1995 (10) TMI 53 - HC - Central Excise

Summary

Issues Involved:
1. Validity of the demand notice issued without show cause notice and opportunity to the petitioner.
2. Alleged violation of conditions of Notification No. 123/81-C.E. by the petitioner.
3. Compliance with principles of natural justice and fair play.
4. Applicability of Section 11A of the Central Excises and Salt Act, 1944.

Issue-wise Detailed Analysis:

1. Validity of the Demand Notice Issued Without Show Cause Notice and Opportunity to the Petitioner:
The petitioner challenged the notice dated 29-9-1995 issued by the Assistant Commissioner of Central Excise, Warangal Division, demanding payment of Central Excise duty amounting to Rs. 13,12,799.43 within 15 days. The grievance was that no show cause notice and opportunity were given before making the demand. The court noted that the first respondent admitted in his counter-affidavit that no show cause notice was issued before the impugned notice. The court emphasized that administrative actions resulting in civil consequences must follow principles of natural justice and fair play, which were not observed in this case.

2. Alleged Violation of Conditions of Notification No. 123/81-C.E. by the Petitioner:
The core issue was whether the petitioner violated the conditions of Notification No. 123/81-C.E., dated 2-6-1981, under which they were exempted from excise duty. The petitioner argued that the machinery was used in accordance with the terms of the exemption. The first respondent, however, claimed that the machinery was used at locations not approved under the notification, leading to its seizure. The court observed that the first respondent's notice stated that "it appears" the petitioner violated the conditions, indicating uncertainty and lack of a definite finding. The court held that a firm conclusion on the violation was necessary before demanding excise duty.

3. Compliance with Principles of Natural Justice and Fair Play:
The court underscored the necessity of adhering to principles of natural justice and fair play, especially when administrative actions have civil consequences. It was highlighted that the petitioner should have been given a notice and an opportunity to be heard before any adverse decision. The court referenced several Supreme Court decisions affirming that principles of natural justice apply to administrative orders affecting citizens' rights. The court concluded that the demand notice violated these principles, making it unsustainable.

4. Applicability of Section 11A of the Central Excises and Salt Act, 1944:
The petitioner contended that the impugned order violated Section 11A of the Central Excises and Salt Act, 1944. The court acknowledged this contention but left it for the first respondent to consider upon re-evaluation of the case. The court reiterated the importance of fair play and adherence to statutory provisions in administrative actions.

Conclusion:
The court set aside the demand notice dated 29-9-1995, holding that it was issued in violation of principles of natural justice and fair play. The court allowed the first respondent to take appropriate action in accordance with the law after providing notice and reasonable opportunity to the petitioner. The writ petition was allowed, and no costs were awarded.