Natural justice in excise proceedings: forfeiture and Cenvat reversal order quashed for denial of hearing.

An excise order forfeiting the facility of duty payment and requiring reversal of Cenvat credit was quashed because it had been issued without giving the assessee a hearing. The Madras HC held that, unless expressly or by necessary implication excluded, principles of natural justice apply to excise adjudication, and audi alteram partem must be read into the statutory scheme. As no hearing had been afforded before the impugned communication, the order was unsustainable and the matter was remitted for reconsideration after giving the assessee an opportunity to be heard.

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Issues: Whether the order forfeiting the facility of payment of duty and demanding reversal of Cenvat credit could stand when passed without affording the assessee a hearing.

Analysis: The dispute arose from an order under the Central Excise Rules, 2002 that imposed forfeiture consequences and required payment of duty allegedly adjusted through Cenvat credit. The Court held that, although the Rules did not contain an express procedure for hearing before such an order, the principles of natural justice are not excluded unless the statute does so expressly or by necessary implication. Relying on the legal position applied in earlier decisions concerning comparable excise provisions, the Court held that audi alteram partem must be read into the scheme. Since there was no dispute that no hearing had been granted before the impugned communication, the order was vitiated.

Conclusion: The impugned order was quashed for breach of natural justice, and the matter was directed to be reconsidered after giving the assessee an opportunity of hearing.

Ratio Decidendi: In the absence of an express or necessarily implied exclusion, principles of natural justice apply to excise adjudication and an order passed without hearing the affected party is unsustainable.

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