Gujarat High Court
Regent Overseas Pvt Ltd & vs Union Of India & on 1 March, 2017
Author: Harsha Devani
Bench: Harsha Devani, A.S. Supehia
C/SCA/10563/2016 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 10563 of 2016
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS.JUSTICE HARSHA DEVANI
and
HONOURABLE MR.JUSTICE A.S. SUPEHIA
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1 Whether Reporters of Local Papers may be allowed No
to see the judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy of No
the judgment ?
4 Whether this case involves a substantial question of No
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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REGENT OVERSEAS PVT LTD & 1....Petitioner(s)
Versus
UNION OF INDIA & 1....Respondent(s)
==========================================================
Appearance:
MR DEVAN PARIKH, SENIOR ADVOCATE with MR MR NIRAV P SHAH,
ADVOCATE for the Petitioner(s) No. 1 - 2
MS AVANI S MEHTA, ADVOCATE for the Respondent(s) No. 1-2
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CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI
and
HONOURABLE MR.JUSTICE A.S. SUPEHIA
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Date : 01/03/2017
ORAL JUDGMENT
(PER : HONOURABLE MS.JUSTICE HARSHA DEVANI)
1. Rule. Ms. Avani Mehta, learned senior standing counsel waives service of notice of rule on behalf of the respondents. With the consent of the learned advocates for the respective parties, the matter is taken up for final hearing.
2. By this petition under Article 226 of Constitution of India, the petitioners have challenged the order-in-original dated 29.1.2016 passed by the Commissioner of Customs and Central Excise, Surat-II, whereby the adjudicating authority has passed an ex parte order confirming the proposals under the show cause notice dated 23.01.2006.
3. The first petitioner company is a 100% EOU engaged in the manufacture of processed/dyed and/or printed fabrics/ sarees/ dress materials and other fabrics and the second petitioner is a Director of the first petitioner company. The petitioners' premises came to be visited by the Central Excise officers in January and March 2001, pursuant to which, a show cause notice dated 23.01.2006 came to be issued for recovery of duty. The adjudicating authority passed an order-in-original confirming the demand, which order came to be challenged by the petitioners before the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as "the Tribunal") on the ground of violation of the principles of natural justice, as the panchnama was tampered with and no cross-examination was granted. The Tribunal allowed the appeal and the matter Page 2 of 13 HC-NIC Page 2 of 13 Created On Mon Aug 14 01:59:41 IST 2017 C/SCA/10563/2016 JUDGMENT came to be remanded to the adjudicating authority to allow cross-examination. Pursuant thereto, the petitioners submitted a list of three persons whom they wanted to cross-examine. It appears that after two of the witnesses were cross-examined, the adjudicating authority, vide letter dated 9.9.2015, fixed the matter for final hearing on 22.9.2015 or 29.9.2015 or 6.10.2015. It is the case of the petitioners that their unit was closed and transferred and they did not receive the said communication and, therefore, could not attend the hearing. After a period of four months, an ex parte order came to be passed on 29.01.2016 confirming the duty liability. Being aggrieved, the petitioners have filed the present petition.
4. Mr. Devan Parikh, Senior Advocate, learned counsel with Mr. Nirav Shah, learned advocate for the petitioner submitted that pursuant to the order of remand passed by the Tribunal, the petitioner had sought permission to examine three witnesses which was granted by the adjudicating authority. However, after two witnesses were examined, the adjudicating authority issued a notice for personal hearing fixing three dates of hearing. It was submitted that on earlier occasions, the notices were also marked to the learned advocate appearing on behalf of the petitioners before the adjudicating authority, however, the notice for personal hearing was sent to the address of the unit which was transferred and closed and no copy was marked to the advocate. Under the circumstances, on account of non-receipt of the notice for personal hearing, the petitioners could not attend the hearing and after a period of four months, the adjudicating authority passed an ex parte order.
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4.1 The learned counsel for the petitioners invited the
attention of the court to the provisions of section 37C of the Central Excise Act, 1944 (hereinafter referred to as "the Act"), to point out that in view of the provisions of sub-section (1) thereof, any decision or order passed or any summons or notices issued under the Act or the rules, is required to be served by tendering the decision, order, summons or notice, or sending it by registered post with acknowledgment due or by speed post with proof of delivery or by courier approved by the Central Board of Excise and Customs to the person to whom it is intended or his authorised agent, if any. It was submitted that in the facts of the present case, the notice for personal hearing has not been sent by registered post and that, according to the respondents, the same has been sent by speed post. It was submitted that in view of the provisions of sub-section (1) of section 37C of the Act, when the notice is sent by speed post it has to be with proof of delivery, whereas in the facts of the present case, there is no proof of delivery. It was, accordingly, submitted that there is no due service of notice of personal hearing in accordance with the provisions of law.
