2021 (9) TMI 1543 - HC - Central Excise

Ex-parte order denying CENVAT credit quashed for violating natural justice principles under section 37C

M/s. Kalp Corporation Versus Union Of India

The Gujarat HC quashed an ex-parte order dated 27.08.2019 by Additional Commissioner denying CENVAT credit to petitioner's factory due to wrong address ... Violation of principles of natural justice - ex-parte order - failure to file appeal within the stipulated period - CENVAT Credit - mentioning of wrong address in the invoice - invoice of M/s. Reliance bore address of Nagalpur unit and payment was also made from the bank account of Nagalpur unit, thus, the Cenvat credit taken by the petitioner of Dediyasan factory denied - HELD THAT:- There is gross violation of principle of natural justice by adjudicating authority in adjudicating inasmuch as submissions and evidence on record have not been considered while passing the ex-parte order on 22.08.2019. There is also non-compliance of section 35C of the Central Excise Act in conducting and concluding de novo examination after the matter was remanded by the CESTAT and therefore, there is violation of principle of natural justice - It is mandatory provision laid down under section 27C of the Act for serving any decision, order, summons or notice to the parties. In the present case, it is nowhere recorded not proved that the notice for hearing notice was sought to be served upon the petitioner firstly by tendering at the petitioner’s premises or sending by registered AD Post, or Speed Post or affixing notice at any conspicuous part of the factory or office or residential premises, of the petitioner. When the notice could be served upon the petitioner, the same can be affixed under the Panchnama in the office of the adjudicating authority. No such kind of procedure is adopted by the respondent authority. The Additional Commissioner, adjudicating authority proceeded ex-parte and mandatory provisions under section 37C is not complied with after the de-novo proceeding was initiated. The Larger Bench of this Court in the case of PANOLI INTERMEDIATE (INDIA) PVT. LTD. VERSUS UNION OF INDIA AND 2 [2015 (7) TMI 303 - GUJARAT HIGH COURT] has further observed that it is not possible to observe that in a case where the limitation period of preferring appeal or further period of condonation of delay is over, the High Court will have no jurisdiction under Article 226 of the Constitution but the exercise of such power has to be in exceptional cases where gross injustice is satisfactorily demonstrated. Otherwise, in normal circumstances, the High Court would give appropriate weightage to the statutory provisions because the things which cannot be done directly as per the statute cannot be permitted to be done indirectly in writ jurisdiction unless a grave and strong case is made out before the High Court that noninterference to the order under challenge would result into a gross injustice to the party suffering the order. The impugned order of Additional Commissioner dated 27.08.2019 is hereby quashed and set aside without entering into the merits of the matter - the present petition is disposed off. Issues Involved:1. Validity of ex-parte adjudication by the Additional Commissioner.2. Compliance with the principles of natural justice.3. Applicability of Section 35 of the Central Excise Act regarding the condonation of delay in filing an appeal.4. The admissibility of Cenvat credit based on invoices addressed to a different unit.Detailed Analysis:1. Validity of Ex-Parte Adjudication by the Additional Commissioner:The petitioner challenged the ex-parte order passed by the Additional Commissioner on the grounds that the adjudication was conducted without proper service of notice, violating Section 37C of the Central Excise Act. The Court noted that the notice for personal hearings was returned undelivered, and no alternative methods of service were adopted by the respondent authority. The Court emphasized that proper service of notice is mandatory, and failure to do so invalidates the ex-parte order.2. Compliance with the Principles of Natural Justice:The petitioner argued that the ex-parte order was passed in violation of the principles of natural justice. The Court agreed, stating that the adjudicating authority did not consider the submissions and evidence on record. The Court cited precedents like Regent Overseas Pvt. Ltd. Vs. Union of India and Messers CTM Technical Textiles LTD Versus Union of India, which underscore the necessity of adhering to statutory procedures and ensuring effective service of notice. The Court concluded that the ex-parte order was in breach of natural justice principles.3. Applicability of Section 35 of the Central Excise Act Regarding the Condonation of Delay in Filing an Appeal:The petitioner contended that the Commissioner (Appeals) has no power to condone delays beyond 30 days under Section 35 of the Central Excise Act. The Court referred to the Larger Bench decision in Panoli Intermediate (India) Pvt. Ltd. Versus Union of India, which held that delays beyond 90 days cannot be condoned. However, the Court noted that under exceptional circumstances, where gross injustice is demonstrated, the High Court can exercise its powers under Article 226 of the Constitution to condone such delays. The Court found the petitioner’s reasons for the delay justified and chose to condone the delay, remanding the matter to the Commissioner (Appeals) for a fresh decision.4. The Admissibility of Cenvat Credit Based on Invoices Addressed to a Different Unit:The dispute arose from the petitioner availing Cenvat credit on invoices addressed to a unit that had surrendered its registration. The respondent argued that the petitioner failed to prove the receipt and utilization of inputs in the manufacturing process. The Court did not delve into the merits of this issue, as it focused on procedural lapses and the violation of natural justice. The matter was remanded to the Commissioner (Appeals) for a decision on merits after providing the petitioner an opportunity to present their case.Conclusion:The Court quashed the ex-parte order dated 27.08.2019, citing violations of natural justice and improper service of notice. The delay in filing the appeal was condoned under Article 226 of the Constitution, and the matter was remanded to the Commissioner (Appeals) for a fresh decision on merits, ensuring the petitioner is given a fair hearing. The Court refrained from making any observations on the merits of the case, leaving all contentions open for adjudication by the Commissioner (Appeals).