2005 (10) TMI 98 - HC - Central Excise

Writ jurisdiction - Alternative remedy - Adjudication - breach of principles of natural justice - classification Of Product 'CHOCHO' exceeds 6% by weight - test carried out by the Deputy Chief Chemist - Petitioner seeking cross-examination of witnesses and personal hearing - methodology followed for determination of cocoa content - HELD THAT - The opportunity to cross-examine involves not only notice of the adverse material but also a sufficient interval of time to prepare for cross-examination. The notice of the adverse material and opportunity of cross-examination is necessary because wherever the opponent has declined to avail himself of the offered opportunity, it must be supposed to have been because he believed that testimony could not or need not be disputed at all or be shaken by cross-examination. In this view of the matter, right to cross-examine or to have opportunity to effectively exercise that right is an essential part of principles of natural justice. Thus affected person must be given fair opportunity not only to answer the case against him but to adduce positive evidence in support of his own case together with right to contradict all adverse allegations, if necessary, by permitting him to cross-examine the witnesses of the opponent. It is needless to mention that although the principles of natural justice are aimed at ensuring a fair hearing, nevertheless, depending on all the circumstances of the case, a decision reached or hearing conducted in breach of the principles of natural justice is reviewable in an action of judicial review. In our view, the above principle would apply even where the petitioner has been denied opportunity to have the contents of the test reports relied upon by the respondents before the adjudicating authority. In our view, the adjudicating authority was, obviously, in error in not directing the respondents to supply copies of the test reports to the petitioners. A document to be relevant may support either the Revenue or the petitioner. No adjudicating authority can, therefore, refuse production of such a document simply because that document which is to be used against the subject is not relevant in its perception. This would certainly amount to refusal of reasonable opportunity to defend. This being the settled legal position, we hold that the adjudicating authority was, obviously, in error in refusing to direct the respondents to hand over the copies of the test reports to the petitioners which has, necessarily, prejudiced the defence of the petitioners. Having examined the case on the touchstone of breach of principles of natural justice, we do not think that we would be justified in accepting the submission that the petitioners should be relegated to the appellate remedy. On the contrary, in order to shorten the length of litigation, it would be in the interest of both parties to set aside the impugned order without expressing any opinion on its merits and remit the matter back to the adjudicating authority with direction to permit the petitioners to cross-examine the Deputy Chief Chemist on day-to-day basis and after evidence is over, it would be open for the adjudicating authority to heard the petitioners giving them reasonable time to make their submissions and to dispose of the adjudication proceedings in a fixed time schedule. So far as second impugned order dated 31st August, 2005 incorporated at Exh. A-1 is concerned, the basis of which being the impugned order dated 22nd July, 2005, that by itself cannot stand to the scrutiny of law. The same needs to be set aside. In the aforesaid view of the matter, impugned orders at Exh. A and Exh. A-1 are set aside. Petition is allowed in terms of this order and remitted back to the adjudicating authority to decide afresh in accordance with law. The adjudicating process must be completed with expeditious despatch, at any rate, within eight weeks i.e. on or before 10th December, 2005. Till then, in order to avoid multiplication of the proceedings, it will be advisable to keep all the show cause notices in abeyance. However, in the event the adjudication order is adverse to the petitioners, the same shall stand stayed for four weeks subject to furnishing bank guarantee within four weeks from the date of communication of the adverse order to secure the Revenue for the liability that may be determined in the adjudicating order. Both parties to appear before the adjudicating authority on 24th October, 2005. Rule is made absolute in terms of this order with no order as to costs.

Issues Involved:
1. Classification of the product "CHOCOS" under the Central Excise Tariff Act.
2. Compliance with principles of natural justice.
3. Availability of alternate remedy under the Central Excise Act, 1944.
4. Adherence to the remand order issued by the Tribunal.

Detailed Analysis:

1. Classification of the Product "CHOCOS":
The central issue in this case was whether the product "CHOCOS" should be classified under Chapter sub-heading No. 1904.10 or Chapter sub-heading No. 1804.00 of the Tariff Act. The Central Excise Department formed a prima facie opinion that the product should be classified under Chapter sub-heading No. 1804.00 based on the Deputy Chief Chemist's test reports, which indicated that the cocoa content exceeded 6%. The petitioners argued that the cocoa content was only 5.16% and challenged the test reports.

2. Compliance with Principles of Natural Justice:
The petitioners contended that they were not provided with the necessary details of the test reports, which hindered their ability to cross-examine the Deputy Chief Chemist effectively. The Tribunal had directed the respondents to disclose the methodology used for the analysis and to allow cross-examination of the Deputy Chief Chemist. However, the adjudicating authority failed to provide the test reports in a timely manner, which was deemed a breach of natural justice.

3. Availability of Alternate Remedy:
The respondents argued that the petition should not be entertained under Article 226 of the Constitution of India due to the availability of an alternate remedy by way of appeal under the Central Excise Act, 1944. However, the court held that the rule of exclusion of writ jurisdiction by availability of alternate remedy is a rule of discretion and not one of compulsion. The court emphasized that where there is a breach of principles of natural justice, the petition can be entertained under Article 226.

4. Adherence to the Remand Order Issued by the Tribunal:
The Tribunal had remanded the matter to the adjudicating authority with specific directions to disclose the methodology of analysis and allow cross-examination. The respondents provided only photo-stat copies of four pages of a book, which contained multiple methods for determining cocoa content. This led to further confusion about which method was used. The court found that the adjudicating authority did not comply with the Tribunal's order and failed to follow the principles of natural justice.

Conclusion:
The court concluded that the adjudicating authority's failure to provide the test reports and disclose the methodology in a timely manner was a clear breach of principles of natural justice. The impugned orders dated 22nd July, 2005, and 31st August, 2005, were set aside. The matter was remitted back to the adjudicating authority with directions to permit cross-examination of the Deputy Chief Chemist and to complete the adjudication process within a fixed time schedule. The court also directed that all show cause notices be kept in abeyance until the adjudication process was completed.

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