Natural justice in penalty proceedings requires furnishing seized records needed for defence before imposing penalty.

Penalty proceedings based on stock variation and other inspection defects require a fair opportunity to meet the allegations, including access to seized documents needed for defence. Where the department retains the stock register until after the penalty process is completed, the assessee cannot effectively controvert the charge. The text states that passing penalty orders without furnishing the very register relied on for defence amounted to denial of an effective opportunity and breach of natural justice, and the resulting penalty orders were quashed.

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Issues: Whether the penalty orders were liable to be quashed for denial of a fair opportunity to meet the allegations when the stock register seized by the department was not furnished to the petitioner.

Analysis: The penalty was imposed on the basis of stock variation and other defects noticed during inspection. The petitioner repeatedly sought the return or supply of the seized stock register, asserting that without it he could not controvert the departmental allegations. The record showed that the stock register had been taken away by the department and was returned only after the penalty proceedings were over. The orders imposing penalty were therefore passed without furnishing the documents on which the petitioner needed to rely for his defence, resulting in denial of an effective opportunity to contest the proceedings.

Conclusion: The penalty orders were vitiated for breach of natural justice and were quashed, in favour of the petitioner.

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