Natural justice and unsustainable show cause notice led to dropping of demand and penalty proceedings.

A show cause notice, and the consequential demand and penalty, were found unsustainable after remand for violation of natural justice. On re-adjudication, the proceedings were dropped by a detailed speaking order, which recorded that the balance of convenience favoured the assessee and that the notice lacked legal sustainability. The Revenue's challenge was decided on the available record, including an affidavit explaining closure of the factory and the respondent's non-appearance, and the challenge to dropping the proceedings failed.

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Issues: Whether the show cause notice and consequential demand and penalty were sustainable in law.

Analysis: The matter had earlier been remanded for violation of the principles of natural justice. On re-adjudication, the proceedings were dropped by a detailed speaking order, recording that the balance of convenience was in favour of the assessee and that the show cause notice was not sustainable in law. The Revenue's appeal was considered on the available record and in light of the affidavit explaining the closure of the factory and the absence of representation for the respondent.

Conclusion: The challenge to the dropping of proceedings failed and the assessee's position was upheld.

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