This is a writ petition for the issue of a writ of certiorarified mandamus to quash the orders of the second respondent passed in A. No. 5/94 (Order in Appeal No. 14 of 1994), dated 8-4-1994, setting aside the order of the first respondent passed in C. No. IV/60/50/91 (Order in Appeal No. 6 of 1993) dated 22.4.1993

2. Briefly stated, the facts leading to the writ petition are: The petitioners are manufacturers of Phthalic Anhydride and Maleic Anhydride under Chapter 2917.90 of the Central Excise Tariff Act, 1985. The goods of the petitioners fall under the Modvat Scheme introduced with effect from 1st March, 1986 with a view to remove the cascading effect of duty payment on final products. The petitioners declared Marlotherm falling tinder Chapter 3823 of the Central Excise Tariff Act, 1985 as an input and availed duty credit for utilisation of the same against Phthalic Anhydride and Maleic Anhydride. A show cause notice came to be issued to the first respondent on 17-1-1991 in O.C No. 80 of 1991 as to why credit on Marlotherm should not be denied on the ground that the same is not an input, as it is not used in the manufacture of the final products. The petitioners were importing Marlotherm and the countervailing duty paid was availed as credit. The petitioners having given reply to the said show cause notice, attended personal hearing on 19-8-1992. After considering the written submissions, documents and evidence, the first respondent passed an order dated 22-4-1993 dropping the further proceedings and thereby permitted the petitioners to avail Modvat credit on Marlotherm. The Collector of Central Excise, exercising power under S. 35E(2) of the Central Excises and Salt Act, 1944 (for short, ‘the Act’), reviewed the order dated 22.4.1993 passed by the first respondent and directed the first respondent to apply to the second respondent. Accordingly, an application was made to the second respondent by the first respondent against his own order, dated 22-4-1993 in Appeal No. 5/94(M)(D). A copy of the said Appeal Memorandum was served on the petitioners on 15.1.1994, inviting to file Cross Objections, if any. Since the entire proceedings initiated through the show cause notice dated 17.1.1991 were dropped by the first respondent, by his order dated 22.4.1993, as stated above, the petitioners did not file any Cross Objections, as contemplated under S. 35B(4) of the Act. However, the petitioners were expecting a notice for personal hearing from the office of the second respondent in the Appeal to defend their case. But the petitioners were shocked to know that the second respondent disposed of the Appeal on 8-4-1994 filed by the first respondent in Appeal No. 5 of 1994, allowing it. In paragraph 3 of the Order passed in the said Appeal, it is stated that the petitioners neither filed any memorandum of cross objection nor sought personal hearing and that therefore, the second respondent decided the Appeal based on the available records. Thereafter the petitioners moved for recalling the order dated 8-4-1994 passed ex parte by the second respondent, contending that there was no need to file any Cross Objections as per S. 35B(4) of the Act, as the entire order passed by the first respondent, dropping the proceedings initiated on the show cause notice dated 17.1.1991 were dropped and that there was no need to seek a personal hearing by the respondents in the Appeal. According to the petitioners, a request for personal hearing is to be made only by an appellant under S. 35A(1) of the Act. In other words, according to the petitioners, neither S. 35A(1) of the Act nor S. 35B(4) of the Act were applicable to the facts of the case and the second respondent ought to have given personal hearing before passing the order in the Appeal and the order passed exparte was clearly in violation of the principles of natural justice. The miscellaneous application filed by the petitioners for recalling the order dated 8-4-1994 passed in the said Appeal and for restoration of the status quo prior to the passing of order in Appeal No. 14 of 1994 (M) (D) was also not conceded to by the second respondent on 23-5-1994, without granting personal hearing, reiterating the reasons stated in paragraph 3 of the original order passed in the Appeal and adding that the second respondent was not vested with any power to recall the orders passed or for restoring the appeal to the original file. Under these circumstances, this writ petition is filed contending that the second respondent, and 23-5-1994 in gross violation of the principles of natural justice; the Act nowhere contemplates and also to state whether it wished to be heard in seeking of personal hearing by the respondent in person before a decision was taken in the Appeal. When the Cross Objections were not required to be filed under S. 35B(4) of the Act and when the petitioner did not file any Appeal under S. 35A(1) of the Act, the question of their seeking personal hearing in the Appeal filed by the first respondent ought to have given an opportunity of personal hearing, which is a basic requirement in a quasi-judicial proceeding. The second respondent, without proper consideration of the material on record has passed an adverse order, affecting the rights of the petitioner and that too without hearing

