Natural justice and Section 74 scrutiny led to setting aside interest and penalty, with remand for fresh hearing.

Natural justice required the assessee to be allowed to place material documents before the authority, because genuine supply of goods and the correctness of invoking Section 74 could not be ruled out without that opportunity. Although input tax credit had already been reversed, revenue interest was treated as protected to that extent, but that did not cure the defect of denying a reasonable hearing. The order imposing interest and penalty was therefore set aside, and the matter was remanded for fresh consideration of the invocation of Section 74 after affording the assessee an effective opportunity.

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Issues: Whether the order imposing interest and penalty under Section 74 was liable to be set aside for breach of natural justice and whether the matter required remand for reconsideration of the invocation of Section 74.

Analysis: The petitioner was held entitled to place material documents on record before the authority, since the possibility of establishing genuine supply of goods and incorrect invocation of Section 74 could not be ruled out without such opportunity. As the ITC had already been reversed, revenue interest was treated as protected to that extent, but that did not dispense with the need for a fresh consideration after affording a reasonable opportunity.

Conclusion: The impugned order was set aside and the matter was remanded for reconsideration of the invocation of Section 74 after giving the petitioner a reasonable opportunity.

Final Conclusion: The petitioner obtained limited relief, with the adjudication on interest and penalty vacated and the dispute sent back for fresh decision after hearing.

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