner argued that their reply to the audit objections, dated 16.12.2016, was not considered. The petitioner highlighted two main reasons for the necessity of considering their reply. Firstly, the Superintendent of Central Excise directed the petitioner to file a reply to the audit slip regarding CENVAT credit. Secondly, the Central Board of Excise and Customs (CBEC) issued a Master Circular on show cause notice procedures, emphasizing pre-notice consultation for demands above a certain limit. The Circular stressed the importance of consultation with the noticee before issuing a show cause notice, particularly for demands exceeding a specified amount. Despite the issuance of various directives by the CBEC regarding pre-show cause notice consultation, it was noted that such mandatory consultation was not followed in the present case.

The Court acknowledged that the procedure mandated by the CBEC for pre-show cause notice consultation was not adhered to in the case at hand. Additionally, the Court highlighted that the reply submitted by the petitioner to the audit slip should have been considered before issuing the show cause notice. As the reply was not taken into account, the Court concluded that the show cause notice was challengeable. Consequently, the Court allowed the Writ Petition, set aside the impugned notice, and remanded the matter to the fourth respondent for fresh consideration. The fourth respondent was directed to provide an opportunity for a personal hearing to the petitioner's representative(s), consider the reply dated 16.12.2016, and proceed in accordance with the law after a full and effective review. The judgment did not impose any costs on the parties involved, and the connected Miscellaneous Petition was closed as a result.