3. Mr. N.V Venkataraman, learned counsel for the petitioners urged:

(1) When the either proceedings initiated by the show cause notice dated 17-1-1991 in O.C No. 80 of 1991 seeking to deny the credit on Marlotherm, were droped by the first respondent on being satisfied that the Martotnerm, was an input used in the manufacture of the final products either to file an Appeal under S. 35A(1) of the Act or Cross Objection under S. 35B(4) of the Act and seek for the opportunity of personal hearing: and

(11) Since the order impugned in this writ petition passed by the second respondent is in gross violation of the principles of natural justice, on an incorrect and untenable, interpretation of the provisions on the face of it, the petitioners need not be driven to avail of the alternative remedy.

4. Mr. K. Jayachandran, learned Additional Central Government Standing Counsel, argued in support and justification of the impugned orders; He contended on the basis of the statements made in paragraph 3 of the impugned order dated 8.4.1994 that the petitioners did not avail of the opportunity given to it, in as much as the second respondent issued a notice dated 11.1.1994 stating that an Appeal was filed by the first respondent, (4) On receipt of notice that an appeal has been as per the directions given by the Collector of Central Excise, Madras in terms of S. 35E(2) of the Act against the order dated 22.4.1993 passed by the first respondent, and the petitioner was requested to submit a Memorandum of Cross Objection, if any within a period of forty-five days, and also to state whether it wished to be heard in person before a decision was taken in the Appeal. But the petition neither filed Cross-Objection nor sought personal hearing.

(2) The petitioners have an alternative and efficacious remedy to challenge the impugned order passed by the Second respondent. Hence, the writ petition is not to be entertained.

5. In order to appreciate the respective contentions of the parties relating to the controversies raised. I consider it appropriate to extract the relevant provisions of the Act so far as they are considered necessary.

“S. 35A. Procedure in Appeal

(1) The Collector (Appeals) shall give an opportunity to the appellant to be heard, if he so desires.

(2) ……..

(3) The Collector (Appeals) may, after making such further inquiry as may be necessary, pass such order as he thinks fit confirming, modifying or annulling the decision or order appealed against, or may refer the case back to the adjudicating authority with such directions as he may think fit for a fresh adjudication or decision, as he case may be, after taking addition evidence, if necessary;

Provided that that an order enhancing any penalty or fine in lieu of confiscation or confiscating goods of greater value or reducing the amount of refund shall not be passed unless the appellant has been given a proposed order;

(4) The order of the Collector (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision.

(5) …….

35B. Appeals to the Appellate Tribunal:

(1) …….

(2) …….

(3) …….

(4) On receipt of notice that an appeal has been preferred under this Section, the party against whom the appeal has been preferred may, notwithstanding that he may not have appealed against such order or any part thereof, file, within forty-five days of the receipt of the notice, a memorandum of Cross Objections verified in the prescribed manner against any part of the order appealed against and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in Sub. S. (3).

(5) ……..

(6) ……..

35C Orders of Appellate Tribunal

(1) The Appellate Tribunal may after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against or may refer the case back to the authority which passed such decision or order with such directions as the Appellate Tribunal may think fit, for a fresh adjudication or decision, as the case may be, after taking additional evidence, if necessary;

(2) ……..

(3) ……..

(4) ……..

35 D Procedure of Appellate Tribunal:—

(1) ……..

(2) ……..

(3) ……..

35 E Powers of Board or Collector of Central Excise to pass certain orders:

(1) ……..

