1.The captioned appeal was initially filed as a revision application before the Central Government which, under the provisions of Section 35-P of the Central Excises & Salt Act, 1944, has come as transferred proceedings to this Tribunal for disposal as if it were an appeal filed before it.
2. The appeal was earlier listed for hearing on 12-11-1984. On that day the Appeal was dismissed by the Bench for default of appearance by the appellants. On 7-12-1984, after hearing the Counsel for the appellants and the Senior Departmental Representative for the Respondent, the Bench set aside the earlier order and restored the appeal to file.
3. The appeal was heard on 7-2-1985. Shri K. Narasimhan, Advocate, represented the appellants and Smt. Vijay Zutshi, SDR, the Respondent.
4. The facts of the case, briefly stated, are that the appellants are engaged in the manufacture of fertilizer from raw naphtha through the ammonia route. For this purpose, they secured raw naphtha under the procedure prescribed in Chapter X of the Central Excise Rules, 1944 in terms of Central Excise Notification No. 187/61 which exempted raw naphtha from excise duty in excess of 5% ad val. provided that it was proved to the satisfaction of the Collector that the raw naphtha was intended for use in the manufacture of fertilizer and that Chapter X procedure was followed. During the period from 16-5-1974 to 6-9-1974, the appellants supplied a quantity of 69 M.T. of ammonia produced from raw naphtha (secured under Chapter X procedure) to M/s. SPIC, Tutieorin for utilisation in the manufacture of fertilizer. The movement of the ammonia from the appellants' factory to Spic was regulated under Chapter X. On 7-9-1984, Notification No. 137/74 came to be issued by the Central Government exempting ammonia sent out of the factory of production to another factory for manufacture of fertilizer. On the issue of this Notification, the Central Excise authorities thought that the extension of Chapter X procedure to the ammonia sent out by the appellants to SPIC was not in order and not covered by Notification No.187/61. The Supdt. of Central Excise thereupon served a demand for the duty involved on the said quantity of ammonia on the appellants. The demand was in form DD2 dated 7-3-1975. In due course, the Assistant Collector of Central Excise, Madras passed an order on 18-7-1979 reducing the amount of duty payable by the appellants. In his own words, he "found it expedient to take this decision without further formalities and issue the speaking order in view of the fact that M/s EID Parry (India) Ltd.'s refund claim consequent to the Court order for a sum of Rs. 4,25,211.82 is pending and I have to deduct the amount due from them from the said refund claim and pay the balance to them expeditiously". This order was upheld by the Appellate. Collector by his order dated 14-11-1980.
5. Though there are several contentions in the appeal before us, we shall refer to only one of them. Shri Narasimhan, the learned Counsel for the appellants, urged that the issue by the Supdt. of a demand for a certain amount of duty without previously serving on the appellants a show cause notice rendered the whole proceedings a nullity. Smt. Zutshi fairly stated, in reply, that a show cause notice ought to have been issued but was not issued.
6. The fact that no show cause notice was issued prior to the subject demand being made, renders the whole proceedings a nullity because the principles of natural justice have been violated and the demand served on the appellants in these circumstances cannot be upheld. It is, therefore, set aside with consequential relief to the appellants.