In absence of prejudice having been caused to appellant, no fault could be laid at the doors of respondent, says Top Court while affirming order of remand made to CESTAT by Madras HC
Justices Pamidighantam Sri Narasimha & Aravind Kumar [25-04-2024]

Read Order: M/S MADURA COATS PRIVATE LIMITED v. THE COMMISSIONER OF CENTRAL EXCISE AND ANR [DEL HC-CIVIL APPEAL NOs. 5347-5348 of 2024]

LE Correspondent

New Delhi, April 26, 2024: In a case alleging a fabric company's involvement in clearance of stock without payment of duty, the Supreme Court has confirmed the order of the Madras High Court remanding the matter back to the CESTAT. The Top Court agreed with the High Court's view that the letter, which was claimed by the appellant as not having been furnished, was only a ruse for not replying to the show cause notices.

In this case the appellant Company has been engaged in the manufacture of cotton yarn, polyester yarn and other materials. Based on an information received that it had indulged in clearance of certain goods manufactured by it without payment of duty resulted in the preventive unit of the respondent visiting the unit and conducting a stock challenge of the finished fabrics stocked in the bonded warehouse. 

Based on a prima facie and reasonable belief that excess quantities of stock were stored for illicit removal, the department seized the excess stock under mahazar and it was provisionally released on execution of general bond. It also resulted in the issuance of two show cause notices (SCNs) which resulted in two orders being passed by the respondent. Being aggrieved by the same, appeals came to be filed before CESTAT whereunder the tribunal set aside the orders in original with a direction to the respondent to provide a copy of the letter referred to in the SCNs to the appellant and to decide the matter afresh.

In the teeth of direction issued by the tribunal, first respondent adjudicated the show cause notices afresh and by separate orders raised the demand for payment of duty which resulted in both the orders being challenged by filing two appeals before CESTAT. The Tribunal allowed the appeals and directed the respondent to pass fresh orders. The respondent filed an application under section 35C (2) of the Central Excise Act, 1944 for rectification of the order contending that the letter which was ordered to be furnished by the department was not available and sought permission to adjudicate the SCNs afresh. The said application came to be dismissed.

The respondent herein filed two miscellaneous petitions before CESTAT for modification of the earlier orders resulting in modification of the order dated 05.05.2009 whereby the respondent was directed to adjudicate the show cause notices without relying upon the letter. Being aggrieved by the same, the appellant filed two appeals before the Madras High Court whereby the matter was remanded back. Hence, appeals were filed before the Top Court.

It was the case of the appellant that the High Court erred in not appreciating the fact that in the absence of document containing detailed explanation the adjudicating authority cannot appreciate and adjudicate the SCNs and the order of remand to the tribunal was erroneous.

The respondent contended that the appellant had been successfully dodging the adjudication process on one pretext or the other and the so-called letter dated 20.01.2001 which had been directed by the CESTAT by Order dated 06.09.2006 to be furnished to the appellant was the letter of the appellant itself, which undisputedly was an explanation offered by the appellant with reference to alleged shortfall and excess storage of fabrics.

The Division Bench of Justice Pamidighantam Sri Narasimha and Justice Aravind Kumar was of the opinion that the High Court had rightly opined that the said letter which was claimed by the appellant as not having been furnished was only a ruse for not replying to the show cause notices and it would in no way prejudice the appellants claim, particularly in the background of reliance not having been placed by the respondent- authority for adjudicating the SCNs.

It was observed that in the absence of prejudice having been caused to the appellant no fault could be laid at the doors of the respondent. 

The Bench further observed that the High Court had also rightly not remitted the matter to the adjudicating authority for considering the matter afresh. 

Though the Court agreed with the contention that order of review or modification which came to be passed on 08.03.2010 was without sanctity of law deserved to be accepted, yet for the reason that matter had been remanded back to the tribunal for adjudicating the SCNs afresh, it dissuaded the Court from setting aside the impugned order.

The Top Court reserved the liberty to the appellant to urge all contentions before the tribunal including the one urged before this Court namely to demonstrate as to how prejudice had been caused to the appellant by non- furnishing of the said letter dated 20.01.2001 (with enclosures). The order of remand made to the tribunal by the High Court under the impugned order also stood affirmed.