Adjudication order quashed for denying proper hearing opportunities despite valid show cause notice under Section 78

The HC disposed of a petition challenging an adjudication order under Section 78 of Finance Act, 1994 read with Section 174 of CGST Act, 2017. The court held that while Section 33A of Central Excise Act, 1994 limits adjournments to three dates to expedite proceedings, it doesn't deny hearing opportunities. The adjudicating authority improperly fixed three successive dates within one week, indicating preconceived notions about adjournments. The authority failed to communicate specific orders granting adjournments on each date. The court found the petitioner's right of hearing was seriously impaired, making alternative remedy ineffective. However, since the original show cause notice was validly served, the petitioner was put to terms for the claimed relief.

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Issues involved: Challenge to adjudication order u/s 78 of Finance Act, 1994 read with Section 174 of CGST Act, 2017; Violation of rules of natural justice in adjudication proceedings.

Adjudication Order Challenge:
The petitioner challenged the adjudication order dated 23.3.2023, which imposed tax demand, penalties u/s 78 of Finance Act, 1994, and CGST Act, 2017. The petitioner claimed the order was served in March 2024, while the revenue authorities stated that notices were dispatched through e-mail and speed post to the petitioner's known address. The petitioner failed to attend personal hearings, leading to penalties. The petitioner argued that fixing three successive hearing dates within a week violated natural justice, citing a Gujarat High Court decision. The court agreed that limiting adjournments to three dates does not deny the right to a hearing but regulates the process to conclude proceedings promptly.

Violation of Natural Justice:
The court concurred with the Gujarat High Court's view that fixing three hearing dates at once, without granting adjournments as per law, breached natural justice principles. The adjudicating authority failed to pass orders on adjournment requests, leading to confusion and denial of proper hearing opportunities. The authority's actions indicated a preconceived notion about adjournments, and the petitioner was not informed about the proceedings adequately. As the petitioner's right to a fair hearing was compromised, the court set aside the adjudication order, requiring a deposit for further proceedings within a specified timeline. The petitioner was directed to respond to the order and appear for a hearing within three months for a prompt resolution.

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