2019 (4) TMI 533 - HC - Central Excise

Principles of natural justice - CENVAT Credit - Use of common inputs used in exempt and dutiable goods - non-maintenance of separate records - it is contended that the impugned order, although notices the reply to the show cause notice in some details but does not deal with the decision of the jurisdictional CESTAT Bench being Esab India Ltd. 2008 (6) TMI 317 - CESTAT, KOLKATA Held that - The impugned order proceeds not to consider Esab India Ltd. - the non-consideration of Esab India Ltd. is an incident, which tantamounts to breach of principles of natural justice by the adjudicating authority - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to show cause notice and order-in-original on grounds of breach of principles of natural justice.

Analysis:
The petitioner challenged a show cause notice dated May 6, 2014, and an order-in-original dated September 28, 2018, citing breach of principles of natural justice. The petitioner argued that the impugned order failed to consider various authorities and defences raised in the reply to the show cause notice. The learned Additional Advocate General contended that non-consideration of a binding authority amounted to a breach of natural justice. The respondent, represented by an Advocate, argued that the impugned order was well-reasoned and did not warrant interference. However, the petitioner's submission regarding non-consideration of relevant authorities was crucial in establishing a breach of natural justice.

The petitioner relied on precedents like Artee Overseas Pvt. Ltd., Century Textile & Ind. Ltd., and Electrosteel Castings Limited, emphasizing that failure to consider a relevant authority cited before the adjudicating authority amounted to a breach of natural justice. The petitioner specifically referred to Esab India Ltd., a decision by the jurisdictional CESTAT Bench, which held that in certain situations, manufacturers should reverse a proportionate amount of credit. The impugned order did not address this crucial aspect, leading to a failure in correctly applying the law. Consequently, the confirmation of the demand without considering Esab India Ltd. was deemed contrary to the established legal principles. The non-consideration of Esab India Ltd. was seen as a significant incident constituting a breach of natural justice by the adjudicating authority.

In light of the above, the High Court set aside the impugned order, directing the authorities to reconsider the show cause notice and the reply in accordance with the law. The court emphasized the importance of expeditious resolution in this matter. The writ petition was disposed of with no order as to costs. The judgment and order were to be made available to the parties upon compliance with the necessary formalities for urgent certified website copies.