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TMI Blog2015 (5) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... ed capacity after that date, exemption on goods cleared from units located in growth centres and integrated infrastructure centres. 3) The aforesaid Notification was issued under the provision of Central Excise Act, 1944 as well as Additional Duties of Excise (Goods of Special Importance) Act, 1957 and Additional Duties of Excise (Textiles and Textile Articles) Act, 1978. However, on December 31, 1999, another Notification was issued whereby exemption of central excise was withdrawn in respect of goods falling under Chapter 21.06 (pan masala) and Chapter 24 (tobacco and tobacco substitutes, including cigarettes, chewing tobacco etc.). 4) This withdrawal Notification was challenged by the appellant by filing the writ petition in the High Court of Gauhati. The learned Single Judge dismissed the writ petition. However, appeal preferred by the appellant was allowed by the Division Bench vide judgment dated December 03, 2012. In nutshell, the High Court held that the principal of Promissory Estoppel shall apply and once a promise was given by the Union of India assuring that no such duty would be charged for a period of ten years, it was not open for the Union of India to withdraw the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposit entire duty amount within a period of thirty days. This order of pre-deposit was challenged by the appellant by filing four writ petitions in the High Court of Gauhati. The learned Single Judge of the High Court, however, dismissed these writ petitions vide orders dated May 18, 2004. The appellant carried this issue of pre-deposit to a higher forum in the form of writ appeals before the Division Bench of the said Court. Interim orders dated June 11, 2004 were passed in the writ appeals directing the Commissioner (Appeals) not to dismiss the appeals preferred by the appellant before him for non-deposit of the duty amount. In other words, interim stay against the pre-deposit was given. The Commissioner (Appeals) heard the appeals and passed the orders dated June 15, 2005 deciding the appeals in favour of the appellant. He held that issuance of show-cause notice was mandatory before a valid recovery of demand could be made from the appellant and, thus, remitted the matter to the adjudicating authority. After this final order was passed by the Commissioner (Appeals), writ appeals of the appellant before the Division Bench were disposed of as infructuous in view of the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta on merits and, therefore, dismissal of the Tax Reference by the High Court, and consequently the Review Petition, is clearly erroneous and the High Court should have gone into the merits of the issue decided by CESTAT. 9) As noted above, CESTAT has decided the case against the appellant on the ground that issue now raised is covered by the judgment of this Court in R.C. Tobacco (supra). As pointed out, in R.C. Tobacco (supra), this Court has already upheld the validity of Section 154 of the Act of 2003 thereby taking away the benefit of Notification No. 32 of 1999 retrospectively insofar as excisable goods falling under Chapter 24 are concerned. Conscious of the position that judgment in R.C. Tobacco (supra) stares at the face of the appellant, Mr. Soli Sorabjee, learned senior counsel who appeared for the appellant, has also made an endeavour to show that the said judgment in R.C. Tobacco (supra) is in clear conflict with earlier three Judge Bench judgment of this Court in M/s. J.K. Cotton Spinning and Weaving Mills Ltd. v. Union of India (1987) Supp SCC 350. Thus, following three issues have arisen for consideration in these appeals: (a) Whether order of the Single Judge at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise and Customs (CBEC) as well as in the Gauhati High Court. All these issues were considered by the Commissioner (Appeals), who gave his prima facie view thereupon observing that the appellants did not have strong prima facie case on merits resulting into the direction to deposit the entire amount within thirty days. 12) The appellant had filed writ petitions against the aforesaid order of the Commissioner (Appeals) with the prayer that the direction of the Commissioner (Appeals) to deposit the entire amount within thirty days be set aside and the prayer of pre-deposit of the appellant be accepted. No doubt, while arguing for this relief, the appellant had raised various contentions on the merits of the case in its endeavour to demonstrate that it had a good case on merits. It is also borne from the record that the learned Single Judge, while dismissing the writ petition, dealt with these issues, which touched upon the merits of the main issue. That is the reason that the order dated May 18, 2004 of the learned Single Judge dismissing the writ petition of the appellant runs into 37 pages. Nevertheless, we find that the observations which were made by the learned Single Judge on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication whereby the amount demanded in the order dated June 06, 2003 was crystallized and, therefore, there could not have been demand for recovery of the stipulated amount without issuing notice to the appellant and giving the appellant herein right of hearing. He also submitted that merely because vires of Section 154 of the Act of 2003 were upheld by this Court in R.C. Tobacco (supra) could not be a ground to dispense with the aforesaid mandatory requirements of principles of natural justice. His further submission was that 'no prejudice' principle adopted by the CESTAT amounted to erroneous approach. He sought to draw a fine distinction in this behalf by contending that the Authority passing the order could not presume that prejudice would not be caused to a person against whom the action is contemplated and on that presumption dispense with the mandatory requirement of issuance of the notice. According to him, such a doctrine could be applied only by the courts while dealing with such issues where it is found that the action of the Authority was violative of principles of natural