High Court overturns rebate order due to breach of natural justice, emphasizes fair hearing.

The High Court set aside the order adjusting a rebate against a pending demand due to a breach of natural justice principles. The Court emphasized the importance of natural justice and directed the Assistant Commissioner to adjudicate on the issue following fair hearing procedures. The Court instructed a prompt resolution within 12 weeks while leaving other contentions open. The writ petition was disposed of without costs.

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Issues:
Challenging order adjusting rebate against pending demand without natural justice principles.

Analysis:
The petition under Article 226 challenges the order adjusting a rebate against a pending demand without following natural justice principles. The Assistant Commissioner of Central Excise sanctioned a rebate claim of Rs. 1.49 crores under Section 11B of the Central Excise Act, 1944. However, instead of handing over the amount to the petitioner, the Assistant Commissioner adjusted it against a confirmed demand of Rs. 2.38 crores under Section 11 of the Act. The petitioner contended that the order was passed without granting a show cause notice or a personal hearing, violating the principle of natural justice.

The High Court acknowledged that ordinarily, they would not interfere as an appeal remedy was available. However, due to the breach of natural justice, they exercised their writ jurisdiction. Citing the Whirlpool Corporation case, the Court emphasized that when an order is passed in breach of natural justice, the Court may consider exercising its extraordinary jurisdiction under Article 226. The Court found that the lack of natural justice principles in the impugned order caused grave prejudice to the petitioner as the sanctioned rebate was being adjusted against a stayed demand, which the Assistant Commissioner was not made aware of due to the absence of a show cause notice or hearing.

Consequently, the High Court set aside the impugned order to the extent of adjusting the rebate against the pending demand. The Assistant Commissioner was directed to adjudicate on the issue in accordance with natural justice principles, ensuring a fair hearing for the petitioner. The Court instructed the Assistant Commissioner to decide on the matter expeditiously, preferably within 12 weeks. All other contentions were left open, and the writ petition was disposed of with no order as to costs.

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