(2) The Collector of Central Excise may, of his own motion, call for and examine the record of any proceeding in which an adjudicating authority subordinate to him has passed any decision or order under this Act for the purpose of satisfying himself as to the legality or propriety of any such decision or order and may, by order, direct such authority to apply to the Collector (Appeals) for the determination of such points arising out of the decision or orders as may be specified by the Collector of Central Excise in his order;

(3) ……..

(4) Where in pursuance of an order under Sub. S. (1) or Sub-S. (2), the adjudicating authority or the authorised officer makes an application to the Appellate Tribunal or the Collector (Appeals) within a period of three months from the date of communication of the order under Sub. S. (1) or Sub. S. (2) to the adjudicating authority, such application shall be heard by the Appellate Tribunal or the Collector (Appeals), as the case may be, as if such applications were an appeal made against the decision or order of the adjudicating authority and the provisions of this Act regarding appeals, including the provisions of Sub. S. (4) of S. 35B shall, so far as may be apply such application.”

(5) ……..

……..

……..

6. In view of the submissions of the learned counsel for the parties, the two points that arise for consideration are:

(i) Whether for want of personal hearing the impugned order passed by the second respondent is sustainable on the ground that it is passed in violation of the principles of natural justice.

(ii) On the undisputed facts and circumstances of the case, whether the petitioner should be driven to avail the alternative remedy to challenge the impugned order.

The facts narrated above are not disputed. The petitioner had fully succeeded before the first respondent in as much as the proceedings initiated by the issue of show-cause notice dated 17.1.91 in O.C No. 80/91 were dropped in entirety by the order of the first respondent dated 22.4.93 Hence the petitioner had no reason or cause to file an appeal against the said order under S. 35 or to file Cross-Objections under S. 35B(4) of the Act. S. 35A(1) provides opportunity of hearing to the appellant, if he so desires. S. 35B(4) enables a party against whom the appeal is filed to provide Cross-Objections even though he may not have appealed against such an order. Since the petitioner was not aggrieved by any part of the order dated 22.4.93, availing the opportunity of hearing under S. 35A(1) or 35B(4) did not arise. As there was no need to file appeal or Cross-Objections and as a matter of fact also the petitioner neither filed appeal nor Cross-Objections.

6.(A) The argument of the learned counsel for the respondents that the petitioner did not avail the opportunity given to him by the notice dated 11.1.94 issued by the second respondent in as much as in response to the said notice, the petitioner did not express its desire to give a personal hearing. The plain and clear language of S. 35B(4) shows the personal hearing stated therein is pursuant to a filing of Cross-Objections. In this regard, the learned counsel for respondents placed reliance on S.V.M. Syed Cassim v. Collector Of Central Excise AIR 1962 Madras 366 = 75 L.W 276 to contend that the petitioner having failed to avail the opportunity given to him cannot, complain that the refusal to grant the personal hearing was unreasonable. In my view, the said decision does not help the respondents for reasons more than one. That was a case relating to the order passed under S. 167 of Sea Customs Act for confiscation and imposition of fine, which Section is not akin to S. 35A(1) or 35B(4) of the Act; in that case, request was made by a party after the time allowed to make representation in the show-cause notice had expired. It was the case where the petitioner was asked if he desires to be heard in person in his defence. S. 35A(3) states that the Collector (Appeals) may, after making such further inquiry as may be necessary, pass such order as he thinks fit: Under the said provision, he could even take additional evidence, if necessary. The provisos to S. 35A(3) indicate that no adverse order could be passed without asking show-cause against passing such an order. S. 35C(1) states that the Appellate Tribunal may after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. In S. 35E(4) it is stated where in pursuance of an order under Sub. S(1) or Sub. S. (2), the adjudicating authority or the authorised officer makes an application to the Appellate Tribunal or the Collector (Appeals), such application shall be heard by the Appellate Tribunal or the Collector (Appeals), as the case may be and the provisions of the Act regarding appeals, including the provisions of Sub. S. (4) of S. 35 B so far as they may be applied to such application.