4.2 The attention of the court was further invited to the fact that by a single consolidated notice dated 9.9.2015, the matter had been fixed for final hearing on three dates, namely, 22.9.2015 or 29.9.2015 or 6.10.2015 to submit that non- appearance on the part of the petitioners pursuant to the said notice was considered as substantial compliance with sub- section (2) of section 33A of the Act. It was further submitted that the proviso to section 33A of the Act provides for grant of not more than three adjournments to a party during the Page 4 of 13 HC-NIC Page 4 of 13 Created On Mon Aug 14 01:59:41 IST 2017 C/SCA/10563/2016 JUDGMENT proceeding and that in the present case, the adjudicating authority has stated three dates in one notice and has considered the same to amount to three adjournments and, accordingly, has decided the matter ex parte, which is not permissible in law. Reference was made to the decision of the Tribunal in the case of Afloat Textiles (P) Ltd. v. Commissioner of Central Excise, Vapi, 2007 (215) E.L.T. 198 (Tri-Ahmd.), wherein the Tribunal has noted that the adjudicating authority had observed that in terms of the proviso to section 33A of the Central Excise Act, 1944, adjournments cannot be granted more than three times and that in view of the fact that the letter of hearing mentioned three dates viz. 10.10.2006, 17.10.2006 and 31.10.2006, it considered the appellant's request that the matter be adjourned for a month as amounting to three adjournments having been sought. The Tribunal held that giving a choice of three dates for personal hearing in one letter and seeking of one months' adjournment by the appellant, would not amount to three adjournments having been sought. The Tribunal was, accordingly, of the view that the adjudicating authority's approach was not in accordance with the principles of natural justice. The learned counsel for the petitioner submitted that the above decision of the Tribunal is binding upon the adjudicating authority and hence, the notice for personal hearing itself stands vitiated, as the same mentions three dates of hearing. It was, accordingly, urged that the impugned order passed by the adjudicating authority is clearly in breach of the principles of natural justice and hence, the same is required to be quashed and set aside and the matter is required to be remanded to the adjudicating authority to decide the same afresh, after affording the petitioners an Page 5 of 13 HC-NIC Page 5 of 13 Created On Mon Aug 14 01:59:41 IST 2017 C/SCA/10563/2016 JUDGMENT opportunity of hearing in accordance with law.
5. Opposing the petition, Ms. Avani Mehta, learned senior standing counsel for the respondents raised a preliminary contention to the maintainability of the petition. It was submitted that against the order passed by the adjudicating authority, an appeal lies to the Tribunal whereby it is mandatory for the assessee to deposit an amount of 7.5% of the duty confirmed and demanded and that it is only with a view to escape the liability of pre-deposit that the petitioners have approached this court invoking its extraordinary jurisdiction under Article 226 of the Constitution. It was submitted that, therefore, the petition deserves to be dismissed on the ground of availability of an alternative remedy alone.
5.1 On the question of breach of principles of natural justice, it was submitted that the petitioners have been given adequate and ample opportunity and have been granted personal hearing by the adjudicating authority and it is only thereafter, that the impugned order has been passed. It was submitted that, therefore, the contention that the order-in- original has been passed ex parte in breach of the principles of natural justice, does not merit acceptance. It was pointed out that earlier the proceedings had been conducted before a particular Commissioner who was the adjudicating authority, who, in the meanwhile, came to be transferred, and a new incumbent took over the charge as Commissioner with effect from 28.8.2015. It was submitted that the adjudicating authority for the purpose of compliance of principles of natural justice issued fresh notice to the petitioners as well as co-
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noticees for personal hearing and also gave them opportunity to appear before him on three days as were convenient to them, that is, 22.9.2015, 29.9.2015 and 6.10.2015. It was submitted that the dates of personal hearing had been communicated in advance to the petitioners vide letter dated 9.9.2015 and that while one notice addressed to one Ramchandra M. Tandel, one of the Directors of the petitioner company came to be returned "undelivered", notices to the petitioner company as well as two co-noticees were duly served. It was submitted that though the notices were served upon the petitioner company as well as two other co-noticees, none of the persons who received the notices remained present or appeared and attended on any of the three personal hearing dates. It was in these circumstances that the adjudicating authority, after giving due opportunity of hearing to the petitioners passed the order-in-original dated 29.1.2016. It was further submitted that the petitioners and other co- noticees have throughout appeared in the proceedings personally as well as through their learned advocate and, therefore, it cannot be said that the procedure has not been followed by the adjudicating authority before passing the impugned order. It was contended that it was the duty of the petitioners to provide any change of address during the course of proceedings and that merely because the petitioners failed to notify the authorities about change of address or shifting of premises, the adjudicating authority cannot be blamed and, therefore, it cannot be said that there is any breach of principles of natural justice.
