Unserved personal hearing notices violate natural justice and require fresh adjudication.

The appellant, a manufacturer of PVC compounds and masterbatches, was subjected to a Central Excise demand of approximately ₹9.73 crores for allegedly availing CENVAT credit on invoices unsupported by actual receipt or supply of goods.

During the proceedings, it deposited ₹1.65 crores, comprising a statutory pre-deposit of ₹1.50 crores and ₹15 lakhs deposited during investigation.

After the CESTAT allowed the appellant’s substantive appeal on 2 February 2018, the appellant sought refund of the deposited amount with interest.

The adjudicating authority sanctioned refund of ₹1.65 crores with interest, but subsequently reduced the interest through a corrigendum.

The Revenue’s appeal was allowed ex parte by the Commissioner (Appeals), who remanded the matter for re-quantification of interest, holding that interest was payable under the applicable version of Section 35FF only after expiry of three months from communication of the appellate order.

The appellant challenged the order on the ground that the notices of personal hearing had not been served. The CESTAT dismissed the appeal on 2 May 2024 and rejected the appellant’s rectification application on 23 September 2024.

Before the High Court, the appellant relied on the fact that its counsel had appeared in another matter before the same Commissioner (Appeals) on 13 December 2018, while there was no acknowledgment or other proof of service of hearing notices in the present matter.

1. Whether the Commissioner (Appeals) was justified in deciding the Revenue’s appeal ex parte on the assumption that notices of personal hearing had been served on the appellant, despite the absence of proof of service.

2. Whether the CESTAT erred in deciding the matter on the merits without properly addressing the appellant’s specific contention that it had been denied an effective opportunity of hearing.

3. Whether the appellant’s entitlement to interest on the refunded pre-deposit was required to be reconsidered afresh by the Commissioner (Appeals) after providing a proper hearing.

The Court applied Section 35A(3) of the Central Excise Act, 1944, which requires the appellate authority to provide the parties an opportunity of being heard before deciding an appeal.

It also considered Section 35FF of the Act concerning interest on delayed refund of pre-deposits, including the statutory position applicable to pre-deposits made before 6 August 2014.

The governing principle of natural justice requires that a party must receive effective notice and a reasonable opportunity of hearing before an adverse order is passed.

The Court also noted the principles stated in CCE v. ITC Ltd., 2005 (179) E.L.T. 15 (S.C.), and Union of India v. Tata SSL Ltd., 2007 (218) E.L.T. 493 (S.C.), regarding interest on delayed refund of pre-deposits, as well as CBEC Circular No. 802/35/2004-CX dated 8 December 2004.

The Commissioner (Appeals) recorded that hearing notices dated 6, 11 and 13 December 2018 had been granted, but the record contained no acknowledgment or other material establishing that the notices had actually been served on the appellant.

The appellant’s counsel had appeared before the same authority in another matter involving the appellant on 13 December 2018, making it improbable that the counsel would deliberately abstain from the present hearing if notice had been received.

The burden was therefore not satisfied merely by showing that notices had allegedly been issued; effective service had to be demonstrated.

The Court held that the absence of proof of service, coupled with the appellant’s appearance in the connected matter on the same date, established denial of a meaningful hearing.

The CESTAT further failed to deal with this foundational natural-justice objection and instead proceeded to decide the substantive issue, thereby compounding the denial of opportunity.

Since the appellant had not been properly heard, the High Court did not finally determine the interest entitlement and directed reconsideration by the Commissioner (Appeals).

The orders of the Commissioner (Appeals) and the CESTAT were consequently interfered with to the extent necessary, and the matter was remanded to the Commissioner (Appeals) for fresh consideration of the appellant’s claim after providing a proper opportunity of hearing.

The appellant undertook to appear before the Commissioner (Appeals) on 21 September 2026 at 2:30 p.m.

The appeal was partly allowed, and pending applications were disposed of.