SHEET WP No.433 of 2012 IN THE HIGH COURT AT CALCUTTA Constitutional Writ Jurisdiction ORIGINAL SIDE BERGER PAINTS INDIA LTD.Versus COMMISSIONER OF CENTRAL EXCISE, KOL-II COMMISSIONERATE & ORS.BEFORE: The Hon'ble JUSTICE DEBANGSU BASAK Date: 15th September, 2016 Appearance Mr.J.P.
Khaitan, Sr.Adv.with Ms.Nilanjana Banerjee, Adv.Mr.R.N.
Das, Sr.Adv.with Ms.Aishwarya Rajyashree, Adv.The petitioner has assailed an order dated March 15, 2014 passed under Section 14AA of the Central Excise Act, 1944 (hereafter the ‘said Act’) on the ground that, the impugned order has been passed in breach of principles of natural justice and that the impugned order is unreasoned.
Learned Senior Advocate appearing for the petitioner has relied upon a decision of the Supreme Court reported in (2008) 300 ITR403(SC) [Sahara India (firm) versus Commissioner of Income-Tax & Another].and submitted that, since under Section 14AA of the said Act entails civil consequences, the authorities are obliged to grant an opportunity of hearing to the petitioner.
In the present case, the petitioner was not afforded any opportunity of hearing.
Moreover, the impugned order is unreasoned.
The impugned order does not specify any ground as to the formation of the opinion of the Commissioner that the petitioner has availed of duty credit or utilised cenvat credit beyond the normal limits.
Learned Senior Advocate on behalf of the department has submitted that the department may be permitted to hear the petitioner after keeping the impugned order stayed.
I have considered the rival contentions of the parties and materials made available on record.
Section 14AA of the said Act is as follows: “14AA.
Special audit in cases where credit of duty availed or utilised is not within the normal limits, etc.– (1) If the Principal Commissioner of Central Excise or Commissioner of Central Excise has reason to believe that the credit of duty availed of or utilised under the rules made under this Act by a manufacturer of any excisable goods – (a) is not within the normal limits having regard to the nature of the excisable goods produced or manufactured, the type of inputs used and other relevant factORS.as he may deem appropriate; (b) has been availed of or utilised by reason of fraud, collusion or any wilful mis-statement or suppression of facts, he may direct such manufacturer to get the accounts of his factory, office, depot, distributor or any other place, as may be specified by him, audited by a cost accountant or chartered account nominated by him.
(2) The cost accountant or chartered accountant so nominated shall, within the period specified by the Principal Commissioner of Central Excise or Commissioner of Central Excise, submit a report of such audit duly signed and certified by him to the said Principal Commissioner or Commissioner mentioning therein such other particulars as may be specified.
(3) The provisions of sub-section (1) shall have effect notwithstanding that the accounts of the said manufacturer aforesaid have been audited under any other law for the time being in force or otherwise.
[***].(5) The manufacturer shall be given an opportunity of being heard in respect of any material gathered on the basis of the audit under sub-section (1) and proposed to be utilised in any proceeding under this Act or rules made thereunder.
5[Explanation 1].– For the purpose of this section, “cost accountant” shall have the meaning assigned to it in clause (b) of sub-section (1) of section 2 of the cost and Works Accountants Act, 1959 (23 of 1959).].6[Explanation 2.
– For the purposes of this section, “chartered accountant” shall have the meaning assigned to it in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949).].Section 14AA of the said Act empowers the Principal Commissioner or the Commissioner of Central Excise to have the accounts of a manufacturer audited by a cost accountant or a chartered accountant nominated by them in the event he finds any of the grounds enumerated therein to be satisfied.
As the impugned order stands, the Commissioner has not specified the materials on the basis of which he has formed the opinion that the petitioner has availed of duty credit or utilised cenvat credit beyond the normal limits having regards to the nature and quantity of finished goods manufactured and cleared.
The Commissioner has not discussed the nature of finished goods manufactured and cleared by the petitioner.
The Commissioner has not discussed of the quantum of the duty credit or utilised cenvat credit by the manufacturer.
The foundational basis for the assumption of jurisdiction by the Commissioner under Section 14AA of the said Act has not been stated in the impugned order.
In such circumstances, the impugned order is unreasoned.
Section 14AA of the said Act does not contemplate that the assessee is entitled to a right of hearing before a decision is taken thereunder.
However, in Sahara India (Supra).the Supreme Court while considering the provisions of Sub-section 2A of Section 142 of the Income Tax Act, 1961 and this question of right of hearing where the statute does not expressly provide for one, has held that, where a decision by a statutory authority entails a civil consequences and where the section does not expressly debar the application of the principles of natural justice, then a right of hearing has to be read into such provision of the statute.
Applying the ratio of Sahara India (Supra) and more particularly when Section 14AA of the said Act entails civil consequences and where such section does not specifically debar the application of the principles of natural justice, the authorities are, therefore, required to afford a reasonable opportunity of hearing to an assessee before a decision is arrived at under such section.
In the present case, it does not appear from the materials made available on record that the authorities have afforded the petitioner an opportunity of hearing prior to the issuance of the impugned order.
In view of the discussions above, the impugned order is set aside.
This order will not prevent the authorities to proceed in accordance with law under Section 14AA of the said Act against the petitioner.
WP No.433 of 2012 is disposed of without any order as to costs.
(DEBANGSU BASAK, J.) AKGoswami