2020 (8) TMI 864 - HC - Central Excise

Court upholds document access, overturns penalty under Central Excise Act.

M/s Ambadi Enterprises Limited, Versus The Department of Revenue, Commissioner of Central Excise

M/s Ambadi Enterprises Limited, Versus The Department of Revenue, Commissioner of Central Excise - TMI Issues Involved:1. Violation of Principles of Natural Justice due to non-furnishing of documents.2. Imposition of penalty under Section 11AC of the Central Excise Act without prior proposal in the show cause notice.Detailed Analysis:1. Violation of Principles of Natural Justice due to non-furnishing of documents:The petitioner claimed that the non-furnishing of documents requested in connection with M/s.ERTP's Disclaimer Certificate amounted to a violation of the Principles of Natural Justice. The petitioner argued that these documents were essential for their defense. The court acknowledged that non-furnishing of requested documents, on which the department relies for making a demand, could typically be termed a violation of the Principles of Natural Justice, thus invalidating the consequential demand. However, the court emphasized that the relevance and nature of the documents, along with the conduct of the party, play a significant role in such considerations.The court found that the petitioner had received reasonable opportunities to inspect and take copies of the documents. The show cause notice dated 12.12.2003 explicitly allowed the petitioner to peruse the records and take copies within 15 days. The petitioner, however, did not avail this opportunity within the stipulated period and instead insisted on receiving copies via mail. Further opportunities were provided during personal hearings on 01.08.2006 and 02.08.2006, where the petitioner’s representative inspected and took copies of some documents but continued to request additional documents. The court noted that the petitioner’s insistence on further documents, which were not relevant to their defense, indicated a lack of bona fides.The court concluded that the petitioner had not been denied reasonable opportunities and thus there was no violation of the Principles of Natural Justice. The court cited the Hon’ble Supreme Court's ruling in Sahara India Real Estate Exchange Corporation Limited Vs. SEBI, emphasizing that the rules of natural justice have limitations and are applicable only to parties acting fairly.2. Imposition of penalty under Section 11AC of the Central Excise Act without prior proposal in the show cause notice:The petitioner contended that the imposition of a penalty under Section 11AC of the Central Excise Act was unjustified as there was no prior proposal for such a penalty in the show cause notice. The court agreed with the petitioner, noting that the authorities had imposed the penalty without addressing the lack of a prior proposal in the show cause notice. The court highlighted that it is a settled proposition of law that any penalty of this nature must be preceded by a notice proposing such a levy, allowing the affected party to respond.The court set aside the portion of the order imposing the penalty of Rs. 15,84,083/- under Section 11AC of the Central Excise Act. The court directed the second respondent to issue a fresh show cause notice proposing the penalty under Section 11AC and to provide the petitioner an opportunity to respond. This process, from issuing the show cause notice to passing final orders, was to be completed within 12 weeks from the date of receipt of the court's order.Conclusion:The Writ Petition was disposed of with the confirmation of the original demand of Rs. 15,84,083/- and the associated penalties, except for the penalty under Section 11AC of the Central Excise Act, which was set aside. The second respondent was instructed to reissue a show cause notice for the penalty under Section 11AC and complete the proceedings within the specified timeframe. The connected Miscellaneous Petition was closed, and no costs were awarded.