1996 (11) TMI 94 - HC - Central Excise

Court Invalidates Demand Notice for Non-Compliance

The court invalidated the demand notice for failing to comply with Section 11A of the Central Excises and Salt Act, 1944, and quashed the order confirming ... Demand Issues Involved:1. Validity of the demand notice dated 21-5-1991.2. Legality of the order dated 20-1-1992.3. Compliance with Section 11A of the Central Excises and Salt Act, 1944.4. Adequacy of the show cause notice issued on 31-8-1991.5. Adherence to principles of natural justice.6. Availability of alternative remedy by way of appeal.Issue-wise Detailed Analysis:1. Validity of the Demand Notice Dated 21-5-1991:The petitioners challenged the demand notice issued by the Superintendent, Central Excise and Customs, Bargarh Range, Bargarh, which required them to pay Rs. 5,23,589.40 as differential duty. The petitioners argued that the demand notice was issued without complying with the mandatory provisions of Section 11A of the Central Excises and Salt Act, 1944. The court observed that the demand notice (Annexure-6) did not comply with Section 11A, which requires a show cause notice before raising a demand. The court concluded that the demand notice was invalid as it did not follow the due process under Section 11A.2. Legality of the Order Dated 20-1-1992:The petitioners also contested the order dated 20-1-1992 passed by the Assistant Collector, Central Excise and Customs, Sambalpur Division, which confirmed the demand. The court noted that the order was passed without giving the petitioners a fair opportunity to present their case, thereby violating the principles of natural justice. The court quashed the order, allowing the petitioners to file a proper show cause within six weeks and directing the competent authority to adjudicate the matter afresh.3. Compliance with Section 11A of the Central Excises and Salt Act, 1944:The court emphasized that Section 11A requires issuing a show cause notice before making a demand. The initial demand notice (Annexure-6) failed to comply with this provision. The subsequent show cause notice (Annexure-9) issued on 31-8-1991 attempted to rectify this mistake. The court held that the issuance of the show cause notice under Section 11A rendered the initial demand notice inoperative.4. Adequacy of the Show Cause Notice Issued on 31-8-1991:The show cause notice issued on 31-8-1991 (Annexure-9) was intended to be read in continuation of the demand letter dated 21-5-1991. The court observed that the show cause notice referred to the same period and amount as the initial demand notice, indicating that the authorities recognized the necessity of complying with Section 11A. The court found that the show cause notice was adequate and in compliance with the legal requirements.5. Adherence to Principles of Natural Justice:The petitioners argued that they were not given a fair opportunity to present their case, as their request for adjournment was ignored, and the order of confirmation was passed ex parte. The court agreed, noting that effective adjudication requires fairness and an adequate chance of hearing. The court quashed the order of demand (Annexure-11) and directed a fresh adjudication after giving the petitioners an opportunity for a personal hearing.6. Availability of Alternative Remedy by Way of Appeal:The respondents contended that the petitioners had an alternative remedy by way of appeal and should not bypass the appellate forum. However, the court recognized the unique factual backdrop and the resultant scenario, which justified exercising its extraordinary jurisdiction. The court concluded that directing the petitioners to pursue an appeal would amount to a denial of justice, given the procedural irregularities and the petitioners' state of bafflement.Conclusion:The court allowed the writ application, quashing the demand notices and the order of confirmation. The petitioners were permitted to file a proper show cause within six weeks, and the competent authority was directed to complete the adjudication within two months from the date of filing the show cause. The court emphasized the importance of fairness and adherence to legal procedures in administrative adjudications.