TaxTMI 
TaxTMI 
2012 (12) TMI 828
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....ort consignment was to be routed through the appellant, as handling agent as also the owner of the bonded warehouse at Kandla Port, where the spirit was to be stored before export, the appellant was required to furnish an indemnity bond, in the prescribed form, in favour of the Excise Commissioner as the authorised nominee of the exporter. On 20th December 1988, the appellant executed an indemnity bond in favour of the Governor of Uttar Pradesh in relation to permission for removal by rail 67.77 lac bulk litres of rectified spirit of any strength ranging between 91.68% V/V @ 15.60C to 95% V/V @ 15.60C. One of the conditions in the indemnity bond was that if the said quantity of rectified spirit, after deducting such allowance for dryage and wastage, as may be sanctioned, is not delivered at the warehouse at Kandla, the authorised nominee, the appellant herein, shall indemnify the Governor for any loss of duty, which the Governor may suffer by reason of such non delivery or short delivery, by paying him on demand the duty @ Rs.40/- per alcoholic litre, on spirit not so delivered, after making the allowances aforesaid. 3. On 8th January, 1989, M/s Daurala Sugar Works consigned a rak....
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....ation furnished by the appellant, vide letter dated 6th April, 1994, the Excise Commissioner directed the District Excise Officer, Bareilly to issue recovery certificate and take appropriate steps against the appellant for the recovery of Excise duty amounting to Rs.8,71,744/- and interest thereon. By letter dated 22nd June, 1994, the Bank of Baroda, Mandwi Branch, informed the appellant that pursuant to an order dated 22nd June, 1994, issued by the Sub-Divisional Magistrate, their bank account had been attached and a sum of Rs.12,00,000/- had been earmarked from their account for payment of Excise duty. 8. Being aggrieved, the appellant filed a writ petition before the High Court, seeking quashing of notice of demand dated 6th April, 1994. Relying on the decision of a Bench of seven Judges in Synthetics And Chemicals Ltd. & Ors. Vs. State of U.P. & Ors. (1990) 1 SCC 109, wherein it was held that the States are not competent to impose a tax or charge imposts in respect of rectified spirit for industrial purposes, having a strength not less than 95% by volume of ethyl alcohol, the High Court held that though the State of U.P. did not have jurisdiction to levy and demand Exc....
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....rotra, learned counsel appearing for the State, on the other hand, supporting the view taken by the High Court, submitted that Rule 633, does not postulate a show-cause notice before levy of penalty or interest because penalty or interest being compensatory in nature because of infringement of condition of an indemnity bond furnished by the appellant to the Collector or the Excise Inspector, the liability under the Bond is absolute. It was argued that since in the present case, admittedly, the discharge certificate in terms of Rule 633 had not been furnished by the appellant within the stipulated time, penalty under the said Rule was clearly exigible. 12. The precise question at issue is whether sub-rule (7) of Rule 633 of the Excise Manual postulates the requirement of hearing before steps for recovery of penalty under the said Rule are initiated? 13. Before addressing the issue, it is necessary to bear in mind the fact that in so far as the question of levy of Excise duty on the high strength rectified spirit in 15 tank wagons is concerned, parties are ad-idem that in view of the judgment of this Court in Synthetics And Chemicals (supra), the State was not empowered to levy Exc....
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....porter, the second forwarded to the Collector, Deputy Commissioner, or *other* officer specially appointed in this behalf of the district to which the spirits are to be taken, and the third retained for record. *NOTE-This will usually be the officer-in-charge of the bonded warehouse to which the spirit is consigned. An advance in form P.D. 26 must also be sent by the officer-in-charge direct to the authority granting the import permit who will return the same duly filed in as soon as possible after receipt and verification of the consignment. Within a reasonable time to be fixed by the Collector of the exporting district and specified in the bond or pass the importer shall produce before the Collector of the exporting district his copy of the pass endorsed with a certificate signed by the Collector, Deputy Commissioner or other officer specially appointed in this behalf, of the importing district certifying the due arrival or otherwise of the spirit at its destination; (4) On each cask or other vessel containing spirit for export there shall be legibly cut or painted: (i) the name and mark of the exporting distillery; (ii) the number of the cask or other vessel and its capacit....
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....named officers of the importing district, certifying due arrival or otherwise of the liquor at its destination, is not furnished to the Collector of the exporting district, he would be entitled to presume that the liquor has been disposed of otherwise than by export and can proceed to take necessary steps as postulated in sub-rule (7) of Rule 633 of the Excise Manual. The said Rule provides for imposition of penalty, which may be equivalent to the Excise duty, leviable under the charging Section 28 of the Act on potable liquor. Bearing in mind the scope of Rule 633, we may now advert to the moot question, viz. whether the principles of natural justice demand that an opportunity of hearing should be afforded before an order under Rule 633(7) of the Excise Manual is made? 16. Before we deal with the question, it would be necessary to understand and appreciate the concept of natural justice and the principles governing its application. 17.Rules of "natural justice" are not embodied rules. The phrase natural justice is also not capable of a precise definition. The underlying principle of natural justice, evolved under the common law, is to check arbitrary exercise of power by the Sta....
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....ve in very exceptional circumstances where compulsive necessity so demands. The court must make every effort to salvage this cardinal rule to the maximum extent possible, with situational modifications. But, the core of it must, however, remain, namely, that the person affected must have reasonable opportunity of being heard and the hearing must be a genuine hearing and not an empty public relations exercise; (Emphasis added) 19. In Canara Bank Vs. V.K. Awasthy (2005) 6 SCC 321 the concept, scope, history of development and significance of principles of natural justice have been discussed in extenso, with reference to earlier cases on the subject. Inter alia, observing that the principles of natural justice are those rules which have been laid down by the courts as being the minimum protection of the rights of the individual against the arbitrary procedure that may be adopted by a judicial, quasi-judicial and administrative authority while making an order affecting those rights, the court said: Concept of natural justice has undergone a great deal of change in recent years. Rules of natural justice are not rules embodied always expressly in a statute or in rules framed the....
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....rovision conferring the power; the nature of the power conferred and the purpose for which the power is conferred and the final effect of the exercise of that power. It is only upon a consideration of all these matters that the question of application of the said principle can be properly determined; 21.Having considered the issue, framed in para 12 supra, on the touchstone of the afore-noted legal principles in regard to the applicability of the principles of natural justice, we are of the opinion that keeping in view the nature, scope and consequences of direction under sub-rule (7) of Rule 633 of the Excise Manual, the principles of natural justice demand that a show-cause notice should be issued and an opportunity of hearing should be afforded to the person concerned before an order under the said Rule is made, notwithstanding the fact that the said Rule does not contain any express provision for the affected party being given an opportunity of being heard. Undoubtedly, action under the said Rule is a quasi-judicial function which involves due application of mind to the facts as well as to the requirements of law. Therefore, it is plain that before raising any demand and initi....