Natural justice requires hearing before adverse action based on undisclosed material under Rule 173H.

Withdrawal of an earlier permission and rejection of an extension request under Rule 173H could not be sustained where the department relied on monthly reports and an adverse inference that the activity was manufacture rather than repair, but those materials and inferences were never confronted to the assessee. The authority was required to afford an opportunity of hearing before taking action with adverse civil consequences, even if the rule did not expressly provide for one. The impugned orders were therefore quashed for breach of fair play and natural justice.

---

---

Issues: Whether the withdrawal of earlier permission and rejection of the request for extension under Rule 173H, based on material and inferences not previously confronted to the assessee, could be sustained without affording an opportunity of hearing.

Analysis: The order under challenge had two components: withdrawal of the earlier permission already granted and rejection of the request for further extension of the period. The record showed that the department relied on material from monthly reports and drew an adverse inference that the activity was manufacture and not repair. Since these materials and inferences were not put to the assessee before the decision was taken, the authority acted in breach of the requirement of fair play and natural justice. Even where the rule does not expressly provide for a hearing, an opportunity must be given when adverse civil consequences follow from undisclosed material.

Conclusion: The impugned orders could not be sustained and were quashed for want of opportunity.

---