Penalty enhancement without show cause notice breached natural justice, justifying waiver of pre-deposit and stay of recovery.

An enhancement of penalty without prior notice was treated as prima facie vulnerable under Section 84 of the Finance Act, 1994 because the applicant had not been put to notice of the proposed increase. The absence of a show cause notice was viewed as a breach of natural justice, and this was sufficient to establish a prima facie case for waiver of pre-deposit. On that basis, the penalties were not required to be deposited pending appeal, and recovery was stayed until disposal of the appeal.

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Issues: Whether pre-deposit of the penalties imposed on the applicant should be waived and recovery stayed, in view of the allegation that enhancement of penalty was made without issuance of a show cause notice and in breach of natural justice.

Analysis: The application challenged the enhanced penalties on the ground that the applicant had not been put to notice for enhancement as contemplated under Section 84 of the Finance Act, 1994. On a prima facie assessment, the order enhancing penalty was found to be vulnerable for want of notice and for violation of natural justice, and the applicant was held to have made out a prima facie case for waiver of pre-deposit.

Conclusion: The pre-deposit of the penalties was waived and recovery was stayed till disposal of the appeal.

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