2013 (9) TMI 935 - HC - Central Excise

Violation of principle of natural justice - Held that - negligence or collusion by officers, enjoined with duty to collect taxes, detect evasion and/or to impose penalties etc., cannot be a ground to allow a delinquent to go scot-free. Where an order discloses violation of principles of natural justice, it is incumbent, while setting aside such an order, to remand the matter instead of allowing a defaulting party to go scot-free. The appellate authority as well as the Tribunal, while holding that principles of natural justice have been violated, should have remanded the matter to the Adjudicating Officer after serving all relevant documents upon the respondent to decide the matter afresh - order passed by the Adjudicating Officer is vitiated for violation of principles of natural justice, however, order passed by the Tribunal is modified by directing that the matter shall be taken up by the Adjudicating Officer from the stage of issuance of show cause and after furnishing all relevant documents to the respondent and granting adequate opportunity to present its defence - Decided partly in favour of Revenue.

Summary

Issues:
Violation of principles of natural justice in the orders passed by the Adjudicating Officer, Commissioner (Appeals), and Tribunal.

Analysis:
The case involves an appeal filed by the Commissioner of Central Excise, Ludhiana challenging the orders passed by the Customs, Excise and Service Tax Appellate Tribunal. The dispute arose when M/s Gulab Industries (P) Ltd. was found with processed fabrics without proper documentation of payment of central excise duty. The Adjudicating Officer confirmed the demand for duty along with interest and penalty. The respondent appealed, and the Commissioner (Appeals) set aside the order citing a violation of natural justice due to failure in supplying relevant documents. Subsequent appeals to the Tribunal were dismissed. The appellant argued that despite errors in not furnishing documents, the respondent's failure to inspect them should not absolve the duty to provide the necessary documents. The respondent contended that the violation of natural justice was evident, and the negligence of officers should not excuse the appellant from its obligations.

The High Court observed negligence or collusion by officials in not providing relevant documents to the respondent, leading to a violation of natural justice. While acknowledging the violation, the court emphasized that negligence should not allow a defaulting party to escape consequences. The court noted that remanding the matter to the Adjudicating Officer after serving all relevant documents would be appropriate instead of letting the defaulting party go unpunished. Therefore, the court allowed the appeal in part, affirming the Adjudicating Officer's order as vitiated for violating natural justice. The court modified the Tribunal's order, directing the Adjudicating Officer to take up the matter from the issuance of the show cause notice, provide all relevant documents to the respondent, grant an opportunity to present a defense, and decide the matter within three months.

In conclusion, the High Court found no error in the orders regarding the violation of natural justice. Still, it emphasized the importance of remanding the matter to the Adjudicating Officer after providing all relevant documents to ensure a fair decision-making process.