TaxTMI 
TaxTMI 
2019 (12) TMI 1014
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....ules, 2010 (hereinafter referred to as "Rules"). 3. By the order dated 03.09.2019, this Court taking cognizance of the submissions made by the learned counsel for the respondent no.1 that the Appeal pending before the respondent no.1 was listed for final hearing on 09.09.2019, adjourned the hearing of the petition to await the outcome of the said Appeal. 4. The respondent no.1 by the order dated 20.09.2019 partially allowed the Appeal filed by the petitioner by reducing the period of blacklisting from three years to 18 months. The said order was challenged by the petitioner before this Court by filing an application being CM No.43517/2019 seeking amendment of the Writ Petition. The said application was allowed by this Court by its order dated 27.09.2019. 5. In view of the above, the primary challenge before this Court is to the order dated 20.09.2019 passed by the respondent no.1. 6. The brief facts giving rise to the Impugned Order are as under: a) On 16.08.2016 the premises of M/s Barshala, respondent no.5 herein, were inspected by a team from the Excise Department of the Government of NCT of Delhi. It is alleged that during the said inspection, by means o....
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....d to the petitioner company and the petitioner was merely being directed to attend the proceedings in relation to the said Show Cause Notice. h) By the order dated 16.07.2019, the respondent no.3, however, held both, M/s Barshala and the petitioner herein, to have violated the provisions of Section 2 (47)(a)(ii), (iii), 11, 33 read with Section 44 and 38 of the Delhi Excise Act, 2009 (hereinafter referred to as "Act") and cancelled the licence of M/s Barshala alongwith blacklisting of its Directors for a period of three years. As far as the petitioner was concerned, the respondent no.3 noted that as the petitioner's licence had already expired due to implementation of new Excise Policy/Terms and Conditions and as the cancellation of the licence was no longer possible, the petitioner was blacklisted for a period of three years. i) The petitioner challenged the above order by way of an Appeal under Section 72 of the Delhi Excise Act, 2009, before the respondent no.1. The petitioner further prayed for stay of the operation of the order dated 16.07.2019 passed by the respondent no.3. j) As noted hereinabove, the application seeking stay was rejected by the re....
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.... liable to be set aside by this Court as having been passed in violation of the Principles of Natural Justice. He submits that the said order has been passed in purported exercise of power under Rule 70 of the Rules. Rule 70 (1) of the Rules itself prescribes that no such order shall be passed without giving reasonable opportunity of hearing to the person concerned. He submits that in the present case, the Show Cause Notice dated 07.09.2016 was issued only to the respondent no.5- M/s Barshala and not to the petitioner. The petitioner was thereafter called upon to attend the hearing of the said Show Cause Notice and filed submissions/documents and explanation. The petitioner, while submitting such documents and submissions, had been reiterating before the respondent no.3 that the proceedings were only against the respondent no.5 and not against the petitioner. Therefore, the order dated 16.07.2019 has been passed without putting the petitioner to a Show Cause Notice. 10. The learned senior counsel for the petitioner further submits that even if, for the sake of the arguments, it is accepted that the notice calling upon the petitioner to attend the hearing is a Show Cause Notice, ....
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....isproportionate and is liable to be set aside. In this regard he placed reliance on the judgment of the Supreme Court in Excel Crop Care Ltd. v. Competition Commission of India & Anr., (2017) 8 SCC 47 and of this Court in M/s Otik Hotels and Resorts Pvt. Ltd. v. Indian Railways Catering and Tourism Corporation Ltd. (judgment dated 05.10.2016 passed in WP(C) 9159/2016). 14. On the other hand, the learned counsel for the respondents submits that the present petition is not maintainable in view of the alternate remedy in form of an Appeal to respondent no.2 being available to the petitioner. He submits that in the present case, the petitioner has availed the statutory remedy not only in form of filing an Appeal before the respondent no.1 against the order dated 16.07.2019 passed by the respondent no.3, but also by filing of an Appeal to the respondent no.2 against the order dated 05.08.2019 passed by the respondent no.1. He submits that the petitioner having exercised its statutory remedies, must be relegated to the same. He places reliance on the judgment of the Supreme Court in State of Rajasthan v. Union of India & Ors., (2018) 12 SCC 83 in support of its contentions. 15. On ....