justice, the Court could still choose not to remit the case back to the concerned Authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n reason can comprehend. In this sense, it may comprehend virtue ethics and virtue jurisprudence in relation to justice as all these are attributes of natural justice. We are not addressing ourselves with this connotation of natural justice here. 19) In Common Law, the concept and doctrine of natural justice, particularly which is made applicable in the decision making by judicial and quasi-judicial bodies, has assumed different connotation. It is developed with this fundamental in mind that those whose duty is to decide, must act judicially. They must deal with the question referred both without bias and they must given to each of the parties to adequately present the case made. It is perceived that the practice of aforesaid attributes in mind only would lead to doing justice. Since these attributes are treated as natural or fundamental, it is known as 'natural justice'. The principles of natural justice developed over a period of time and which is still in vogue and valid even today were: (i) rule against bias, i.e. nemo iudex in causa sua; and (ii) opportunity of being heard to the concerned party, i.e. audi alteram partem. These are known as principles of natural justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocedural fairness shown in the decision making that decision becomes acceptable. In its proper sense, thus, natural justice would mean the natural sense of what is right and wrong. 23) This aspect of procedural fairness, namely, right to a fair hearing, would mandate what is literally known as 'hearing the other side'. Prof. D.J. Galligan On 'Procedural Fairness' in Birks (ed), the Frontiers of Liability (Volume One) (Oxford 1994) attempts to provide what he calls 'a general theory of fair treatment' by exploring what it is that legal rules requiring procedural fairness might seek to achieve. He underlines the importance of arriving at correct decisions, which is not possible without adopting the aforesaid procedural fairness, by emphasizing that taking of correct decisions would demonstrate that the system is working well. On the other hand, if mistakes are committed leading to incorrect decisions, it would mean that the system is not working well and the social good is to that extent diminished. The rule of procedure is to see that the law is applied accurately and, as a consequence, that the social good is realised. For taking this view, Galligan took su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cientious citizen, willing to make reasonable sacrifices for the public good. If obedience to law ideally entails a recognition of its morally obligatory character, there must be suitable opportunities to test its moral credentials. Procedures may also be though to have intrinsic value in so far as they constitute a fair balance between the demands of accuracy and other social needs: where the moral harm entailed by erroneous decisions is reasonably assessed and fairly distributed, procedures express society's commitment to equal concern and respect for all." It, thus, cannot be denied that principles of natural justice are grounded in procedural fairness which ensures taking of correct decision and procedural fairness is fundamentally an instrumental good, in the sense that procedure should be designed to ensure accurate or appropriate outcomes. In fact, procedural fairness is valuable in both instrumental and non-instrumental terms. 25) It is on the aforesaid jurisprudential premise that the fundamental principles of natural justice, including audi alteram partem, have developed. It is for this reason that the courts have consistently insisted that such procedural fairness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to administrative proceedings also especially when it is not easy to draw the line that demarcates administrative enquiries from quasijudicial ones. An unjust decision in an administrative inquiry may have a more far reaching effect than a decision in a quasi-judicial inquiry. It was further observed that the concept of natural justice has undergone a great deal of change in recent years. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the inquiry is held and the constitution of the tribunal or the body of persons appointed for that purpose. Whenever a complaint is made before a Court that some principle of natural justice has been contravened, the Court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case. The rule that inquiry must be held in good faith and without bias and not arbitrarily or unreasonably is now included among the principles of natural justice. 21. In Chairman, Board of Mining Examination v. Ramjee, (1977) 2 SCC 256, the Court has observed that natural justice is not an un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was not statutorily required. The Court took the view that even in the absence of statutory provision to this effect, the authority was liable to give notice to the affected parties while purchasing their properties under Section 269-UD of the Income Tax Act, 1961. It was further observed that the very fact that an imputation of tax evasion arises where an order for compulsory purchase is made and such an imputation casts a slur on the parties to the agreement to sell leads to the conclusion that before such an imputation can be made against the parties concerned they must be given an opportunity to show-cause that the under valuation in the agreement for sale was not with a view to evade tax. It is, therefore, all the more necessary that an opportunity of hearing is provided. 