5.2 Insofar as the service of notice upon the petitioners is concerned, the learned senior standing counsel submitted that Page 7 of 13 HC-NIC Page 7 of 13 Created On Mon Aug 14 01:59:41 IST 2017 C/SCA/10563/2016 JUDGMENT the notices have been served through speed post. It was submitted that while there is no material with the respondent authorities to show proof of delivery to the petitioners, the outward register maintained by the respondents contains details such as date of despatch, speed post consignment, name of party, etc. which indicates that the notices for personal hearing have, in fact, been despatched to the petitioners. It was, accordingly, urged that there is substantial compliance with the provisions of section 37C of the Act and hence, it cannot be said that notice has not been duly served in accordance with the provisions of law.
6. From the facts and contentions noted hereinabove, it is apparent that the principal ground on which the impugned order-in-original has been assailed by the petitioners is breach of principles of natural justice. Such breach is alleged, firstly, on the ground that the notice for personal hearing had not been served upon the petitioners in accordance with the provisions of section 37C of the Act, and secondly, on the ground that in one single notice, a choice of three dates of hearing has been given and non-appearance on all the three dates has been considered to amount to three adjournments having been sought in terms of the proviso to section 33A of the Act.
7. It may, therefore, be germane to refer to the provisions of section 37C of the Act, which provide for service of decisions, orders, summons, etc. and reads thus:-
"37C. Service of decisions, orders, summons, etc. -
(1) Any decision or order passed or any summons or notices issued under this Act or the rules made Page 8 of 13 HC-NIC Page 8 of 13 Created On Mon Aug 14 01:59:41 IST 2017 C/SCA/10563/2016 JUDGMENT thereunder, shall be served, -
(a) by tendering the decision, order, summons or notice,
or sending it by registered post with
acknowledgment due or by speed post with proof of delivery or by courier approved by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963)], to the person for whom it is intended or his authorised agent, if any:
(b) if the decision, order, summons or notice cannot be served in the manner provided in clause (a), by affixing a copy thereof to some conspicuous part of the factory or warehouse or other place of business or usual place of residence of the person for whom such decision, order, summons or notice, as the case may be, is intended;
(c) if the decision, order, summons or notice cannot be served in the manner provided in clauses (a) and (b), by affixing a copy thereof on the notice board of the officer or authority who or which passed such decision or order or issued such summons or notice.
(2) Every decision or order passed or any summons or notice issued under this Act or the rules made thereunder, shall be deemed to have been served on the date on which the decision, order, summons or notice is tendered or delivered by post or courier referred to in sub-section (1), or a copy thereof is affixed in the manner provided in sub-section (1)."
8. Thus, under clause (a) of sub-section (1) of section 37C of the Act, in case of service of notice by speed post, the same has to be with proof of delivery. To put it differently, service by speed post is valid provided there is proof of delivery. In the present case, it is an admitted position that the letter of personal hearing was sent to the petitioners through speed post; however, though details of date of despatch, etc. have been produced on record by the learned counsel for the Page 9 of 13 HC-NIC Page 9 of 13 Created On Mon Aug 14 01:59:41 IST 2017 C/SCA/10563/2016 JUDGMENT respondents, including tracking number, there is no material by way of proof of delivery to the petitioners; whereas, on the other hand, it is the specific case of the petitioners that they have not received the notice for personal hearing. Thus, in view of the mandate of section 37C of the Act, which provides for notice by speed post with proof of delivery, it is incumbent upon the respondents to furnish proof of delivery. In the absence of any proof of delivery, it cannot be said that there is effective service of notice, as contemplated under section 37C of the Act. In the absence of service of notice of personal hearing, the petitioners or their representative could not remain present before the adjudicating authority during the course of personal hearing and hence, the impugned order which has been passed ex parte is clearly in breach of principles of natural justice.
