2019 (10) TMI 369 - HC - Central Excise

Principles of natural justice - opportunity of personal hearing not provided - maintainability of petition - availability of alternative remedy - liability of Job-worker to pay Central Excise Duty - manufacture taking place or not? - HELD THAT - There is no dispute to the fact that before passing the impugned order, the show cause notice was issued to the petitioner and that the petitioner has not chosen to file any reply. No doubt, the learned counsel for the petitioner contended that in view of the earlier reply submitted by the petitioner dated 29.05.2014, there is no need for the petitioner to file a reply to the show cause notice - I am unable to agree with the above submissions for the simple reason that the issuance of show cause notice has emerged only after receiving the letter submitted by the petitioner on 29.05.2014. Therefore, if the Adjudicating Authority has chosen to issue the show cause notice even after receipt of such reply and make some allegations therein against the petitioner, it is for the petitioner to file a suitable reply to the said notice and agitate the matter before the Adjudicating Authority. In this case, the petitioner has not chosen to file any reply. A person to whom a show cause notice is issued, if chooses not to respond to the same, is to be construed as a person not denying the allegation so long as the said show cause notice itself is not put to challenge by him on any other ground/ reason legally sustainable. Therefore, failure to file reply and participate in the adjudication process would certainly lead to draw an adverse inference against such person. As this Writ Petition is sought to be maintained only on the ground of the alleged violation of principles of natural justice and in view of the findings rendered supra that no such violation is found in this case, I am of the view that this is a matter to be further agitated only before the Appellate Authority by filing regular appeal. The Writ Petition is disposed of by granting liberty to the petitioner to file regular appeal within a period of four weeks from the date of receipt of a copy of this order.

Summary

Issues:
Challenge to Order in Original dated 31.10.2018; Violation of principles of natural justice; Liability of petitioner for penalty under Rule 26 of Central Excise Rules 2002; Consideration of reply dated 29.05.2014; Opportunity of personal hearing.

Analysis:

The petitioner, engaged in a contract for job work with another entity, faced a challenge against Order in Original No.11/2018 dated 31.10.2018, alleging under valuation leading to Excise Duty demand of ?12,96,27,909/- along with penalties. The petitioner contended that as the job work was on a principal to principal basis, the responsibility for Excise Duty payment lay solely with the other entity. The petitioner argued that the impugned order was passed without a personal hearing, violating principles of natural justice. The respondent, however, stated that the petitioner was aware of the valuation method and the relationship was that of a Principal - Job Worker, making the petitioner liable for the penalty under Rule 26 of Central Excise Rules, 2002.

The respondent claimed that the petitioner failed to participate in the adjudication process despite multiple opportunities for personal hearings. The petitioner's counsel argued that the earlier reply dated 29.05.2014, asserting the principal to principal relationship, should have been considered by the Adjudicating Authority. The Revenue contended that the petitioner's failure to respond to the show cause notice meant they were not entitled to a personal hearing as a matter of right. The Adjudicating Authority found the petitioner liable for penalty based on the relationship with the other entity and the valuation method.

The Court noted that the petitioner did not file a reply to the show cause notice, despite an earlier submission regarding the principal to principal relationship. It emphasized that failure to participate in the adjudication process could lead to adverse inferences. The Court clarified that a request for a personal hearing must emerge from the reply filed against the show cause notice, which did not occur in this case. The Court advised the petitioner to file a regular appeal to challenge the impugned order, as the alleged violation of natural justice was not substantiated.

In conclusion, the Court disposed of the Writ Petition, granting the petitioner the liberty to file a regular appeal within four weeks. The Appellate Authority was directed to consider the appeal on its merits, without reference to the period of limitation. No costs were awarded in this matter.