Natural justice in excise restrictions fails where relied-upon materials are withheld from the assessee.

Restrictions on monthly payment facility and CENVAT credit imposed under the special procedure in Rule 12AA of the CENVAT Credit Rules and Rule 12CC of the Central Excise Rules could not stand where the Department relied on undisclosed documents and statements. Although the procedure is summary and based on prima facie satisfaction, it still has civil consequences and requires a meaningful opportunity of hearing. Because the materials forming the adverse view were neither supplied with the show cause notice nor made available despite repeated requests, and no inspection was offered as an alternative, the assessee was denied an effective chance to answer the case. The impugned order was set aside for violation of natural justice.

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Issues: Whether the restrictions imposed on availment of monthly payment facility and CENVAT credit under the relevant excise rules could be sustained when the documents and materials relied upon by the Department were not supplied to the assessee, resulting in breach of natural justice.

Analysis: The impugned restrictions were imposed under the special procedure contemplated by Rule 12AA of the CENVAT Credit Rules, 2004 and Rule 12CC of the Central Excise Rules, 2002, read with the notification issued on 30.12.2006. Those provisions permit temporary withdrawal of facilities and imposition of restrictions on a prima facie view that the assessee has been involved in specified evasion-related conduct. Even though the proceeding is summary in nature and based on prima facie satisfaction, it still carries civil consequences and the notification itself contemplates an opportunity of hearing before the proposal is forwarded. The Department relied on several documents, statements and other materials to form the adverse opinion, but those materials were neither disclosed in the show cause notice nor supplied despite repeated requests. In such circumstances, the assessee was denied an effective opportunity to respond to the very basis of the proposed restrictions. The Court held that where relied upon materials are withheld, and inspection was not even offered as an alternative, the requirement of natural justice is violated.

Conclusion: The restrictions could not be sustained and the impugned order was liable to be set aside for violation of natural justice.

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