2021 (10) TMI 890 - HC - Central Excise

Principles of natural justice - legality and validity of ex-parte order - levy of personal penalty on the petitioner without service of show cause notice and without service of notices of personal hearing - HELD THAT - From the reply of the respondent department, it can be deduced unequivocally that the show cause notice and the personal hearing notices have not been served upon the petitioner. It has a reference of the first show cause notice served upon the company and therefore, it assumed that the show cause notice and the personal hearing notices have been served upon the present petitioner also. This stand on the part of the respondent of not having known the changed address of petitioner on his having failed to put to the notice of department is wholly unacceptable. Failure to send the show cause notice and the notices of personal hearing therefore, upon the last known address of the petitioner is also unsustainable as the department of Income Tax already had details. The penalty imposed upon the petitioner in the order in original is to the tune of ₹ 4,50,000/-. Any penalty imposed personally on the person cannot be saddled, unless due opportunity is given. Here not only there is a question of availing opportunity of hearing, the very service of the show cause notice is also seriously questioned and we also could notice from the pleadings before us that neither the show cause notice was served upon the petitioner nor was he served notice of personal hearing. There is nothing to indicate as to how this affixing at company premise should be construed as sufficient notice to the petitioner nor is it found on record from any document that he was made aware of the show cause notice which led to the order impugned and therefore, merely because in reply to another show cause notice, he has been made aware also cannot furnish the ground to assume that he was aware of the show cause notice, the order of which is impugned in this matter. Such assumption and presumption are absent in the statute and they cannot furnish the basis to sustain the order of huge amount of personal penalty. The foundation of principle of natural justice is audi alteram partem, the necessity of grant of opportunity of hearing and no party is to be condemned unheard. Here, there appears to be a flagrant violation of the said principle which necessitates indulgence. Reluctantly, without touching the merits of the matter and leaving it to the parties to decide it before the appropriate forum, the order in original to the extent concerning the present petitioner is quashed and set aside - Matter shall be decided by the authority concerned by giving the fullest opportunity without being influenced by any other aspects - petition allowed by way of remand.

Issues Involved:
1. Legality and validity of the ex-parte order imposing personal penalty.
2. Non-service of show cause notice and notices of personal hearing.
3. Alleged breach of principles of natural justice.
4. Maintainability of the petition in light of alternative remedy.

Detailed Analysis:

1. Legality and Validity of the Ex-Parte Order Imposing Personal Penalty:
The petitioner challenged the legality and validity of the ex-parte order dated 28.02.2019 passed by the Principal Commissioner of Central Excise and GST, Vadodara-II, which imposed a personal penalty on the petitioner. The petitioner argued that the order was passed without the service of a show cause notice and without providing notices of personal hearing, rendering the order illegal and void ab-initio.

2. Non-Service of Show Cause Notice and Notices of Personal Hearing:
The petitioner contended that he did not receive the show cause notice issued in 2017 and that it was the responsibility of the respondent to ensure the service of the show cause notice and provide an opportunity for a personal hearing before proceeding with adjudication. The petitioner emphasized that he had left the company in June 2016 and had not received any notices until his retirement. The respondent department argued that the show cause notice was sent to the petitioner's factory and residential addresses by Speed Post, which were returned with the endorsement "left." Consequently, the show cause notice was deemed served by affixing it on the Notice Board of the DGGSSTI under Section 37C of the Central Excise Act, 1944.

3. Alleged Breach of Principles of Natural Justice:
The petitioner asserted that the imposition of a personal penalty without serving the show cause notice and without a personal hearing violated the principles of natural justice, specifically the principle of "audi alteram partem." The petitioner argued that the penalty was imposed without any opportunity to present his case, which is a fundamental requirement for a fair adjudication process. The court acknowledged that the principles of natural justice were violated, as the petitioner was not given a fair opportunity to be heard.

4. Maintainability of the Petition in Light of Alternative Remedy:
The respondent department raised a preliminary objection regarding the maintainability of the petition, arguing that the petitioner had an alternative remedy under Section 35(B) of the Central Excise Act, 1944, to appeal before the Customs, Excise & Service Tax Appellate Tribunal (CESTAT). The court recognized that while an alternative remedy existed, the petition could be entertained under Article 226 of the Constitution of India due to the gross and clear violation of principles of natural justice. The court noted that the petitioner had claimed a violation of natural justice and non-affording of an opportunity of hearing, which warranted judicial intervention despite the availability of an alternative remedy.

Conclusion:
The court quashed and set aside the ex-parte order to the extent it concerned the petitioner, emphasizing the breach of principles of natural justice. The court directed that the show cause notice be served to the petitioner on his official email ID and provided the petitioner an opportunity for a personal hearing. The court refrained from entering into the merits of the matter, leaving it to be decided by the appropriate forum with the fullest opportunity for both parties to present their cases.

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