Once Initiation Of Proceedings Itself Is Bad, Consequential Proceedings Automatically Fails: Allahabad HC

The Allahabad High Court has held that once the initiation of proceedings is bad in law, all consequential proceedings shall fail.

While dealing with recovery without show cause notice under the Excise Act, Justice Piyush Agrawal held

“Once the initiation of the proceedings itself is bad, the consequential proceedings automatically fails in the eyes of law.”

Certain samples were drawn by the Excise officials from the CL - 2/wholesale suppliers, which was not under control of the petitioner, but under control of some other entity, i.e., whole seller under the control of Excise Department. Counsel for petitioner argued that Rule 776 of U.P. Excise Manual was not complied with while drawing the samples as no person of the distillery was present.

It was argued that 5 days after passing of the impugned order, the amount of alleged duty and penalty under Section 74-A was withdrawn from the advance duty register which amounts to Rs. 1,49,85,677.20. it was further argued that Section 11(2) of the Excise Act provides a period of one month for filing revision. However, instead of giving petitioner a month's time to file revision, the authorities proceeded to recover the amount rendering the revision virtually infructuous.

Counsel for petitioner further argued that no show cause notice was issued before passing order under section 74-A of the Excise Act and thus, was in violation of principles of natural justice.

Defending the impugned order, counsel for respondent argued that on inspection and after drawing the samples, there was shortage beyond the permissible limit and hence, action has rightly been taken. However, on specific query of the Court, it was admitted that no notice under section 74-A(1) of the Act was given and the procedure under Rule 776 was not complied with in letter and spirit.

Accordingly, the Court directed that after deducting 25% of the amount recovered from the petitioner towards the deposit for filing the revision, the remaining amount shall be kept in a fixed term interest bearing account in a Nationalized Bank. The Court has directed the Commissioner of Excise Tax, U.P., Lucknow to file his personal affidavit regarding the compliance of the order.

Case Title: M/S Wave Distilleries Breweries Ltd v. State Of U.P. And 2 Others 2023 LiveLaw (AB) 504 [WRIT TAX No. - 1461 of 2023]

Case Citation: 2023 LiveLaw (AB) 504

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