2015 (12) TMI 1267 - HC - Central Excise

Claim of exemption - Washing natural clay - use / non use of acid - sale of the product under trade name Bleach-9 - activated clay/activated earth - Maintainability of petition - Alternate remedy - breach of principles of natural justice - Opportunity of cross examination not granted - Conflicting chemical test reports of different chemical examiners - Held that - directions relate to sending the matter for the opinion of the Chief Chemist, therefore, one of the important factors in the ultimate outcome of these proceedings would be the report of the Chief Chemist. The record further reveals that the report of the Chief Chemist is adverse to the petitioner. It is further the case of the petitioner that the material furnished by it has not been considered at the time of preparing such report. Under the circumstances, it cannot be said that the petitioner was not justified in seeking to cross-examine the Chief Chemist, which opportunity has been denied by the adjudicating authority under the specious plea that the petitioner does not want to pay the excise duty. - The petitioner also requested for a personal hearing before taking any final decision in the matter. However, the adjudicating authority has proceeded to adjudicate the show-cause notice without affording any opportunity to cross-examine the Chief Chemist as well as without affording any further opportunity of hearing. Therefore, there is a clear case of breach of principles of natural justice, under the circumstances, the contention that the petition should not be entertained on the ground of availability of an alternative remedy under the statute, does not merit acceptance. While opinion of the Chief Chemist has been called for pursuant to the directions issued by the Commissioner (Appeals), the true purport of the directions issued by the Commissioner (Appeals) has not been conveyed to the Chief Chemist. Under the circumstances, the Chief Chemist has not applied his mind to the matter in the light of the directions issued by the Commissioner (Appeals). The adjudicating authority, having regard to the directions issued by the Commissioner (Appeals) was required to furnish the operative part of the order passed by the Commissioner (Appeals) to the extent of the directions issued by him as well as the supporting documents, namely, the two reports of the different chemical examiners of the same laboratory as well as the documents furnished by the petitioner to the adjudicating authority in support of its case namely, the reports of IIT, Bombay, Vaibhav Enviro Consultant, Ahmedabad etc. were also required to be forwarded to the Chief Chemist. While from the affidavit-in-reply as well as the impugned order, it appears that the said documents have been forwarded to the Chief Chemist, however, in the absence of the specific directions issued by the Commissioner (Appeals) being brought to the notice of the Chief Chemist, the report does not appear to have been prepared keeping the said parameters in mind. With a view to bring finality to the proceedings, the matter is once again required to be referred to the adjudicating authority to ensure that the matter is once again referred to the Chief Chemist together with the directions issued by the Commissioner (Appeals) and the supporting documents as referred to hereinabove, for a fresh opinion on the question as to whether on the parameters contained in the two reports of the Chemical Examiner, Vadodara, it could be said that Bleach-9 is activated earth. The Chief Chemist would also be required to keep in mind the documents/reports furnished by the petitioner in support of its claim. Upon such report being furnished, a copy thereof is required to be furnished to the petitioner and in case the report is adverse to the petitioner, the petitioner shall be entitled to an opportunity of cross-examining the Chief Chemist. Thereafter, it is only after affording a reasonable opportunity of hearing to the petitioner that the final order may be passed by the adjudicating authority. - Decided in favour of assessee.

Issues Involved:
1. Compliance with directions issued by the Commissioner (Appeals).
2. Denial of cross-examination of the Chief Chemist.
3. Denial of opportunity for a personal hearing.
4. Availability of an alternative remedy under the statute.

Issue-wise Detailed Analysis:

1. Compliance with Directions Issued by the Commissioner (Appeals):
The petitioners contended that the adjudicating authority failed to comply with the directions issued by the Commissioner (Appeals) in the order dated 12th July 2006. Specifically, the directions included sending both conflicting chemical test reports to the Chief Chemist, CRCL, New Delhi, along with the petitioners' defense and any adverse report to be provided to the petitioners before any decision. The adjudicating authority's failure to follow these directions led to repeated remands by the Appellate Tribunal. The court found that the adjudicating authority did not properly convey the true purport of the directions to the Chief Chemist, leading to non-compliance with the appellate directions.

2. Denial of Cross-examination of the Chief Chemist:
The petitioners requested the opportunity to cross-examine the Chief Chemist, which was denied by the adjudicating authority. The court emphasized that cross-examination is an integral part of the principles of natural justice. The denial was seen as a violation of these principles, as established in various judicial precedents, including the Supreme Court's ruling in Ayaaubkhan Noorkhan Pathan v. State of Maharashtra and others, which underscored the necessity of cross-examination to meet the requirements of natural justice.

3. Denial of Opportunity for a Personal Hearing:
The petitioners also sought a personal hearing after the receipt of the Chief Chemist's report, which was not granted. The court noted that despite the petitioners' specific request for a personal hearing, the adjudicating authority proceeded to pass the final order without affording such an opportunity. This was deemed a breach of the principles of natural justice, further invalidating the adjudication process.

4. Availability of an Alternative Remedy Under the Statute:
The respondents argued that the petition should not be entertained as the petitioners had an alternative remedy of appeal under the statute. However, the court held that the breach of natural justice principles and non-compliance with the appellate directions justified the invocation of writ jurisdiction under Article 226 of the Constitution. The court referred to the Supreme Court's decision in C.I.T. v. Chhabil Dass Agarwal, which recognized exceptions to the rule of alternative remedy, including cases involving violation of natural justice.

Conclusion:
The court quashed the impugned order dated 30th March 2015 and remanded the matter to the adjudicating authority with directions to refer the matter to the Chief Chemist in compliance with the appellate directions and afford the petitioners the opportunity to cross-examine the Chief Chemist and a personal hearing. The court emphasized the need for strict adherence to procedural fairness to bring finality to the proceedings.

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