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....cing reliance on the judgment of the Supreme Court in Kulja Industries Ltd. v. Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Limited & Ors., (2014) 14 SCC 731, Devchand Kalyan Tandel v. State of Gujarat and Anr., (1996) 6 SCC 255 and Jagdamba Sales Corporation vs. State (GNCT of Delhi) & Ors. (Judgment dated 17.07.2018 passed by this Court in WP(C) No.2660/2018), he submits that in cases of economic offences, the Court cannot take a lenient view as the exact proportion of tax evasion cannot be estimated. 19. I have considered the submissions made by the learned counsels for the parties. 20. Rule 70 of the Rules provides as under: "70. Excise Black List, manner of blacklisting.-(1) Any licensee, tenderer, bidder, manufacturer or supplier, whose products are sold in Delhi, may be blacklisted by the Deputy Commissioner for violation of the provisions of the Act and the rules framed thereunder or for any other reason which may be considered detrimental to the interest of revenue or public health. No such order shall be passed without giving reasonable opportunity of hearing to the person concerned. (2) Any person whose name is mentioned in ....
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....leged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. Another requirement, according to us, is the nature of action which is proposed to be taken for such a breach. That should also be stated so that the noticee is able to point out that proposed action is not warranted in the given case, even if the defaults/breaches complained of are not satisfactorily explained. When it comes to blacklisting, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action. xxxxxxx 26. In the present case, it is obvious that action is taken as provided in sub-clause (ii). Under this clause, as is clear from the reading thereof, the Department had a right to cancel the contract and withhold the agreement. That has been done. The Department has also a right to get the job which was to be carried out by the defaulting contractor, to be carried out from other contractor(s). In such an event, the Department also has a right to recover the difference from the defaulting contractor. This clause, no doubt, gives further right to the Department to blacklist the contractor for a period of 4 years and also ....
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....actions so stated in the provisions of NIT. xxxxxx 33. When we apply the ratio of the aforesaid judgment to the facts of the present case, it becomes difficult to accept the argument of the learned Additional Solicitor General. In the first instance, we may point out that no such case was set up by the respondents that by omitting to state the proposed action of blacklisting the appellant in the show-cause notice, has not caused any prejudice to the appellant. Moreover, had the action of blacklisting being specifically proposed in the show-cause notice, the appellant could have mentioned as to why such extreme penalty is not justified. It could have come out with extenuating circumstances defending such an action even if the defaults were there and the Department was not satisfied with the explanation qua the defaults. It could have even pleaded with the Department not to blacklist the appellant or do it for a lesser period in case the Department still wanted to blacklist the appellant. Therefore, it is not at all acceptable that non-mentioning of proposed blacklisting in the show-cause notice has not caused any prejudice to the appellant. This apart, the extreme nature....
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....nform that date of hearing in the matter of show cause notice dated 07.09.2016 served upon M/s Barshala (A Unit of Indospirit Bars Pvt. Ltd.) 2, Community Centre, East of Kailash, New Delhi-110065 (copy enclosed for ready reference) has been fixed for 24.09.2018 at 11:00AM. You are therefore directed to appear before the Dy. Commissioner (Excise)/Licensing Authority on aforementioned date." 31. The petitioner in all its replies kept insisting that no Show Cause Notice has been issued to the petitioner and that it was participating in such proceedings merely to give information as required and called upon by the Licencing Authority. In spite of these submissions, the Licencing Authority never put the petitioner to notice of allegations against it or the proposed penalty. The mere fact that the petitioner was allowed to take an inspection of all the records, cannot satisfy the test of putting the petitioner to a specific notice of allegations against it. 32. In view of the above, it is held that the order dated 16.07.2019 passed by the Deputy Commissioner (Excise) was in complete breach of the Principles of Natural Justice. 33. The learned counsel for the respondent....
