Natural justice requires prior supply of relied-upon investigation reports before restrictive excise action can be sustained.

Non-supply of investigation reports before passing a restrictive order under Rule 12CCC of the Central Excise Rules, 2002 read with Section 12AA of the CENVAT Credit Rules, 2004 violated natural justice. The authority was required to examine the records, afford a hearing, and disclose the material proposed to be relied upon so that an effective reply could be made. As the investigation reports dated 20 and 21 December 2016 were not furnished before the order, the affected party was denied a meaningful opportunity of defence. Later supply of documents did not cure the breach, and the Calcutta HC treated the order as liable to be set aside.

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Issues: Whether the impugned order passed under Rule 12CCC of the Central Excise Rules, 2002 read with Section 12AA of the CENVAT Credit Rules, 2004 was vitiated for non-supply of the investigation reports relied upon before passing the order, thereby breaching the principles of natural justice.

Analysis: The procedure under the notification governing action under Rule 12CCC required the authority to examine the records and evidence and, before imposing restrictions, afford the affected person an opportunity of being heard. Such opportunity necessarily includes disclosure of the materials proposed to be relied upon so that an effective representation can be made. Since the investigation reports dated December 20, 2016 and December 21, 2016 were admittedly not supplied before the impugned order was passed, the petitioner was denied a meaningful opportunity of defence. A subsequent supply of documents at a later stage would not cure the illegality already committed, and the asserted possibility of future show cause proceedings did not remove the existing breach.

Conclusion: The impugned order was vitiated for non-adherence to the principles of natural justice and was liable to be set aside.

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