2024 (2) TMI 138 - AT - Central Excise

Appeals allowed by remand after Commissioner denied proper hearing in duty refund case involving area-based exemptions

CESTAT Chandigarh allowed appeals by remand in a refund claim case involving duty payment through PLA and area-based exemptions under Notifications ... Refund claim - appellant has made payment of duty through PLA at Nil payment through CENVAT credit - Area based exemption vide Notification No.56/2002-CE dated 14.11.2002 and Notification No.01/2010-CE dated 06.02.2010 - ex parte order without giving any reasonable opportunity of hearing to the appellant - violation of principles of natural justice - HELD THAT:- The impugned order passed by the learned Commissioner (Appeals) ex parte is without affording an opportunity of hearing to the appellant. Further, it is found that one consolidated hearing notice granting opportunity of hearing on three different dates i.e. 09.09.2022, 16.09.2022 and 23.09.2022 is clearly in violation of the principles of natural justice. This issue has been considered by the Hon’ble High Court of Gujarat in the case of REGENT OVERSEAS PVT LTD AND 1 VERSUS UNION OF INDIA AND 1 [2017 (3) TMI 557 - GUJARAT HIGH COURT] wherein the Hon’ble High Court has held as notice for personal hearing was Kat served upon the petitioners in accordance with law, no one could remain present for personal hearing on behalf of the petitioners on the dates specified in the notice and the adjudicating authority has proceeded on the footing that three adjournments have been granted and has passed and the impugned ex parte order. The impugned order is not sustainable in law and therefore, the same is set aside and the case remanded back to the learned Commissioner (Appeals) with the direction to decide the same on merits after giving reasonable opportunity of hearing to the appellant and thereafter pass a reasoned order in accordance with law - the appeals are allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether the Commissioner (Appeals) complied with the principles of natural justice in issuing a single consolidated hearing notice listing three hearing dates and thereafter passing an ex parte order without affording a reasonable opportunity of hearing. 2. Whether an ex parte appellate order passed by the Commissioner (Appeals) on the basis that the appellant failed to appear on the dates specified in a consolidated notice is legally sustainable where service and procedure for personal hearing under the statutory scheme are in issue. 3. Whether the impugned appellate order could be sustained on merits without remand for fresh adjudication after remedying any procedural infirmity in the hearing notice and opportunity afforded. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of a consolidated notice fixing three hearing dates and compliance with principles of natural justice Legal framework: Sub-section (2) of Section 33A of the Act (as discussed in the judgment) prescribes procedure for personal hearing and permits adjournments, subject to a proviso limiting adjournments to not more than three; service of notice contemplated by Section 37C (as referred to) must also be in accordance with law. Precedent Treatment: The Tribunal relied on the reasoning of the High Court in Regent Overseas (supra), which held that issuing one consolidated notice fixing multiple hearing dates is inconsistent with the statutory scheme governing adjournments and personal hearings and thus infringes natural justice. Interpretation and reasoning: The Tribunal reasoned that the statutory scheme requires fixation of one date at a time, with adjournments recorded and reasons recorded when requested; the proviso limiting adjournments to three contemplates sequential dates arising from ad hoc adjournments, not pre-fixing multiple dates in one notice. Fixing three dates in one notice cannot be equated to granting adjournments and, when coupled with defective service, prevents the party from effectively availing the right to be heard. Consequently, proceeding ex parte on the basis of absence when the notice itself is legally infirm violates principles of natural justice. Ratio vs. Obiter: Ratio - A consolidated notice fixing multiple hearing dates in one communication, without separately recording proper adjournments, constitutes a legal infirmity and breaches natural justice such that any ex parte order based on such notice is vitiated. Obiter - Observations on the technical arithmetic of adjournments (i.e., that three adjournments envisages four dates) serve explanatory purposes but reinforce the core ratio. Conclusion: The consolidated notice fixing three dates was in violation of the statutory procedure and principles of natural justice; the ex parte appellate order based on such notice is unlawful and cannot be sustained. Issue 2 - Lawful basis for ex parte disposal where service and hearing procedure are disputed Legal framework: Principles of natural justice require reasonable opportunity of hearing; statutory provisions governing service of hearing notices and adjournments must be complied with before treating absence as abandonment. The adjudicating authority is required to give an opportunity to be heard and record reasons for adjournments when granted. Precedent Treatment: The Tribunal followed the High Court precedent holding that absence of proper service and a defective hearing notice preclude a finding that adjournments were sought or granted and render an ex parte order vulnerable to interference. Interpretation and reasoning: The Tribunal found that the appellant was not afforded a reasonable opportunity of hearing because the consolidated notice was legally defective and not served in the manner contemplated by law; treating non-appearance on the consolidated dates as successive adjournments (and thereby as waiver of hearing) was erroneous. An ex parte decision based on such a premise is a breach of natural justice and must be set aside. Ratio vs. Obiter: Ratio - An adjudicatory authority cannot validly proceed ex parte where the alleged failure to appear is attributable to a hearing notice that is not in conformity with statutory requirements for fixing and recording adjournments; such ex parte orders are liable to be set aside. Conclusion: The impugned ex parte appellate order was invalid because it was founded on a defective hearing notice and absence of a proper, recorded opportunity to be heard; interference and remand were warranted. Issue 3 - Necessity of remand to decide merits after curing procedural infirmity Legal framework: Where procedural unfairness prejudices a party's right to be heard, the appropriate remedy is ordinarily to set aside the impugned order and remit the matter for fresh consideration in accordance with law, rather than decide merits in the absence of a fair hearing. Precedent Treatment: The Tribunal applied the established remedial approach endorsed by higher judicial authority that procedural breach of natural justice necessitates remand for fresh hearing rather than adjudication on merits by the appellate forum which committed the breach. Interpretation and reasoning: Because the Commissioner (Appeals) did not afford a proper opportunity to the appellant and the notice procedure itself was defective, the Tribunal concluded that the appellate order could not stand on merits; it was not appropriate to decide substantive entitlement to refund without a proper hearing. The Tribunal therefore set aside the impugned order and directed fresh adjudication on merits after affording a reasonable hearing. Ratio vs. Obiter: Ratio - Where an appellate order is vitiated by denial of a proper hearing, the correct remedy is to set aside and remit to the appellate authority for reconsideration after giving a proper opportunity to the aggrieved party; the appellate authority must pass a reasoned order within a specified timeframe. Conclusion: The Tribunal set aside the impugned order and remanded the matter to the Commissioner (Appeals) with directions to decide the appeals on merits after giving reasonable opportunity of hearing and to pass a reasoned order within three months of receipt of the remand order. The Tribunal did not adjudicate the substantive refund entitlement. Cross-references See Issue 1 and Issue 2 for interrelated analysis on notice validity and ex parte disposal; Outcome under Issue 3 follows directly from the procedural conclusions under Issues 1 and 2 and preserves the right to adjudication on merits after compliance with statutory hearing procedure.