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.... was also provided to be one year. In those specific facts, the Court held that the judgment of the Supreme Court in Gorkha Security Services (supra) would not apply. 39. In Raman Kalra (supra), this Court, in fact rejected the argument that punitive measure like debarment would follow automatically without affording the bidder a chance to represent against the same. The same was the view taken in Jagdamba Sales Corporation (supra). 40. The learned counsel for the respondents further submitted that even assuming that the order passed by the Deputy Commissioner, Excise was in violation of Principles of Natural Justice, the petitioner having been granted a full opportunity of hearing by the Commissioner, (Excise) in its appeal filed against the order of the Deputy Commissioner, the infirmity in the order of the Deputy Commissioner, if any, stood rectified and therefore, the petitioner must be relegated to its statutory remedies. 41. The answer to the above submission would require consideration of two linked questions of law; (a) whether granting an opportunity of hearing and compliance with the Principles of Natural Justice by an Appellate Authority cures the defect in the ....
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....ing: instead of fair trial followed by appeal, the procedure is reduced to unfair trial followed by fair trial." And he makes reference to the observations of Megarry, J. in Leary v. National Union of Vehicle Builders. Treating with another aspect of the point, that learned Judge said: "If one accepts the contention that a defect of natural justice in the trial body can be cured by the presence of natural justice in the appellate body, this has the result of depriving the member of his right of appeal from the expelling body. If the rules and the law combine to give the member the right to a fair trial and the right of appeal, why should he be told that he ought to be satisfied with an unjust trial and a fair appeal? Even if the appeal is treated as a hearing de novo, the member is being stripped of his right to appeal to another body from the effective decision to expel him. I cannot think that natural justice is satisfied by a process whereby an unfair trial, though not resulting in a valid expulsion, will nevertheless have the effect of depriving the member of his right of appeal when a valid decision to expel him is subsequently made. Such a deprivation would be a p....
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....vation. And, therefore, it seems to us, there is manifest need to ensure that there is no breach of fundamental procedure in the original proceeding, and to avoid treating an appeal as an overall substitute for the original proceeding." 44. In Shri Farid Ahmed Abdul Samad & Anr. (supra), the Supreme Court held that if an order at the inception is invalid, its invalidity cannot be cured by its approval or by its confirmation by the concerned Authorities. Paragraphs 24 to 26 of the said judgment are quoted hereinbelow: "24. We are clearly of opinion that Section 5A of the Land Acquisition Act is applicable in the matter of acquisition of land in this case and since no personal hearing had been given to the appellants by the Commissioner with regard to their written objections the order of acquisition and the resultant confirmation order of the State Government with respect to the land of the appellants are invalid under the law and the same are quashed. It should be pointed out, it is not a case of failure of the rules of natural justice as such as appeared to be the only concern of the High Court and also of the city civil court. It is a case of absolute non-compliance w....
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.... we think, quite properly exercise its power to issue the prerogative writ of certiorari to correct the error of the court or tribunal of first instance, even if an appeal to another inferior court or tribunal was available and recourse was not had to it or if recourse was had to it, it confirmed what ex facie was a nullity for reasons aforementioned. This would be so all the more if the tribunals holding the original trial and the tribunals hearing the appeal or revision were merely departmental tribunals composed of persons belonging to the departmental hierarchy without adequate legal training and background and whose glaring lapses occasionally come to our notice. The superior court will ordinarily decline to interfere by issuing certiorari and all we say is that in a proper case of the kind mentioned above it has the power to do so and may and should exercise it. We say no more than that." 48. This Court in L.P.Desai (supra) held that mere fact that the petitioner therein had filed an appeal and was heard in the appeal would not alter the situation that the original order passed was in violation of the Principles of Natural Justice and therefore, void ab initio. This Court ....
