Court quashes ex-parte penalty order due to procedural violations, grants fresh hearing opportunity

The court quashed the ex-parte order imposing a personal penalty on the petitioner, citing violations of natural justice principles due to inadequate notice and lack of opportunity for a personal hearing. The court directed the authority to serve the show cause notice to the petitioner's official email and address, granting a fresh decision opportunity with full hearing rights. The court allowed the writ petition under Article 226, bypassing the statutory appeal process due to the severe breach of natural justice. The decision refrained from addressing case merits, leaving further contentions for appropriate forums.

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Issues Involved:
1. Legality and validity of the ex-parte order imposing personal penalty.
2. Service of show cause notice and notice of personal hearing.
3. Breach of the principles of natural justice.
4. Maintainability of the petition due to the availability of alternative statutory remedies.

Detailed Analysis:

1. Legality and Validity of the Ex-Parte Order Imposing Personal Penalty:

The petitioner challenged the ex-parte order dated 11.02.2019, passed by the Principal Commissioner of Central Excise and GST, which imposed a personal penalty of Rs. 2,28,65,888/- under Rule 15(1) of the Cenvat Credit Rules, 2004. The petitioner argued that the order was passed without serving a show cause notice and without providing an opportunity for a personal hearing, thus violating principles of natural justice.

2. Service of Show Cause Notice and Notice of Personal Hearing:

The petitioner claimed that no show cause notice dated 10.10.2017 was received, and the order was passed ex-parte. The respondent argued that the show cause notice was sent via speed post to the petitioner’s residential address but was returned with the remark "Left." Consequently, the notice was affixed on the notice board under Section 37(C) of the Central Excise Act, 1944. The respondent also stated that multiple notices for personal hearings were issued and affixed at the company premises.

3. Breach of the Principles of Natural Justice:

The petitioner emphasized that the imposition of a personal penalty without serving the show cause notice and without providing an opportunity for a personal hearing was a breach of the principles of natural justice. The court noted that the petitioner had left the company in June 2016, and the show cause notice was issued in 2017. The court found that the respondent failed to serve the show cause notice and personal hearing notices at the petitioner’s last known address, despite having access to the petitioner’s updated address from the Income Tax Department records.

4. Maintainability of the Petition Due to the Availability of Alternative Statutory Remedies:

The respondent raised a preliminary objection regarding the maintainability of the petition, arguing that the petitioner should have appealed to the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) as provided under Section 35(B) of the Central Excise Act, 1944. The court acknowledged the statutory requirement of pre-depositing 7.5% of the penalty amount before filing an appeal. However, the court decided to entertain the writ petition under Article 226 of the Constitution of India due to the gross violation of principles of natural justice.

Conclusion:

The court quashed and set aside the ex-parte order to the extent concerning the present petitioner, emphasizing the necessity of serving the show cause notice and providing an opportunity for a personal hearing. The court directed that the show cause notice be served to the petitioner’s official email ID and future correspondence be sent to the petitioner’s address as mentioned in the cause title. The matter was remanded to the concerned authority for a fresh decision, ensuring the fullest opportunity for the petitioner to be heard. The court refrained from commenting on the merits of the case, leaving all contentions open for the parties to agitate before the appropriate forum.

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