Natural justice breach in exemption dispute led to remand and waiver of pre-deposit after ignored reply and incomplete review.

Failure to consider the assessee's reply and the claim for exemption under Notification No. 175/86-C.E. rendered the adjudication unsustainable, because the authority did not examine the notification as a whole or address the plea under paragraph 4(b). That omission was treated as a breach of natural justice. As fresh consideration was required and the assessee had raised a substantial grievance, insistence on pre-deposit was held to cause undue hardship. The order was set aside, pre-deposit was dispensed with, and the matter was remanded for fresh adjudication after a proper hearing.

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Issues: Whether the impugned adjudication order was vitiated for failure to consider the assessee's reply and the applicability of Notification No. 175/86-C.E., warranting remand and dispensing with pre-deposit.

Analysis: The reply to the show cause notice specifically raised the claim to exemption under Notification No. 175/86-C.E. and referred to clause (b) of paragraph 4, but the adjudicating authority did not deal with that reply or examine whether the assessee was covered by the notification as a whole. The omission was treated as a denial of natural justice. Since the matter required fresh consideration on the full text of the notification and the assessee had raised a substantial grievance, insistence on pre-deposit was viewed as causing undue hardship. The matter was therefore required to be reconsidered after granting a proper hearing.

Conclusion: The order was set aside, pre-deposit was dispensed with, and the matter was remanded for fresh adjudication after observing the principles of natural justice and granting personal hearing.

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