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....on is reached that a complainant has the right to nothing less than a fair hearing both at the original and at the appeal stage. This was the result reached by Megarry J. In Leary v. National Union of Vehicle Builders [1971] Ch. 34. In his judgment in that case the judge seems to have elevated the conclusion thought proper in that case into a rule of general application. In an eloquent passage he said, at p. 49: "If the rules and the law combine to give the member the right to a fair trial and the right of appeal, why should he be told that he ought to be satisfied with an unjust trial and a fair appeal? ...... As a general rule ...... I hold that a failure of natural justice in the trial body cannot be cured by a sufficiency of natural justice in an appellate body." In their Lordships' opinion this is too broadly stated. It affirms a principle which may be found correct in a category of cases: these may very well include trade union cases, where movement solidarity and dislike of the rebel, or renegade, may make it difficult for appeals to be conducted in an atmosphere of detached impartiality and so make a fair trial at the first-probably branch-level an essenti....
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....ters of domestic disputes should be to leave these to be settled by the agreed methods without requiring the formalities of judicial processes to be introduced." xxxxx "Their Lordships agree, and have given reasons for concluding, that in this field there is no automatic rule. But they do not understand the Court of Appeal to be subscribing to a view that cases of "insulation" or "curing," after a full hearing by an appellate body, may not exist: on the contrary, Cooke J. expresses the opinion that the court, in the exercise of its discretion, when reviewing the domestic or statutory decision, should take into account all the proceedings which led to it, the conduct of the complaining party and the gravity of any breach of natural justice which may have occurred. This, though perhaps with some difference in emphasis, is their Lordships' approach. It remains to apply the principles above stated to the facts of the present case. In the first place, their Lordships are clearly of the view that the proceedings before the committee were in the nature of an appeal, not by way of an invocation, or use, of whatever original jurisdiction the committee may have had. The ....
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.... whole procedure is properly regarded as being fair, then to strike that procedure down because of a flaw in part will be to apply an unduly technical approach. My view of the test receives some support in de Smith's Judicial Review of Administrative Action, 4th ed. (1980), p. 242 et seq. and is in accord with Lord Wilberforce's opinion in Calvin v. Carr [1980] A.C. 574. Furthermore it does not have the flaw to which Megarry J. Referred in Leary v. National Union of Vehicle Builders [1971] Ch. 34 because it presupposes Parliament gave the complainant no more than a right to a fair hearing in the proceedings as a whole." 51. In the appeal filed, the House of Lords held as under: "Lord Keith of Kinkel- Upon the view which I take, that the district auditor's decision was not vitiated by procedural unfairness to the question whether such unfairness, had it existed, was capable of being cured by the appeal to the High Court does not arise directly for decision. It is, however, my opinion that the particular appeal mechanism provided for by section 20(3) of the Act of 1982, considered in its context, is apt to enable the court, notwithstanding that it finds some proc....
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....-tier adjudicatory systems a procedural failure at the level of the first tier can be remedied at the level of the second tier was considered by the Privy Council in Calvin v. Carr [1980] A.C. 574 in which all the relevant previous authorities on the subject are reviewed. I do not find it necessary in this case to examine the general principles there discussed, nor would I think it appropriate in this case to seek to lay down any principles of general application. This is because the question arising in the instant case must be answered by considering the particular statutory provisions here applicable which establish an adjudicatory system in many respects quite unlike any that has come under examination in any of the decided cases to which we were referred. We are concerned with a point of statutory construction and nothing else." "Lord Templeman My Lords, when by statute an appeal lies from a tribunal to a court of law, the statute must be construed to determine whether the court is free to determine the appeal on the basis of the evidence before the court or is bound by the evidence or information laid before the tribunal. In the present case I have no doubt t....
