Madhya Pradesh High Court
Steel Ingots Pvt. Ltd. vs Union Of India (Uoi) on 9 September, 1987
Equivalent citations: 1988(16)ECC205
ORDER G.G. Sohani, J.
1. The order in this case will also govern the disposal of Miscellaneous Petitions Nos. 329, 458 and 958, all of 1987.
2. By these petitions under Articles 226 and 227 of the Constitution of India, the petitioners have prayed for quashing of orders passed by the Superintendent, Central Excise, under Rule 57-I of the Central Excise Rules, 1944 (hereinafter referred to as "the Rules") holding that as the credit of duty paid on inputs, as specified in the orders, was wrongly taken by the petitioners, the credit so taken was being disallowed. By these orders, the petitioners were directed to adjust the credit account immediately, as directed in those orders. Aggrieved by those orders, the petitioners have filed these petitions.
3. A number of points were urged in the petitions but having heard learned Counsel for the parties, we have come to the conclusion that the petitions deserve to be allowed on the short ground that before taking action under Rule 57-I of the Rules, the Superintendent, Central Excise, has not given any opportunity to the petitioners to show cause why action as contemplated by the said rule be not taken. The relevant provisions of Rule 57-I of the Rules read as follows:
57-I. (1) If the credit of duty paid on inputs has been taken wrongly, the credit so taken may be disallowed by the proper officer and the amount so disallowed shall be adjusted in the credit account or the account current maintained by the manufacturer or if such adjustments are not possible for any reason, by cash recovery from the manufacturer of the said goods." It was contended on behalf of the respondents that the aforesaid rule did not envisage giving of any opportunity to show cause before proceeding to take action under Rule 57-I. But we do not see anything in that rule, which excludes the applicability of the principles of natural justice. It is now well settled, as held by the Supreme Court in Ramana Dayaram Shetty v. The Inter national Airport Authority of India and Ors. AIR 1979 SC 1628 that it is "unthinkable that in a democracy governed by the rule of law, the executive Government or any of its officers should possess arbitrary power over the interests of the individual. Every action of the executive Government must be informed with reason and should be free from arbitrariness. That is the very essence of the rule of law and its bare minimal requirement.
4. It cannot be disputed that action taken by a proper officer under Rule 57-I would adversely affect the interests of the petitioners. It is true that Rule 57-I does not contemplate giving of any show cause notice but in this connection, we may usefully refer to the following observations of the Supreme Court in Olga Tellis and Ors. v. Bombay Municipal Corporation and Ors. AIR 1986 SC 180:
There are situations, which demand the exclusion of the rules of natural justice by reason of diverse factors like time, place, the apprehended danger and so on. The ordinary rule, which regulates all procedure is that persons, who are likely to be affected by the proposed action, must be afforded an opportunity of being heard as to why that action should not be taken. The hearing may be given individually or collectively, depending upon the facts of each situation. A departure from this fundamental rule of natural justice may be presumed to have been intended by the Legislature only in circumstances, which warrant it. Such circumstances must be shown to exist, when so required, the burden being upon those who affirm their existence.
The learned Counsel for the respondents was unable to point out any cogent reason for holding that a departure from the fundamental rule of natural justice "audi alteram partem" can be presumed to have been intended before taking action under Rule 57-I. As further held by the Supreme Court in AIR 1986 SC 180 (supra), the decision to dispense with notice cannot be founded upon a presumed impregnability of the proposed action. The Supreme Court further observed as follows:
The proposition that notice need not be given of a proposed action because there can possibly be no answer to it, is contrary to the well-recognized understanding of the real import of the rule of hearing. That proposition overlooks that justice must not only be done but must manifestly be seen to be done and confuses one for the other. The appearance of injustice is the denial of justice. It is the dialogue with the person likely to be affected by the proposed action, which meets the requirement that justice must also be seen to be done.
In the instant cases, no opportunity was admittedly given to the petitioners to show cause before passing the impugned orders under Rule 57-I. These orders, therefore, deserve to be quashed on this short ground. We would, however, like to make it clear that the proper officer shall be at liberty to pass orders under Rule 57-I, afresh, after giving reasonable opportunity to the petitioners to show cause why action under Rule 57-I as contemplated by the proper officer, be not taken. It is needless to point out that if any cause is shown by the petitioners, the proper officer shall take that into consideration and after applying his mind, pass speaking orders as the circumstances of a particular case may require. In view of the fact that we are allowing these petitions on the short ground that the impugned orders are contrary to the principles of natural justice, we refrain from expressing any opinion on the question as to whether cash recovery from the petitioners in case of any adverse decision against them under Rule 57-I, as contemplated by Rule 57-I, can only be effected in the manner provided by Section 11A of the Central Excises & Salt Act, 1944, as urged by the petitioners, or under Section 11 of that Act, as urged by the respondents.
5. For all these reasons, the Order No. C. Ex-20/R-III/S. L./85/152 dated 24-2-1987 (annexure 'D') passed in Misc. Petition No. 264 of 1987; the Orders No. G.B.G.L./Misc./86/267 dated 11-3-1987 and No. G.B.G.L./Misc./86/249 dated 6-3-1987 (annexures 'C and 'D' respectively) passed in Misc. Petition No. 458 of 1987; the Orders No. Modvat/Modella/R-I/RTM/86/116 dated 27-1-1987 (annexure 'H'), No. Modvat/Modella/RI/RTM/86/171 dated 6-2-1987 (annexure) 'L') No. Modvat/Modella/RI/RTM/86/155/dated 5-2-1987 (annexure 'K') and No. Modvat/Modella/R-I/Rtm/86/185 dated 11-2-1987 (annexure 'N') passed in Miscellaneous Petition No. 329 of 1987 and Order No. Modvat/Modella/RS/RTM/86/267 dated 3-3-1987 (annexure 'F') passed in Miscellaneous Petition No. 958 of 1987, are all quashed. The proper officer shall be at liberty to take action afresh, according to law, under Rule 57-I of the rules, after giving reasonable opportunity to the petitioners to show cause why such action be not taken.
6. The petitions are disposed of accordingly. In the circumstances of the case, parties shall bear their own costs.