2019 (12) TMI 1014 - HC - VAT and Sales Tax

Court dismisses petition, grants appeal under Delhi Excise Act. Emphasizes natural justice principles.

The Court dismissed the petition, granting liberty to challenge the order in an appeal under Section 72 of the Delhi Excise Act, 2009. The Financial ... Cancellation of Warehouse License - blacklisting - 12 beer bottles the petitioner has been blacklisted for period of 18 months - service of SCN - violation of the terms and conditions of the license/Delhi Excise Act, 2009 and Rules framed there under - principles of natural justice - HELD THAT:- The requirement of serving a Show Cause Notice is a sine qua non before taking any action of blacklisting. The Show Cause Notice must state the alleged breach / default as also the nature of action which is proposed to be taken for such a breach. These two components of the Show Cause Notice, if not specifically mentioned therein, must be clearly and safely discernible from a plain reading. Mere presence of a power to blacklist cannot amount to a sufficient notice. In absence of a Show Cause Notice, extreme nature of a harsh penalty like blacklisting, would itself amount to causing prejudice to the person against whom such order is passed. - there can be absolutely no doubt that the order dated 16.07.2019 was passed by the Deputy Commissioner (Excise) in complete violation of the Principles of Natural Justice. The show cause notice dated 07.09.2016, apart from the fact that it was issued only on M/s Barshala, also called the said noticee to show cause why its licence be not suspended / cancelled - The power to suspend/cancel the licence is provided under Section 17 of the Act. This clearly is a power distinct from blacklisting as provided in Rule 70 of the Rules. The petitioner in all its replies kept insisting that no Show Cause Notice has been issued to the petitioner and that it was participating in such proceedings merely to give information as required and called upon by the Licencing Authority. In spite of these submissions, the Licencing Authority never put the petitioner to notice of allegations against it or the proposed penalty. The mere fact that the petitioner was allowed to take an inspection of all the records, cannot satisfy the test of putting the petitioner to a specific notice of allegations against it - the order dated 16.07.2019 passed by the Deputy Commissioner (Excise) was in complete breach of the Principles of Natural Justice. Alternative remedy of appeal - Section 72 of the Delhi Excise Act, 2009 - HELD THAT:- In the present case, though the order passed by the original authority that is the Deputy Commissioner of Excise was clearly in violation of Principles of Natural Justice, the petitioner chose the statutory remedy of filing an appeal before the Commissioner (Excise) - Reading of section 72 provision would show that the Appellate Authority is entitled to make further enquiry as may be necessary, pass such order, as he thinks just and proper, confirming, modifying or annulling the decision or order of the original authority, as the case may be. The powers of the Appellate Authority are therefore, wide. The petitioner not only chose to exercise such appellate remedy by filing the first appeal before the respondent no. 1- Commissioner (Excise), but also, on being declined an order of stay by the order dated 05.08.2019, preferred a second appeal before the respondent no. 2-Financial Commissioner. It is only when the second appeal could not be heard that the petitioner preferred the present petition - In the present petition also, the petitioner primarily sought the setting aside of the order dated 05.08.2019 (rejecting the stay) and for a stay of the order dated 16.07.2019 (order of blacklisting the petitioner) rather than laying a substantive challenge to the order dated 16.07.2019 passed by the Deputy Commissioner-respondent no. 3. The petitioner, therefore, having availed of the statutory remedies under the Act, must be relegated to the same. It is not the case of the petitioner that the petitioner was not afforded an opportunity of hearing by the Commissioner Excise. By that stage, the petitioner was fully aware of the allegations against it and the proposed penalty. It had full opportunity to meet allegations on merit as also counter the extenuating circumstances that would justify an order of blacklisting the petitioner even for a lesser period. The finding of the Commissioner (Excise) rejecting the submission of the petitioner of violation of Principle of Natural Justice by the Deputy Commissioner of Excise, cannot be sustained and is accordingly set aside. However, as the Commissioner (Excise) has also considered the submissions of the petitioner on merits against the allegations made against it, the petitioner may challenge the same in an appeal filed under Section 72 of the Act. In such appeal, the Financial Commissioner shall also consider the effect of the present order on the order passed by the Commissioner (Excise). The present petition is dismissed granting liberty to the petitioner to challenge the order dated 20.09.2019, if so advised, in the form of an appeal as provided in Section 72 of the Act. Issues Involved:1. Violation of Principles of Natural Justice.2. Validity of the Show Cause Notice.3. Proportionality of the penalty.4. Availability and adequacy of alternative remedies.Detailed Analysis:Violation of Principles of Natural Justice:The petitioner argued that the order dated 16.07.2019 by the Deputy Commissioner (Excise) was passed without giving a reasonable opportunity of hearing, violating Rule 70 of the Delhi Excise Rules, 2010. The Court emphasized that an order of blacklisting cannot be passed without a Show Cause Notice that details the alleged breach and the proposed action, as per the Supreme Court's ruling in *Gorkha Security Services v. Government (NCT of Delhi)*. The Court found that the show cause notice dated 07.09.2016 was issued only to M/s Barshala and not to the petitioner, and it did not mention the proposed penalty of blacklisting. Thus, the order dated 16.07.2019 was held to be in complete violation of the Principles of Natural Justice.Validity of the Show Cause Notice:The Court noted that the show cause notice dated 07.09.2016 was addressed to M/s Barshala and called upon the noticee to show cause why its license should not be suspended or cancelled. The power to suspend/cancel the license is distinct from blacklisting under Rule 70. The Court held that the notice did not satisfy the requirements laid down by the Supreme Court in *Gorkha Security Services* regarding the material/grounds and the proposed action. Therefore, the second requirement of a Show Cause Notice was also not satisfied.Proportionality of the Penalty:The petitioner contended that the penalty of an 18-month blacklisting for 12 beer bottles was disproportionate. The Court refrained from making a detailed comment on the merits of this submission but directed that the Financial Commissioner should consider the proportionality of the penalty, keeping in mind that the petitioner was denied an opportunity of fair hearing by the Deputy Commissioner and that blacklisting results in a 'civil death' of the business.Availability and Adequacy of Alternative Remedies:The respondents argued that the petition was not maintainable due to the availability of an alternative remedy in the form of an appeal to the Financial Commissioner. The Court held that while the general rule is that violation of Principles of Natural Justice allows a party to bypass alternative remedies, in this case, the petitioner had already availed of the statutory remedy by filing an appeal before the Commissioner (Excise). The Court concluded that the petitioner must be relegated to the same statutory remedy, highlighting that the petitioner had participated in the appellate proceedings and was aware of the allegations and proposed penalty.Conclusion:The Court dismissed the petition, granting liberty to the petitioner to challenge the order dated 20.09.2019 in an appeal as provided under Section 72 of the Delhi Excise Act, 2009. The Financial Commissioner was directed to consider the appeal in light of the present order and decide within thirty days of its filing. The Court emphasized that the principles of natural justice must be observed at both the original and appellate stages, and the availability of an alternative remedy does not absolve the original authority from following these principles.