Natural justice requires notice before capacity-based duty determinations, leading to remand for fresh assessment.

Annual capacity of production and resulting duty liability could not be sustained when the key verification report was prepared without notice to, or participation by, the assessee. A determination founded on such an ex parte report violated natural justice, especially where earlier and later verifications had been conducted in the assessee's presence. The assessee's alternative bases for computing capacity and duty for the disputed period were considered fit for examination by the adjudicating authority. The matter was therefore remanded for fresh determination of annual capacity and duty liability after hearing the assessee.

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Issues: Whether the annual capacity of production and duty liability could be sustained on the basis of a verification report prepared in the absence of the assessee, and whether the matter required remand for fresh determination.

Analysis: The verification on 16-1-1998 was relied upon by the Commissioner even though it was not carried out in the presence of the assessee, while the earlier and later verifications were conducted in their presence. Since the impugned determination was founded on a report obtained without notice or participation, it suffered from violation of natural justice. The assessee also offered alternative bases for determining capacity and duty liability for the disputed period, and those suggestions were considered fit to be examined by the adjudicating authority for a conclusive redetermination.

Conclusion: The impugned order could not be sustained and the matter was remanded for fresh determination of annual capacity of production and duty liability after hearing the assessee.

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