Natural justice and pre-demand hearing under Textiles Cess rules required an effective hearing before issuing the demand notice.

Rule 8 of the Textiles Committee (Cess) Rules, 1975 required an effective opportunity of hearing before a demand notice could be issued. The record showed that although a show cause notice was served, no effective hearing was granted after the appellants sought time, and the demand was based on figures taken from the Accountant General rather than the Central Excise Department. That procedural lapse amounted to a breach of natural justice, rendering the demand notice unsustainable in law. The notice was quashed and set aside in favour of the assessee.

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Issues: Whether the demand notice was sustainable when no effective opportunity of hearing was granted under Rule 8 of the Textiles Committee (Cess) Rules, 1975 and when the figures were taken from the Accountant General instead of the Central Excise Department.

Analysis: Rule 8 required an opportunity of being heard before issuance of the demand. The record showed that a show cause notice was issued, but the appellants sought time and no effective hearing was granted before the demand notice was issued. The stated basis for the demand also showed that the figures were taken from the Accountant General, Rajasthan, Jaipur, which was treated as contrary to the procedure contemplated by Rule 8. The denial of hearing amounted to a breach of natural justice. In view of this infirmity, the other contentions were not required to be examined.

Conclusion: The demand notice was held to be unsustainable in law and was quashed and set aside in favour of the assessee.

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