2013 (1) TMI 359 - HC - Central Excise

Court sets aside show cause notice for predetermined liability, orders fresh notice ensuring natural justice

The court found in favor of the petitioner, holding that the show cause notice indicated a predetermined liability, violating principles of natural ... Cenvat Credit on the excise duty paid on Cement, MS Angles, MS Channels, TMT/CTD bars, MS rounds, MS Squares, Joists, Beams etc. - assessee challenged the show cause notice on the ground that the contents thereof indicate that the respondent had predetermined the liability of the petitioner company - Held that:- The impugned show cause notice by use of the words 'it is clear' at various places as pointed out clearly suggests predetermination by the respondent of the liability of the petitioner. The fact that it even quantified the amount of Cenvat Duty wrongly availed of by the petitioner allegedly, corroborates this view. Following the decision of Oryx Fisheries (P.) Ltd v. Union of India [2010 (10) TMI 660 - SUPREME COURT OF INDIA], Siemens Ltd v. State of Maharashtra [2006 (12) TMI 203 - SUPREME COURT OF INDIA] and Rajam Industries (P.) Ltd v. Dy. CTO [2010 (6) TMI 249 - MADRAS HIGH COURT] set aside the impugned show cause notice issued by the respondent with a direction to the respondent to issue a fresh show cause notice clearly indicating the issues on which prima facie the petitioner appears to have availed of the Cenvat Credit allegedly without justification . While issuing such show cause notice, the respondent should ensure that it does not indicate any premeditation or prejudgment by the respondent. In case any such fresh show cause notice is issued by the respondent, the respondent shall also furnish the material on the basis of which the show cause notice is issued and give reasonable opportunity to the petitioner to file its objections with supporting material apart from personal hearing (if sought by the petitioner) and then pass a reasoned order in accordance with law. Issues Involved:1. Challenge to the show cause notice on grounds of predetermined liability.2. Violation of principles of natural justice.3. Maintainability of writ petition against a show cause notice.4. Requirement for a fair and unbiased show cause proceeding.Detailed Analysis:1. Challenge to the Show Cause Notice on Grounds of Predetermined Liability:The petitioner challenged the show cause notice dated 14.12.2011, claiming that the respondent had predetermined the liability of the petitioner company. The petitioner argued that the notice indicated a conclusive decision that the petitioner was not entitled to the Cenvat Credit claimed, thus prejudging the issue.2. Violation of Principles of Natural Justice:The petitioner contended that the show cause notice violated principles of natural justice as it confronted the petitioner with definitive conclusions rather than charges. The petitioner argued that the language of the notice suggested that the respondent had already made up its mind, thus denying the petitioner a fair opportunity to present its case. The petitioner cited several instances from the notice where the respondent used definitive phrases such as 'it is clear' and 'manifestly indulged,' indicating a prejudgment.3. Maintainability of Writ Petition Against a Show Cause Notice:The respondent argued that a writ petition against a show cause notice should not be entertained under Article 226 of the Constitution of India, as the petitioner had the opportunity to respond to the notice and prove its claim. The respondent cited various judgments to support the contention that writ jurisdiction should not be invoked at the show cause notice stage unless the notice is without jurisdiction. However, the petitioner relied on decisions like Oryx Fisheries (P.) Ltd. v. Union of India and Siemens Ltd. v. State of Maharashtra, where the Supreme Court held that a writ petition is maintainable if the show cause notice is issued with premeditation.4. Requirement for a Fair and Unbiased Show Cause Proceeding:The court emphasized that a quasi-judicial authority must act fairly and with an open mind while initiating show cause proceedings. The court noted that the language used in the impugned notice suggested a predetermined conclusion, which vitiated the fairness of the proceedings. The court referred to the Supreme Court's rulings in Oryx Fisheries (P.) Ltd.'s case and Siemens Ltd.'s case, which underscored the need for an open mind and fair procedure in quasi-judicial proceedings.Conclusion:The court found substance in the petitioner's contention that the show cause notice indicated a predetermined liability. The court held that the impugned notice violated the principles of natural justice and fairness, as it confronted the petitioner with definitive conclusions rather than charges. The court set aside the impugned show cause notice and directed the respondent to issue a fresh notice, ensuring that it does not indicate any premeditation or prejudgment. The respondent was also directed to furnish the material on which the new show cause notice is based and provide the petitioner with a reasonable opportunity to file objections and seek a personal hearing if desired.Order:The writ petition was allowed to the extent that the impugned show cause notice was set aside, and the respondent was directed to issue a fresh notice in compliance with the principles of natural justice. No costs were awarded.