2007 (3) TMI 8 - SC - Central Excise

Demand Department alleged that appellant directly supply the various bought out items to other party and accordingly demanded for duty was confirmed the power of remand by the Commissioner (A) has been taken away by amending Section 35A with effect from 11-5-2001 under the Finance Bill, 2001. Under the Notes to clause 122 of the said Bill it is stated that clause 122 seeks to amend Section 35A so as to withdraw the powers of the Commissioner (A) to remand matters back to the adjudicating authority for fresh consideration. Therefore, the Commissioner (A) continues to exercise the powers of the adjudicating authority in the matters of assessment. Under Section 35B any person aggrieved by the order of the Commissioner as an adjudicating authority is entitled to move the Tribunal in appeal. Section 35B indicates that the decision of order passed by the Commissioner (A) shall be treated as an order of an adjudicating authority. In the circumstances the High Court had erred in holding that the assessee was not entitled to agitate the question of dutiability in appeal before the Tribunal. - After considering the fact authority allowed the appeal partly

Summary

Issues:
- Whether the Customs Excise and Service Tax Appellate Tribunal (CESTAT) was correct in entertaining the assessee's appeal on dutiability against the order passed by Commissioner (A) dated 9-4-2003.
- Whether the Tribunal had the authority to decide on the dutiability of bought out items after the order of the Commissioner (A) dated 22-3-2000 had become final.
- Whether the appellants were entitled to the benefit of Modvat credit on the bought out items.
- Whether the demand for duty by the department was correctly quantified and whether the appellants were liable to pay the demanded amount.

Analysis:

The case involved a dispute regarding the dutiability of certain bought out items supplied by the appellants to a specific site for the erection of plants. The Commissioner (A) had initially concluded that the bought out items were dutiable, which was challenged by the appellants. The Tribunal, in a subsequent round of litigation, held that no duty was payable on the bought out items and allowed the appeal. However, the High Court set aside the Tribunal's decision, stating that once the order of the Commissioner (A) became final, the Tribunal could not entertain the appeal on the question of dutiability.

The Supreme Court analyzed the jurisdiction of the Tribunal in such matters and emphasized that excisability is a matter of principle, and the Tribunal has the authority to decide on the dutiability of items independently of the Commissioner (A)'s decision. The Court highlighted that the Commissioner (A)'s order was not binding on the Tribunal, especially when it came to issues of dutiability. The Court also explained the concept of assessment under the taxing law, stating that the order of assessment is subject to review and appeal, including before the Tribunal.

Regarding the Modvat credit entitlement, the Court noted that even if the bought out items were dutiable, the appellants were still entitled to the benefit of Modvat credit. The Court observed that the department's quantification of duty was flawed, and the demand needed modification. The Court reduced the demand amount from Rs. 94,03,500 to Rs. 23,56,000, emphasizing that the appellants should pay the revised amount within a specified timeframe to avoid interest charges.

In conclusion, the Supreme Court partly allowed the appeal, setting aside the High Court's judgment and modifying the duty demand amount. The Court clarified the Tribunal's authority to decide on dutiability issues independently and upheld the appellants' right to claim Modvat credit on the bought out items.