WRIT PETITION AGAINST SHOW CAUSE NOTICE

[Mr. M. GOVINDARAJAN]

A show cause notice is meant to give the person proceeded against a reasonable opportunity of making his objection against the proposed charges indicated in the notice.   He must be told the charges against him so that he can take his defence and prove his innocence.  The authority issuing the show cause notice cannot instead of telling him the charges, confront him, with definition, conclusion or his alleged guilt.  If this is done, the entire proceeding initiated by the show cause notice gets vitiated by unfairness and bias and the subsequent proceedings become an idle ceremony.  It is settled principle of law that a quasi judicial authority in exercising its statutory powers must act fairly within an open mind while initiating the show cause proceeding. 

In ‘SBQ Steels Limited V. Commissioner of Customs, Central Excise & Service Tax, Guntur’ – 2013 (1) TMI 359 - ANDHRA PRADESH HIGH COURT the High Court held that the impugned show cause notice by use of the words ‘it is clear’ at various places clearly suggests the pre determination by the respondent of the liability of the petitioner.   The fact that it even quantified the amount of CENVAT duty wrongly availed or by the petitioner allegedly corroborates this view.   The High Court set aside the impugned show cause notice issued by the Department with a direction to issue a fresh show cause notice clearly indicating the issue on which prima facie the petitioner appears to have availed of the CENVAT credit allegedly without justification.  While issuing such show cause the department should ensure that it does not indicate any pre meditation or prejudgment by the Department.

In ‘Siemens Limited V. State of Maharastra’ – 2006 (12) TMI 203 - SUPREME COURT OF INDIA the Supreme Court held that ordinarily a writ court may not exercise its discretionary jurisdiction in entertaining a writ petition questioning a notice to show cause under the same inter alia appears to have been without jurisdiction, when the notice is issued with premeditation, however, a writ petition would be maintainable.

In ‘Rajam Industries Private Limited V. Additional DG DCEI, Chennai’ – 2010 (6) TMI 249 - MADRAS HIGH COURT the High Court held that where a show cause notice quantified the amount of central excise duty not paid by the petitioner therein under various heads and also stated that the petitioner was liable to pay penalty and interest the said show cause notice has to be set aside insofar as it relates to the quantification of the amount, liable to be paid by the petitioner.

In ‘Balarampur Chini Mills Limited V. Union of India’ – 2013 (1) TMI 525 - ALLAHABAD HIGH COURT the writ petition is maintainable against the show cause notice based on CBE & C circular as Departmental authority would not be in position to take view against such circular.

In ‘TRF Limited V. Commissioner of Central Excise & Service Tax, Jamshedpur’ – 2013 (4) TMI 21 - JHARKHAND HIGH COURT the High Court held that the challenge to show cause notice is not ordinarily permissible.   It is justified only in exceptional circumstances where-

• Conditional vires of enactment is challenged;
• Violation of principle of Natural Justice;
• Orders impugned are without jurisdiction;
• Private and public wrongs are inextricably mixed up;
• Prevention of public injury; and
• Vindication of public interest demands it

In this case the High Court was of the opinion that the purported show cause notice is only a consequence or pre determined mind of the officers issuing the notice and is fortified more seriously by the counter affidavit filed by the Officer-in-charge of the respondents.

In ‘Chemplast Sanmar Limited V. Dy. Commissioner of Central Excise (LTU), Chennai’ – 2011 (3) TMI 1300 - MADRAS HIGH COURT the writ petition has been filed challenging the notice issued by the Department requiring the petitioner as to whether it would like to avail the opportunity of being heard in person, with regard to the amount of rebate claimed by the petitioner and with regard to arrears of excise duty due to be paid by the petitioner.  The High Court was not inclined to quash the impugned notice and dismissed the writ petition since the petitioner is having opportunity to appear before the authority to represent his case.

In ‘Union of India V. Vicco Laboratories’ – 2007 (11) TMI 21 - SUPREME COURT OF INDIA the Supreme Court held that normally the writ should not interfere at the stage of issuance of show cause notice by the authorities.   In such a case the parties get ample opportunity to put forth their contentions before the authorities concerned and to satisfy the authorities concerned about the absence if case for proceeding against the person against whom the show cause notice has been issued.   Abstinence from interference at the stage of issuance of show cause notice in order to relegate the parties to the proceedings before the authorities concerned is the normal rule.   However the said rule is not without any exceptions. Where a show cause notice is issued either without jurisdiction or an abuse of process of law, certainly in that case, the writ court would not hesitate to interfere even at the stage of show cause notice.   The interference at the show cause notice stage should be rare and not in a routine manner.   Mere ascertain by the petitioner that notice was without jurisdiction and/or abuse of process of law would not suffice. It should prima facie be established.  Where factual adjudication would be necessary interference is ruled out.

In ‘AGV Altab Limited V. Commissioner of Central Excise, Delhi – II' – 2011 (3) TMI 1107 - DELHI HIGH COURT the High Court held that it cannot be disputed that the Commissioner of Central Excise has jurisdiction to decide and go into the said questions by issue of notice under Section 118 of the Customs Act. The said authority can adjudicate and decide the objection and contention raised by the petitioner.   In these circumstances the High Court was not inclined to entertain the Writ Petition against the show cause notice and the petitioner is given liberty to file reply and the Commissioner of Central Excise will decide the case after giving reasonable opportunity to the petitioner.

The Supreme Court and High Courts in a large number of cases have deprecated the practice of entertaining writ petitions questioning the legality of the show cause notices stalling enquiries as proposed and retarding investigation process to find actual facts with the participation.   Unless the High Court is satisfied that the show cause notice was totally honest in the eye of the law for absolute want of jurisdiction of the authority to even investigate into the fact, writ petitioners will not be entertained for the mere asking and as a matter of routine.  The writ petitioners in such cases are directed to respond to the show cause notice and take all stands highlighted in the writ petition before the Adjudicating Authority.                 

Discussions to this article

[Sandhya Vijaykumar]

Issuance of Show cause notice is a statutory provision subject to limitation. The purpose of its issuance is to seek a reply for the proposed actions there under, before initiation of adjudication proceedings. The right to issue the Notice by the department is in parallel with the right to receive the same by the assessee as a threshold of fair trial. Show cause notice is merely answerable and not questionable in a writ proceeding.

N S SANDHYA

Advocate, Bangalore