In the case on hand, the application was made under S. 35E(2) to the Collector (Appeals). As stated above, S. 35C(1) speaks of giving the parties the opportunity of being heard. S. 35E(4) clearly states the provisions of the Act regarding appeals are attracted. It is not a particular provision of the Act regarding the appeals, but all the provisions regarding the appeals are to be kept in view. Thus a combined reading of S. 35A(1) and (3), 35B(4), 35C(1) and S. 35E(4) suggests that the opportunity of hearing is to be given in a case like the one on hand. This apart, the opportunity of hearing under the provisions of the Act is not expressly or by inevitable implication is excluded.

7. In Union of India v. Col J.N Sinha (1971 SCJ 655) the Supreme Court, in para B has stated thus:

“Fundamental Rule 56(j) in terms does not require that any opportunity should be given to the concerned government servant to show cause against his compulsory retirement. A government servant serving under the Union of India holds his office at the pleasure of the President as provided in Art. 310 of the Constitution. But this “pleasure” doctrine is subject to the rules or law made under Art. 309 as well as to the conditions prescribed under Art. 311. Rules of natural justice are not embodied rules nor can they be elevated to the position of fundamental rights. As observed by this court in Kraipak and others v. Union of India (AIR 1970 SC 150) the aim of rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. The rules can operate only in areas not covered by any law validly made. In other words they do not supplant the law but supplement it.” It is true that if a statutory provision can be read consistently with the principles of natural justice, the Courts should do so because it must be presumed that the Legislatures and the statutory authorities intend to act in accordance with the principles of natural justice. But if on the other hand a statutory provision either specifically or by necessary implication excludes the application of any or all the rules or principles of natural justice then the court cannot ignore the mandate of the legislature or the statutory authority and read into the concerned provision the principles of natural justice. Whether the exercise of a power conferred should be made in accordance with any of the principles of natural justice or not depends upon the express words of the provision conferring the power, the nature of the power conferred, the purpose for which it is conferred and the effect of the exercise of that power.”

In the case of Institute of Chartered Accountants of India v. L.K Ratna (A.I.R 1987 SC 71), the Supreme Court, as can be seen from para 16, has held that the principles of natural justice must be read into the unoccupied interstices of the statute unless there is a clear mandate to the contrary.

8. The Division Bench of this Court in Workmen of Kempf (India) Ltd. v. The Government of Tamil Nadu (1991-I-L.W 440), in paragraph 9, has expressed thus:

“Even otherwise, one principle which is now well settled and established, by a catena of authorities is that even if the statute is silent with regard to the grant of hearing to the person affected, then at least a minimal hearing is necessary, and not only desirable, to avoid the charge of arbitrariness. The observance of the principles of natural justice is the pragmatic requirements of fair play in action. The purpose of following the principles of natural justice is basically the prevention of miscarriage of justice. The rules of natural justice operate as implied mandatory processual requirements, non observance whereof invalidates the exercise of power of court. The content of application of principles of natural justice is the dependent variable, conditioned by the facts and circumstances of each situation and even where, in the statute, there are no positive words requiring that the party shall be heard, even then, as laid down by the apex court in Menaka Gandhi v. Union of India (AIR 1978 SC 597) the justice of common law would supply the omission of the legislature and the principles of natural justice shall be read into the statute, so as to ensure a just decision. The rule of audi alteram partem is devised to ensure a just decision and is a healthy check on the abuse or misuse of power and the courts in this country have been very jealous to see that its reach and applicability is not allowed to be unnecessarily circumscribed. There cannot be indeed, any undue expansion of the principles of natural justice without reference to the administrative realities and other factor, but the fact, remains that it is “untenable heresy to lock-jaw the victim or act behind his back” by tempting invocations.”

