Yangir Properties And Trading LTD. vs. Union Of INDIA

Facts

The petitioner, Yangir Properties and Trading Ltd., a 100% Export Oriented Unit manufacturing Polyester Texturized Yarn, operated a private bonded warehouse. They removed excisable goods from their warehouse to the Domestic Tariff Area on payment of CENVAT. A show cause notice dated 16.04.2004 was issued by the Commissioner of Central Excise and Customs, Surat-II, demanding Central Excise duty of Rs.9,03,814/- and Rs.26,62,651/-, along with customs duty of Rs.78,74,022/-. The petitioner replied, but an ex-parte order dated 08.08.2005 confirmed the demands and imposed penalties. The CESTAT set aside this order due to a breach of natural justice and remanded the matter. The petitioner closed their factory, surrendered registration, and sold it in 2012. After nearly 15 years, the respondent scheduled a hearing for 08.12.2020, which the petitioner could not attend due to the closure and sale of the factory and the unavailability of documents.

Held

The Court held that the respondent authorities could not proceed with the adjudication of the show cause notice issued in 2004 after a delay of approximately 17 years. The Court found that the respondent's action of scheduling a hearing after such a significant lapse of time, without any formal communication to the petitioner about the matter being transferred to the "call book" or its status, constituted a breach of the principles of natural justice. The Court reasoned that the delay prejudiced the petitioner, who had closed their factory, surrendered registration, and sold it in 2012, making it virtually impossible to retrieve relevant documents and defend themselves. The Court also noted that the respondent itself did not have the papers. The Court relied on the principle that authorities must act with transparency and that keeping a matter in "call book" without informing the assessee is unacceptable. The Court concluded that expecting the petitioner to adduce evidence after 15 years from a closed factory would cause serious prejudice. Therefore, the petition was allowed, and the show cause notice and the communication scheduling the hearing were quashed and set aside.

Key Issues

1. Whether the respondent authorities can proceed with the adjudication of a show cause notice issued in 2004, after a delay of approximately 17 years from the initial issuance and 15 years from the remand by the CESTAT, thereby violating the principles of natural justice. This issue turns on the interpretation and application of principles of natural justice, particularly concerning undue delay and prejudice to the assessee. Petitioner's arguments: The petitioner contended that the prolonged delay in adjudicating the show cause notice, coupled with the closure and sale of their factory in 2012 and the consequent inability to retrieve relevant documents, renders a fair adjudication impossible. They argued that the respondent's action of scheduling a hearing after such a significant lapse of time, without prior intimation of the matter being kept in "call book" or any communication regarding its status, amounts to a breach of natural justice and that the proceedings should be quashed. Revenue's arguments: The judgment does not record any specific arguments made by the revenue or state in response to the petitioner's contentions regarding the delay and prejudice. The court noted that it was not the case of the respondent that the petitioner had been formally communicated about the matter being transferred to the call book.