27) From the aforesaid discussion, it becomes clear that the opportunity to provide hearing before making any decision was considered to be a basic requirement in the Court proceeding. Later on, this principle was applied to other quasi-judicial authorities and other tribunals and ultimately it is now clearly laid down that even in the administrative actions, where the decision of the authority may result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned to hold that there was a requirement of issuance of show-cause notice by the Deputy Commissioner before passing the order of recovery, irrespective of the fact whether Section 11A of the Act is attracted in the instant case or not. 30) But that is not the end of the matter. While the law on the principle of audi alteram partem has progressed in the manner mentioned above, at the same time, the Courts have also repeatedly remarked that the principles of natural justice are very flexible principles. They cannot be applied in any straight-jacket formula. It all depends upon the kind of functions performed and to the extent to which a person is likely to be affected. For this reason, certain exceptions to the aforesaid principles have been invoked under certain circumstances. For example, the Courts have held that it would be sufficient to allow a person to make a representation and oral hearing may not be necessary in all cases, though in some matters, depending upon the nature of the case, not only full-fledged oral hearing but even cross-examination of witnesses is treated as necessary concomitant of the principles of natural justice. Likewise, in service matters relating to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... natural justice, the Courts have held that it may not be necessary to strike down the action and refer the matter back to the authorities to take fresh decision after complying with the procedural requirement in those cases where non-grant of hearing has not caused any prejudice to the person against whom the action is taken. Therefore, every violation of a facet of natural justice may not lead to the conclusion that order passed is always null and void. The validity of the order has to be decided on the touchstone of 'prejudice'. The ultimate test is always the same, viz., the test of prejudice or the test of fair hearing. 32) In Managing Director, ECIL (supra), the majority opinion, penned down by Sawant, J., while summing up the discussion and answering the various questions posed, had to say as under qua the prejudice principle: "30. Hence the incidental questions raised above may be answered as follows: xx xx xx (v) The next question to be answered is what is the effect on the order of punishment when the report of the enquiry officer is not furnished to the employee and what relief should be granted to him in such cases. The answer to this question has to be rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court also spoke in the same language in the case of The Board of High School and Intermediate Education, U.P. & Ors. v. Kumari Chittra Srivastava & Ors. (1970) 1SCC 121 : AIR 1970 SC 1039 , as is apparent from the following words: "8. The learned counsel for the appellant, Mr. C.B. Aggarwal, contends that the facts are not in dispute and it is further clear that no useful purpose would have been served if the Board had served a show cause notice on the petitioner. He says that in view of these circumstances it was not necessary for the Board to have issued a show cause notice. We are unable to accept this contention. Whether a duty arises in a particular case to issue a show cause notice before inflicting a penalty does not depend on the authority's satisfaction that the person to be penalised has no defence but on the nature of the order proposed to be passed." 34) In view of the aforesaid enunciation of law, Mr. Sorabjee may also be right in his submission that it was not open for the authority to dispense with the requirement of principles of natural justice on the presumption that no prejudice is going to be caused to the appellant since judgment in R.C. Tobacco (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, the appellant was accorded certain benefits under Notification dated July 08, 1999. This Notification stands nullified by Section 154 of the Act of 2003, which has been given retrospective effect. The legal consequence of the aforesaid statutory provision is that the amount with which the appellant was benefitted under the aforesaid Notification becomes refundable. Even after the notice is issued, the appellant cannot take any plea to retain the said amount on any ground whatsoever as it is bound by the dicta in R.C. Tobacco (supra). Likewise, even the officer who passed the order has no choice but to follow the dicta in R.C. Tobacco (supra). It is important to note that as far as quantification of the amount is concerned, it is not disputed at all. In such a situation, issuance of notice would be an empty formality and we are of the firm opinion that the case stands covered by 'useless formality theory'. 38) In Escorts Farms Ltd. (Previously known as M/s. Escorts Farms (Ramgarh) Ltd.) v. Commissioner, Kumaon Division, Nainital, U.P. & Ors. (2004) 4 SCC 281, this Court, while reiterating the position that rules of natural justice are to be followed for doing substantia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h overriding consideration had been disclosed. The submission went to the extent of pleading that if the appellant is called upon to pay the excise duty now it will cripple its unit. More pertinent was another submission, which is relevant for our purpose, that the demand which was raised could not be sustained as it was made without issuing any show-cause notice and was in contravention of Section 11A of the Act. In support of this view, few judgments, including J.K. Cotton (supra), were relied upon. The Court, however, did not find any merit in the aforesaid submissions and dealt with the issue as under, duly taking note of the judgment in J.K. Cotton (supra): "40. In J.K. Cotton Spg. & Wvg. Mills Ltd. v. Union of India, (1987) Supp. SCC 350, relied upon by the petitioners, by virtue of the retrospective amendment of Rules 9 and 49 of the Central Excise Rules in 1982, commodities obtained at an intermediate stage of manufacture in a continuous process were deemed to have been 'removed' within the meaning of Rule 9(1) thereby making such intermediate products dutiable under the Act with effect from the commencement of the Act i.e. 1944. In this context the Court held that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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