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Issues: (i) Whether suspension or withdrawal of the fortnightly duty payment facility without an order of the proper officer and without notice violated the rules and principles of natural justice; (ii) Whether the demand was sustainable by invoking the extended period of limitation in the absence of intent to evade duty, particularly where the payment structure was revenue neutral.
Issue (i): Whether suspension or withdrawal of the fortnightly duty payment facility without an order of the proper officer and without notice violated the rules and principles of natural justice
Analysis: Rule 173G(1)(e) required the facility to be withdrawn or forfeited only by an order of the proper officer. The Board's circular identified the proper officer as the Assistant or Deputy Commissioner. The suspension was communicated by the Superintendent without notice to show cause and without an order by the competent authority. Such action did not satisfy the statutory procedure and offended the requirement of fair hearing.
Conclusion: The withdrawal of the facility was invalid and the assessee succeeded on this issue.
Issue (ii): Whether the demand was sustainable by invoking the extended period of limitation in the absence of intent to evade duty, particularly where the payment structure was revenue neutral
Analysis: The assessee had paid duty through the PLA and availed credit, and even on the department's case the same credit benefit would have been available on consignment basis. The situation was therefore revenue neutral, and the facts did not support an inference of intent to evade duty. In such circumstances, the extended period could not be invoked.
Conclusion: The demand was time-barred and this issue was also decided in favour of the assessee.
Final Conclusion: The impugned demand and the action withdrawing the duty payment facility were set aside, with consequential relief to the assessee.
Ratio Decidendi: Withdrawal of a statutory duty-payment facility must be made by the competent proper officer after following the prescribed procedure and affording notice and hearing, and the extended limitation period cannot be invoked where the case is revenue neutral and no intent to evade duty is established.
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