2016 (4) TMI 196 - HC - Central Excise

Adjustment of rebate sanctioned to the petitioner against a pending demand raised on the petitioner - denial of principles of justice - Held that - In view of the breach of principles of natural justice in passing the impugned order, grave prejudice is caused to the petitioner inasmuch as an amount of ₹ 1.49 crores being the sanctioned rebate claim is being adjusted against a confirmed demand of ₹ 2.38 crores which is stayed by the orders dated 22nd December, 2012 and 18th May, 2015 of the Customs, Excise and Service Tax Appellate Tribunal. The impugned order has not considered the above aspect as in the absence of the petitioner being served with a show cause notice or being granted an opportunity for personal hearing, the aforesaid facts could not be brought to the notice of the Assistant Commissioner of Central Excise. In the circumstances, we set aside the impugned order dated 17th September, 2015 to the extent the rebate claim of ₹ 1.49 crores granted as being adjusted against the confirmed demand of ₹ 2.38 crores in exercise of power under Section 11 of the Act. It is made clear that the Assistant Commissioner of Central Excise would adjudicate on the issue of adjusting an amount of ₹ 1.49 crores (being the rebate granted) against the pending demand, in accordance with the principles of natural justice.

Summary

Issues:
Challenging order adjusting rebate against pending demand without natural justice principles.

Analysis:
The petition under Article 226 challenges the order adjusting a rebate against a pending demand without following natural justice principles. The Assistant Commissioner of Central Excise sanctioned a rebate claim of Rs. 1.49 crores under Section 11B of the Central Excise Act, 1944. However, instead of handing over the amount to the petitioner, the Assistant Commissioner adjusted it against a confirmed demand of Rs. 2.38 crores under Section 11 of the Act. The petitioner contended that the order was passed without granting a show cause notice or a personal hearing, violating the principle of natural justice.

The High Court acknowledged that ordinarily, they would not interfere as an appeal remedy was available. However, due to the breach of natural justice, they exercised their writ jurisdiction. Citing the Whirlpool Corporation case, the Court emphasized that when an order is passed in breach of natural justice, the Court may consider exercising its extraordinary jurisdiction under Article 226. The Court found that the lack of natural justice principles in the impugned order caused grave prejudice to the petitioner as the sanctioned rebate was being adjusted against a stayed demand, which the Assistant Commissioner was not made aware of due to the absence of a show cause notice or hearing.

Consequently, the High Court set aside the impugned order to the extent of adjusting the rebate against the pending demand. The Assistant Commissioner was directed to adjudicate on the issue in accordance with natural justice principles, ensuring a fair hearing for the petitioner. The Court instructed the Assistant Commissioner to decide on the matter expeditiously, preferably within 12 weeks. All other contentions were left open, and the writ petition was disposed of with no order as to costs.