Natural justice bars interest demand and detention memo without notice and hearing before fastening excise liability.

Interest liability for alleged default in the mode of payment of central excise duty could not be fastened after several years without first issuing a show cause notice and giving the assessee an opportunity of hearing. The assessee had acted on an earlier revenue communication permitting payment through an alternative prescribed method, and the Court held that the absence of notice and hearing offended natural justice. The demand notices and consequential detention memo were quashed, while the revenue was left free to proceed afresh in accordance with law after issuing notice and granting a hearing.

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Issues: Whether the demand for interest and the consequential detention memo could be sustained without issuing a show cause notice and granting an opportunity of hearing to the assessee.

Analysis: The dispute concerned recovery of interest arising from alleged default in the mode of payment of central excise duty under Rule 173G of the Central Excise Rules, 1944. The assessee had acted on the basis of the revenue's earlier communication permitting payment through the prescribed alternative method. The Court held that, before fastening liability for interest after several years, the assessee was entitled to notice and an opportunity to explain its defence. In the absence of a show cause notice and hearing, the action offended the principles of natural justice.

Conclusion: The demand notices and the detention memo were quashed and set aside, and the matter was left open to the revenue to proceed afresh in accordance with law after issuing notice and granting a hearing.

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