Appellate penalty enhancement requires prior notice and hearing before any fresh penalty can be sustained.

An appellate authority cannot impose or enhance a penalty without first issuing notice and giving a reasonable opportunity of being heard where the governing proviso requires prior show cause. A fresh penalty under Rule 173Q, introduced in appeal without such notice, was unsustainable because the enhancement requirement in the proviso to Section 35A(3) was not met. The matter was remanded for reconsideration after compliance with natural justice and an opportunity of hearing.

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Issues: Whether the Commissioner (Appeals) could impose a fresh penalty under Rule 173Q without issuing notice and giving the appellant a reasonable opportunity to show cause, in view of the proviso to Section 35A(3).

Analysis: The appellate authority enhanced the burden by imposing a new penalty in appeal, although the original authority had not imposed that penalty. The proviso to Section 35A(3) bars enhancement of penalty unless the appellant is first given a reasonable opportunity of showing cause against the proposed order. Since no show cause notice was issued before imposing the fresh penalty, the requirement of prior notice and fair hearing was not satisfied.

Conclusion: The fresh penalty under Rule 173Q could not be sustained without compliance with the proviso to Section 35A(3), and the matter was rightly remanded to the Commissioner (Appeals) to proceed after giving the appellant an opportunity of hearing.

Final Conclusion: The appeal succeeded to the extent that the enhanced penalty was set aside for want of notice and the matter was sent back for reconsideration in accordance with law.

Ratio Decidendi: An appellate authority cannot impose or enhance a penalty without first issuing notice and affording a reasonable opportunity of being heard where the governing proviso so requires.

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