2015 Supreme(SC) 437

SUPREME COURT OF INDIA
A.K. SIKRI, ROHINTON FALI NARIMAN, JJ.
M/S. DHARAMPAL SATYAPAL LTD. – APPELLANT
VERSUS
DEPUTY COMMISSIONER OF CENTRAL EXCISE, GAUHATI & ORS. – RESPONDENTS
CIVIL APPEAL NOS. 4458-4459 OF 2015 (ARISING OUT OF SLP (C) NOS. 37108-37109 OF 2012)
Decided on: 14-05-2015

IMPORTANT POINTS
Interim orders, prima facie in nature, cannot operate as res judicata.
Natural justice must be complied with before taking any adverse action against anybody.
When statute is silent on need to hear out affected person, requirement to follow fair procedure must be read into statute.
Not complying with natural justice does not always invalidate and nullify the order. It depends upon extent of prejudice suffered by the aggrieved person due to non-compliance with natural justice. 'Useless formality theory'.
When a Bench considers and explains a larger Bench decision in particular manner, it cannot be said to be running contrary to the larger Bench decision.

Headnote:(a) Code of Civil procedure, 1908 – Section 11 – Res judicata – Interim orders, prima facie in nature, cannot operate as res judicata. (Para 12)

       (b) Finance Act, 2003 – Section 154 and section 11A, Excise Act – Concessional tax benefits withdrawn – Withdrawal by section 154 upheld as valid – Recovery of amount already availed as concession – Whether show cause mandatory – Natural justice – Must be complied with before taking any adverse action against anybody – When statute is silent on need to hear out affected person, requirement to follow fair procedure must be read into statute – Held, Dy. Commr. was required to issue show cause notice to appellants before passing order of recovery – Applicability of section 11A immaterial. (Para 16, 25, 29)

       (2005) 7 SCC 725; (1995) 2 SCC 38; (1978) 1 SCC 405 : AIR 1978 SC 851; (1969) 2 SCC 262 : (1970) 1 SCR 457; (1993) 1 SCC 78; (1978) 1 SCC 248; (1994) 5 SCC 566; AIR 1962 SC 1893 – Relied upon

       (1987) Supp SCC 350; (1988) 3 SCC 348; (1995) Supp 3 SCC 588; (2003) 2 SCC 36; 1988 (38) ELT 739 (SC) : 1988 (19) ECR 569 (SC) – Referred

       (c) Natural Justice – Not rigid rules – More strictly adhered to in service matters involving major penalties – Hearing may not always be personal – Aggrieved person may be directed to represent – Natural justice may even be excluded in certain circumstances – Like where there can be only one conclusion, hearing or not – Not complying with natural justice does not always invalidate and nullify the order – It depends upon extent of prejudice suffered by the aggrieved person due to non-compliance with natural justice. (Para 31)

       (1971) 1 WLR 1578; (1980) 1 WLR 582; (1993) 4 SCC 727 – Relied upon

       (d) Natural justice – 'Useless formality theory' – Finance Act, 2003 – Section 154 – Retrospective operation – Held constitutionally valid by R.C. Tobacco – Authorities ordering refund of excise duty availed by appellants and also payment of the same – No show cause notice issued before the demand – Demand held vitiated – However in view of R.C. Tobacco appellants have to refund the duty already availed and pay the same – Issue of notice would be a ‘useless formality’ both for the appellants as well as the authorities. (Para 37, 39)

       (2004) 4 SCC 281 – Relied upon

       (e) Legal interpretation – Interpretation of judgment – Contention that R.C. Tobacco ( a two Judge Bench decision) runs contrary to J.K. Cotton (a three Judge Bench decision) – R.C. Tobacco discussing and explaining J.K. Cotton in a particular manner – It cannot be argued that judgment in R.C. Tobacco runs contrary to J.K. Cotton. (Para 40)

       Facts of the case:

       Union of India announced a new industrial policy for the North-Eastern region wherein the North-Eastern region was made tax free zone for a period of ten years giving incentives to those who wanted to establish industries in that region. Pursuant thereto, the Notification dated July 08, 1999 was issued granting new industrial units that had commercial production on or after December 24, 1997 and certain types of industrial units that increased their installed capacity after that date, exemption on goods cleared from units located in growth centres and integrated infrastructure centres.

       On December 31, 1999, another Notification was issued whereby exemption of central excise was withdrawn in respect of goods falling under Chapter 21.06 (pan masala) and Chapter 24 (tobacco and tobacco substitutes, including cigarettes, chewing tobacco etc.).

       This withdrawal Notification was challenged by the appellant by filing the writ petition in the High Court of Gauhati. The Single Judge dismissed the writ petition. However, appeal preferred by the appellant was allowed by the Division Bench. In nutshell, the High Court held that the principal of Promissory Estoppel shall apply and once a promise was given by the Union of India assuring that no such duty would be charged for a period of ten years, it was not open for the Union of India to withdraw the same.

       This order of High Court was challenged before Supreme Court.

       During pendency of the appeal before Supreme Court, vide Section 154 of the Finance Act, 2003, withdrawal of the benefit was effected from retrospective effect. The provision was held to be valid.

       The effect was to disentitle the appellant and other similarly situated from getting any such benefit by virtue of Section 154 of the Act of 2003 and knocking down the basis of the judgment of the High Court, which lost its validity on the aforesaid ground.

       After notifying Section 154 of the Act of 2003, respondent No.1 passed recovery order for recovery of a sum of Rs.2,93,43,244 from the appellant, which was the benefit that had been drawn by the appellant for the period November 1999 till February 2001 in terms of the Notification No. 32 of 1999. By another order dated June 06, 2003 issued by respondent No.1, the appellant was directed to pay the excise duty for the said period for which the benefit had been availed. He also rejected the pending claim of refund for the period from March 2001 till May 31, 2003.

       Finally, the Customs Excise & Service Tax Appellate Tribunal ('CESTAT') allowed the appeal by the appellants and dismissed the appeal by Revenue.

       The appellant challenged the order of CESTAT by filing Central Excise Tax Reference before the High Court of Gauhati which was dismissed.

       Finding of the Court:

       There was a requirement of issuance of show-cause notice by the Deputy Commissioner before passing the order of recovery, irrespective of the fact whether Section 11A of the Act is attracted in the instant case or not.

       Result: Appeals dismissed.