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....gain distinctiveness if judicial proceeding must be kept clearly distinguished. The principle that an appropriate appellate procedure is said can be curative, in our opinion, operates a fortiori in the context of purely judicial proceedings, if there is, as of right, an appeals on facts and law to an appellate forum with plenary appellate jurisdiction co-extensive with that of original court and if the aggrieved party had full opportunity of presenting its whole case and a decision on merits is made. xxxxx 49. The principle that in judicial proceedings a full-fledged appellate hearing where opportunity is afforded to an aggrieved party to present his case and evidence and the appellate court in exercise of a jurisdiction, coextensive with that of the original jurisdiction, decides a matter on merits, then the consequences of non-compliance of rules if natural jurisdiction in the original proceeding may be held to by been cured, is a recognized principle. We think this principle should operate here." 53. The Calcutta High Court in West Bengal State Electricity Regulatory (supra), applied the principles laid down by the Supreme Court in Canara Bank & Ors. vs. Deb....
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....earing before an Appellate Tribunal (as in section 111 of the Act of 2003) both on facts and in law, procedural defect in the initial order would not vitiate the decision making process unless prejudice is demonstrated. As to how respondent/writ petitioners may be prejudiced if oral hearing is not given to them by the State Commission while considering their written objection has not been made out on facts in the instant case." 54. In United Planters Association of Southern India vs. K.G. Sangameswaran & Anr. (1977) 4 SCC 741, the Supreme Court in relation to the Industrial Dispute held that the Appellate Authority had full jurisdiction to record evidence to enable it to come to its own conclusion and therefore, even where the domestic enquiry held by the employer was defective, opportunity of hearing afforded at the appellate stage will sufficiently meet the demands for a just and proper enquiry. It observed as under:- "28. In the instant case, the appellant has contended that the respondent did not participate in the domestic enquiry in spite of an opportunity of hearing having been provided to him. He was also offered the inspection of the documents, but he did not a....
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....l to the Tribunal, and thereupon the assessment of the compensation shall be made by the Tribunal." The pre-requisites for the application of sub- section (3A) are that a person first be aggrieved by an "assessment of compensation" "made" by the prescribed authority. Where no assessment of compensation whatsoever is made by the prescribed authority (and on the facts here, the prescribed authority has not, in fact, stated that for the reasons given by it, compensation awarded to FTIL, its shareholders and creditors is nil), no person can be aggrieved by an order which does not assess any compensation, which may be interfered with by the Appellate Tribunal which must then assess the compensation for itself. The statute clearly entitles such shareholders and creditors to have compensation assessed first by the prescribed authority and then by the appellate authority. This Court, in Institute of Chartered Accountants of India v. L.K. Ratna and Ors., [1986] 3 SCR 1049, held that the defect in observing the rules of natural justice in the trial administrative body cannot be cured by observing such rules of natural justice in the appellate body. It was held: "It is then urged by ....
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.... the effect of depriving the member of his right of appeal when a valid decision to expel him is subsequently made. Such a deprivation would be a powerful result to be achieved by what in law is a mere nullity; and it is no mere triviality that might be justified on the ground that natural justice does not mean perfect justice. As a general rule, at all events, I hold that a failure of natural justice in the trial body cannot be cured by a sufficiency of natural justice in an appellate body." The view taken by Megarry, J. was followed by the Ontario High Court in Canada in Re Cardinal and Board of Commissioners of Police of City of Cornwall, [(1974) 42 D.L.R. (3d) 323]. The Supreme Court of New Zealand was similarly inclined in Wislang v. Medical Practitioners Disciplinary Committee, [(1974) 1 N.Z.L.R. 29] and so was the Court of Appeal of New Zealand in Reid v. Rowley [(1977) 2 N.Z.L.R. 472]."[(at pp. 1065-1066)] This judgment was the subject matter of comment in Union Carbide Corporation v. Union of India, [1991] Supp (1) SCR 251, where this Court held, following the judgment in Charan Lal Sahu v. Union of India, (1990) 1 SCC 613, that non-compliance with the ob....
