Natural justice requires consideration of a material defence on manufacture before fixing duty liability; order set aside and remanded.

An adjudication order that ignores a material defence directly affecting duty liability is vitiated for breach of natural justice. The assessee's central contention was that polishing and shearing of grey fabric did not amount to manufacture and therefore no duty was payable, but the authority proceeded on the assumption that dutiable processes were carried out without addressing that plea. The order was set aside and the matter remanded for fresh adjudication after proper consideration of the defence and compliance with natural justice.

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Issues: Whether the adjudication order was liable to be set aside and the matter remanded because the main defence that the processes on grey fabric did not amount to manufacture and, therefore, no duty was payable, was not considered.

Analysis: The adjudicating authority proceeded on the assumption that dutiable processes were being carried out and did not deal with the assessees' central plea that polishing and shearing of grey fabric did not bring into existence a new commodity. Since the principal contention affecting liability to duty was ignored, the decision-making process was found to be vitiated by breach of natural justice.

Conclusion: The impugned order was set aside and the matter was remanded for fresh adjudication after considering the assessees' defence and affording proper observance of natural justice.

Ratio Decidendi: An adjudication order that ignores a material defence bearing directly on duty liability is vitiated for breach of natural justice and may be set aside for de novo consideration.

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