2017 (3) TMI 557 - HC - Central Excise

100% EOU - breach of principles of natural justice - notice for personal hearing had not been served upon the petitioners in accordance with the provisions of section 37C of the Act - Held that - under clause (a) of sub-section (1) of section 37C of the Act, in case of service of notice by speed post, the same has to be with proof of delivery - In the present case, it is an admitted position that the letter of personal hearing was sent to the petitioners through speed post; however, though details of date of despatch, etc. have been produced on record by the learned counsel for the respondents, including tracking number, there is no material by way of proof of delivery to the petitioners; whereas, on the other hand, it is the specific case of the petitioners that they have not received the notice for personal hearing - in the absence of any proof of delivery, it cannot be said that there is effective service of notice, as contemplated u/s 37C of the Act - the impugned order which has been passed ex parte is clearly in breach of principles of natural justice. In one single notice, a choice of three dates of hearing has been given and non-appearance on all the three dates has been considered to amount to three adjournments having been sought in terms of the proviso to section 33A of the Act - the petitioners or their representatives did not remain present on any of the dates, the adjudicating authority has proceeded further with the matter and has passed the order-in-original ex parte - is the order valid? - Held that - by virtue of the provisions of sub-section (2) of section 33A of the Act, when a personal hearing is fixed, it is open to a party to seek time by showing sufficient cause and in such a case, the adjudicating authority may grant time and adjourn the hearing by recording the reasons in writing. However, in view of the proviso thereto not more than three such adjournments can be granted - It is not permissible for the adjudicating authority to issue one consolidated notice fixing three dates of hearing, whether or not the party asks for time, as has been done in the present case. Sub-section (2) of section 33A of the Act provides for grant of not more than three adjournments, which would envisage four dates of personal hearing and not three dates, as mentioned in the notice for personal hearing. Therefore, even if by virtue of the dates stated in the notice for personal hearing it were assumed that adjournments were granted, it would amount to grant of two adjournments and not three adjournments, as grant of three adjournments would mean, in all four dates of personal hearing. Petition allowed - matter is restored to the file of the adjudicating authority to decide the same in accordance with law - decided in favor of petitioner.

Summary

Issues Involved:
1. Breach of principles of natural justice.
2. Service of notice under Section 37C of the Central Excise Act, 1944.
3. Interpretation of Section 33A of the Central Excise Act, 1944 regarding adjournments.
4. Maintainability of the petition under Article 226 of the Constitution of India.

Issue-Wise Detailed Analysis:

1. Breach of Principles of Natural Justice:
The petitioners contended that the adjudicating authority's ex parte order breached the principles of natural justice. The petitioners argued that they did not receive the notice for personal hearing, which was sent to their closed and transferred unit address, and no copy was marked to their advocate. The court found that the adjudicating authority's failure to ensure proper service of notice led to the petitioners' absence at the hearing, thereby violating the principles of natural justice.

2. Service of Notice under Section 37C of the Central Excise Act, 1944:
The petitioners argued that the notice for personal hearing was not served as per Section 37C of the Central Excise Act, 1944, which mandates service by registered post with acknowledgment due, speed post with proof of delivery, or courier approved by the Central Board of Excise and Customs. The court noted that while the respondents claimed to have sent the notice by speed post, there was no proof of delivery. In the absence of proof of delivery, the court held that there was no effective service of notice as required under Section 37C, rendering the ex parte order invalid.

3. Interpretation of Section 33A of the Central Excise Act, 1944 regarding Adjournments:
The petitioners contended that the adjudicating authority's notice fixing three dates for personal hearing in one consolidated notice was not permissible under Section 33A of the Act. The court agreed, stating that Section 33A(2) envisages fixing one date at a time and granting adjournments upon showing sufficient cause, with a maximum of three adjournments. The court held that the adjudicating authority's approach of fixing three dates in one notice and considering non-appearance on all three dates as three adjournments was legally infirm and not in consonance with the proviso to Section 33A.

4. Maintainability of the Petition under Article 226 of the Constitution of India:
The respondents argued that the petition should be dismissed due to the availability of an alternative remedy of appeal to the Tribunal, which requires a pre-deposit of 7.5% of the duty confirmed. The court, however, exercised its extraordinary jurisdiction under Article 226, considering the breach of principles of natural justice and the improper service of notice, which warranted interference.

Conclusion:
The court quashed the impugned order dated 29.1.2016 passed by the Commissioner of Customs and Central Excise, Surat-II, and remanded the matter to the adjudicating authority for a fresh decision after affording the petitioners an adequate opportunity of hearing in accordance with law. The court emphasized the need for proper service of notice and adherence to the principles of natural justice and statutory provisions.