1991 (7) TMI 206 - AT - Central Excise

Tribunal grants stay on duty payment order, citing lack of reasoning and violation of natural justice

RAMENDRA NATH GHOSH, PROP. RG. INDUSTRIES Versus COLLECTOR OF C. EX.

The Tribunal granted a stay of the Assistant Collector's direction for the petitioner to obtain a Central Excise license and pay duty without a show cause ... Licensing - Dutiability Issues Involved:1. Whether the direction of the Assistant Collector to take out a Central Excise licence and pay Central Excise duty without issuing a show cause notice and without giving an opportunity of personal hearing violates the principle of natural justice.2. Whether the appeal against the Assistant Collector's direction is maintainable.3. Whether the stay of the Assistant Collector's direction should be granted during the pendency of the appeal.Issue-wise Detailed Analysis:1. Violation of Natural Justice:The petitioner argued that the Assistant Collector's direction to take out a Central Excise licence and pay duty was issued ex parte, without a show cause notice or a personal hearing, violating the principle of audi alteram partem and Article 21 of the Constitution. The Assistant Collector's communication dated 15-6-1990 was issued within nine days of a departmental search and concluded that production had exceeded exemption limits without any prior notice or hearing. The petitioner cited Supreme Court decisions in Jain Exports Pvt. Ltd. v. Union of India and Olga Tellis v. Bombay Municipal Corporation to support the contention that the impugned order was indiscreet and violated natural justice.The respondent countered that the direction was not a final order but an interlocutory one, and hence, no show cause notice was necessary at that stage. The respondent cited an unreported judgment of the Calcutta High Court in M/s. Thinners & Lacquers v. Superintendent (Preventive), Central Excise, Calcutta-I, arguing that a show cause notice was not required before issuing an interim direction.The Tribunal found that while the Assistant Collector's direction was based on preliminary scrutiny, it did not contain detailed reasons or evidence. The Tribunal acknowledged that the direction was interlocutory and that the petitioner could have demonstrated to the proper authority that the grounds were not proper. However, the Tribunal also noted that the Assistant Collector's direction lacked detailed reasoning and was issued without a show cause notice, which prima facie appeared to violate natural justice principles.2. Maintainability of the Appeal:The respondent argued that the appeal was premature and not maintainable as the direction was not a final order. The Tribunal considered whether such an interlocutory direction could be appealed. The Tribunal noted that the direction affected the petitioner's rights and liabilities and was based on a tentative view without observing natural justice principles.The Tribunal concluded that the appeal was maintainable as the direction had significant implications for the petitioner and was issued without following due process. The Tribunal distinguished between provisional orders, which are not appealable, and interlocutory directions that affect rights and liabilities and are open to challenge.3. Grant of Stay:The petitioner sought a stay of the Assistant Collector's direction during the pendency of the appeal. The respondent opposed the stay, arguing that it would jeopardize government revenue and that the department was still investigating the matter.The Tribunal was divided on this issue. The Technical Member declined to grant the stay, emphasizing that the direction was interlocutory and that the department should complete its investigation promptly. The Judicial Member, however, granted the stay, arguing that the direction had civil consequences and was issued without giving the petitioner an opportunity to be heard.The Vice President, agreeing with the Judicial Member, granted the stay, highlighting that the direction was issued without observing natural justice principles and that the petitioner had a prima facie case. The Vice President emphasized that the stay was granted without prejudice to the department's right to conduct further inquiries and issue a show cause notice.Conclusion:The Tribunal, by majority opinion, granted the stay sought by the petitioner during the pendency of the appeal. The stay was granted without prejudice to the department's right to conduct further inquiries and issue a show cause notice. The petitioner was required to keep proper accounts of production and clearance, and the department was allowed to inspect records and visit the premises if necessary.