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.... 57. I may also herein note the opinion of the Author in MP Jain & SN Jain Principles of Administrative Law (8th Edition) (Volume 1) page 741 wherein the Author after considering the judgment in Leary (Supra) and Calvin vs. Carr (Supra) as also various judgments of the Indian Courts concluded as under:- "The ruling in Calvin v. Car to the effect that failure of natural justice at the original stage may be cured by a hearing at the appellate stage is subject to three inherent limitations: (1) the ruling is concerned only with consensual bodies and not with governmental or administrative bodies; (ii) the ruling refers to a two tier adjudicatory system - first tier deciding the dispute originally and the second tier hearing appeal from the original decision; and (iii) the appeal is by way of rehearing and the appellate body gives a full-fledged hearing to the party concerned. If the appeal is not by way of rehearing, but is limited only to the points of law, and the appellant remains bound to accept the determinations of fact as found by the original body, then the Calvin ruling would not apply. Calvin v. Carr qualifies the Leary principle....
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.... Natural Justice. However, where the appellate authority considers the case denovo, granting full opportunity of hearing to the aggrieved party, and there is a right available with the aggrieved party to file a second appeal against such decision, the aggrieved party cannot approach High Court again challenging the order of the original authority. Allowing the party to do so would clearly amount to allowing the party to have two bites of the same cherry and do forum shopping. In such cases, having availed of the appellate remedy, the party must be relegated back to the same. Of course, where there is no other remedy available to the aggrieved party, the party may be entitled to challenge both the original and the appellate order by way of a Writ Petition before the High Court. There certainly cannot be a straight jacket answer to the above question. 61. In the present case, though the order passed by the original authority that is the Deputy Commissioner of Excise was clearly in violation of Principles of Natural Justice, the petitioner chose the statutory remedy of filing an appeal before the Commissioner (Excise). Section 72 of the Delhi Excise Act, 2009 provides for remedy of....
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....itioner primarily sought the setting aside of the order dated 05.08.2019 (rejecting the stay) and for a stay of the order dated 16.07.2019 (order of blacklisting the petitioner) rather than laying a substantive challenge to the order dated 16.07.2019 passed by the Deputy Commissioner-respondent no. 3. 65. It is only when the Commissioner Excise dismissed the appeal filed by the petitioner in so far as the petitioner was found guilty of having breached the provisions of the Act and the Rules and visited the petitioner with a lesser period of blacklisting, that the petitioner by way of an amendment application sought to challenge the order dated 16.07.2019 before this Court in a substantive manner. 66. The petitioner, therefore, having availed of the statutory remedies under the Act, must be relegated to the same. It is not the case of the petitioner that the petitioner was not afforded an opportunity of hearing by the Commissioner Excise. By that stage, the petitioner was fully aware of the allegations against it and the proposed penalty. It had full opportunity to meet allegations on merit as also counter the extenuating circumstances that would justify an order of blacklisti....
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....licensee, having a license been granted under the Act, 2009, is being proceeded against by the competent authority under the Act, 2009, as per the provisions of the Act, 2009, for the alleged contravention of the provisions of the Act, 2009, the said Licensee cannot claim that he is but ignorant of the penalties under the Act, 2009, and rules thereunder which may be imposed upon him by the competent authority. 34. Thus, once the officers of the Appellant have examined the record, and in fact confirmed the same to the Deputy Commissioner, the Appellant can neither claim any ignorance of the facts of the case being made out against it. The Appellant cannot claim a lack of fair opportunity in rebutting the case against it particularly when the record reflects that the Appellant not only participated in numerous hearings before the Deputy Commissioner but also led arguments and filed written submissions upon the case against it on three occasions viz. on 27.11.2018, 18.12.2018 and on 03.04.2O19. 35. Thus, it emerges that not only the Appellant was served with a show cause notice in relation to the inspection carried out at Barshala, the Appellant was also informed of ....