9. Another aspect of the matter is that by the notice of personal hearing, the adjudicating authority has given a choice of three dates of personal hearing as mentioned hereinabove. In view of the fact that the petitioners or their representatives did not remain present on any of the dates, the adjudicating authority has proceeded further with the matter and has passed the order-in-original ex parte. In this regard, reference may be made to section 33A of the Act, which reads thus:
"33A. Adjudication procedure. - (1) The adjudicating authority shall, in any proceeding under this Chapter or any other provision of this Act, give an opportunity of being heard to a party in a proceeding, if the party so desires.
(2) The Adjudicating authority may, if sufficient cause is shown, at any stage of proceeding referred to in sub-
section (1), grant time, from time to time, to the parties Page 10 of 13 HC-NIC Page 10 of 13 Created On Mon Aug 14 01:59:41 IST 2017 C/SCA/10563/2016 JUDGMENT or any of them and adjourn the hearing for reasons to be recorded in writing:
Provided that no such adjournment shall be granted more than three times to a party during the proceeding."
10. Section 33A of the Act provides for giving an opportunity of hearing to a party in a proceeding by the adjudicating authority. Sub-section (2) thereof, provides for granting time to the parties and for adjourning the hearing for reasons to be recorded in writing. The proviso thereto circumscribes the power to grant time conferred under sub-section (2) of section 33A of the Act, by providing that no such adjournment shall be granted more than three times to a party during the proceeding.
11. Thus, by virtue of the provisions of sub-section (2) of section 33A of the Act, when a personal hearing is fixed, it is open to a party to seek time by showing sufficient cause and in such a case, the adjudicating authority may grant time and adjourn the hearing by recording the reasons in writing. However, in view of the proviso thereto not more than three such adjournments can be granted. On a plain reading of sub- section (2) of section 33A of the Act and the proviso thereto, what the same envisages is fixing a date of hearing and in case if a party asks for time and makes out sufficient cause, then to adjourn the hearing. Since the number of such adjournments is limited to three, the hearing would be required to be fixed on each such occasion, and on every occasion when time is sought and sufficient cause is made out, the case would be adjourned to another day. However, the adjudicating authority is required to give one date at a time and record his reasons for granting adjournment on each Page 11 of 13 HC-NIC Page 11 of 13 Created On Mon Aug 14 01:59:41 IST 2017 C/SCA/10563/2016 JUDGMENT occasion. It is not permissible for the adjudicating authority to issue one consolidated notice fixing three dates of hearing, whether or not the party asks for time, as has been done in the present case. Thus, apart from the fact that the notice of hearing has not been served in the manner contemplated under section 37C of the Act, the notice itself suffers from a legal infirmity inasmuch as it fixes three dates of hearing at a time, which is not in consonance with the proviso to section 33A of the Act.
12. Another aspect of the matter is that by the notice for personal hearing three dates have been fixed and absence of the petitioners on those three dates appears to have been considered as grant of three adjournments as contemplated under the proviso to sub-section (2) of section 33A of the Act. In this regard it may be noted that sub-section (2) of section 33A of the Act provides for grant of not more than three adjournments, which would envisage four dates of personal hearing and not three dates, as mentioned in the notice for personal hearing. Therefore, even if by virtue of the dates stated in the notice for personal hearing it were assumed that adjournments were granted, it would amount to grant of two adjournments and not three adjournments, as grant of three adjournments would mean, in all four dates of personal hearing.
13. As discussed hereinabove, in view of the fact that the notice for personal hearing was not served upon the petitioners in accordance with law, no one could remain present for personal hearing on behalf of the petitioners on the dates specified in the notice and the adjudicating authority has Page 12 of 13 HC-NIC Page 12 of 13 Created On Mon Aug 14 01:59:41 IST 2017 C/SCA/10563/2016 JUDGMENT proceeded on the footing that three adjournments have been granted and has passed and the impugned ex parte order. Such order is, therefore, clearly in breach of the principles of natural justice warranting interference by this court in exercise of powers under Article 226 of the Constitution of India.
14. For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The impugned order dated 29.1.2016 passed by the Commissioner of Customs and Central Excise, Surat-II (Annexure-A to the petition) is hereby quashed and set aside and the matter is restored to the file of the adjudicating authority to decide the same in accordance with law after affording adequate opportunity of hearing to the petitioners. Rule is made absolute accordingly with no order as to costs.
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