9. Having regard to the long line of decisions, I am of the firm view that in cases where the requirement of hearing between the contending parties, having competing interests is dispensed with expressly or by necessary implication the principles of natural justice demand that the authorities, exercising judicial or quasi-judicial function are required to give an opportunity of hearing. More so, when the orders are passed affecting the rights of the parties resulting in civil consequences. In the instant case, it is plain that the impugned order was passed without giving opportunity of hearing to the petitioner that too affecting its rights in as much as order passed by the first respondent in its favour is reversed by the second respondent by the impugned order. Having regard to the provisions of the Act and keeping in view the principles laid down in decisions aforementioned. I conclude that the impugned order was passed in violation of principles of natural justice. An order passed in violation of principles of natural justice stands vitiated without anything more as it is passed without hearing the petitioner, taking away the advantage that he had by virtue of the order dated 22.4.93 passed by the first respondent, which has visited the petitioner with civil consequences

10. As regards the second question as to whether the petitioner should be driven to other forum to avail alternative remedy of filing appeal, I must stale that it is not necessary, in this case having regard to the undisputed facts and position of law. It is firmly settled law that mere existence of an alternative remedy is no bar to entertain a writ petition and give relief will be slow in entertaining writ petitions, where parties have alternative remedy and unless they exhaust such remedy. But the rule that the party should exhaust statutory remedy before the writ will be granted is a rule of policy, convenience and discretion rather than a rule of law. In cases where the principles of natural justice are denied or violated, the superior court will readily issue a writ of certiorary. Para 11, in the case of U.P State v. Mohd. Noch (AIR 1958 SC 86) reads thus:—

“On the authorities referred to above it appears to us that there may conceivable by cases-and the instant case is in point where the error, irregularity or illegality touching jurisdiction or procedure committed by an inferior court or tribunal of first instance is so patent & loudly obtrusive that it leaves on its decision an indelible stamp of infirmity or vice which cannot be obliterated or cured on appeal or revision. If an inferior Court or tribunal of first instance acts wholly without jurisdiction or patently in excess of jurisdiction or manifestly conducts the proceedings before it in a manner which is contrary to the rules of natural justice and all accepted rules of procedure and which offends the superior court's sense of fairplay the superior court may, we think, quite properly exercise its power to issue the prerogative writ of certiorari to correct the error of the Court or tribunal of first instance, even if an appeal to another inferior Court or tribunal was available and recourse was not had to it or if recourse was had to it, it confined what ex facie was a nullity for reasons aforementioned. This would be, so all the more if the tribunals holding the original trial and the tribunals hearing the appeal or revision were merely departmental tribunals composed of persons belonging to the departmental hierarchy without adequate legal training and background and whose glaring lapses occasionally come to our notice. The superior Court will ordinarily decline to interfere by issuing certiorari and all we say is that in a proper case of the kind mentioned above it has the power to do so and may and should exercise it. We say no more than that.”

In the light of what is stated above, when the impugned order is one passed clearly in violation of principles of natural justice this Court should not only entertain the writ petition and give relief to the petitioner but it has a duty to do so. Accordingly I am of the opinion that the petitioner need not be asked to avail the alternative remedy.

11. One more submission of the learned counsel for the petitioner that in the event this Court comes to the conclusion that the impugned order is not sustainable, the matter maybe sent back to the first respondent who will be in a better position to appreciate the entire material on record, being the original authority and pass appropriate orders. This submission is opposed by the learned counsel for the respondents stating in such an event, the second respondent also can consider the entire material on record having the power even to hold further enquiry and to record additional evidence, if necessary and pass appropriate orders on merits and in accordance with law. I am inclined to accept the submission made by the learned counsel for the respondents in this regard.

12. In the result, for the reasons stated and discussion made above, I pass the following order:

(i) The writ petition is allowed.

(ii) The impugned order of the second respondent dated 8.4.94 passed in A. No. 5/94 (Order in Appeal 14/94) is quashed.

(iii) The case is remitted to the second respondent for fresh disposal on merits and in accordance with law after affording an opportunity of hearing to the petitioner. No costs.

RR/KA/VCS