Natural justice breach in duty demand proceedings justified unconditional stay against pre-deposit and recovery.

A demand order confirmed without a valid show cause notice and without a reasonable opportunity of hearing was treated as procedurally defective and contrary to natural justice, so interim protection against pre-deposit and recovery was granted. The underlying challenge was reinforced by the view that the modvat credit issue was arguable and not free from doubt. The operative principle stated was that an order passed in violation of natural justice is void and can justify unconditional stay of enforcement.

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Issues: Whether the appellants were entitled to unconditional stay against pre-deposit and recovery where the demand appeared to have been confirmed without a valid show cause notice and without affording a reasonable opportunity of hearing.

Analysis: The order under challenge disclosed two material infirmities: the demand-cum-show cause notice was held to be not in accordance with law, and the demand was confirmed on the basis of an earlier order without giving a reasonable opportunity of hearing. The defect went to the root of the proceedings, and the order was treated as having been passed in violation of the principles of natural justice. The question relating to entitlement to modvat credit was noticed as being arguable and not free from doubt, supporting interim protection.

Outcome: Unconditional stay of the requirement of prior deposit and recovery was granted in favour of the appellants.

Final Conclusion: Interim relief was granted on the footing that the impugned demand order suffered from fundamental procedural illegality and breach of natural justice.

Ratio Decidendi: An order passed in violation of the principles of natural justice is void and warrants interim protection against enforcement.

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