2008 (4) TMI 283 - HC - Central Excise

Jurisdiction of Appellate Authority to act under the second proviso to sub-section (3) of Section 35A - order made by the appellate authority is without jurisdiction as the appellate authority has travelled beyond the subject matter of the appeal appellate authority is required to issue a SCN containing basis, material, reasons for forming an opinion since no such notice is issued, exercise of powers under above proviso is not fulfilled by appellate authority appellate order is quashed

Issues Involved:
1. Jurisdiction of the appellate authority.
2. Relationship between the petitioner and the buyer company.
3. Compliance with procedural requirements under Section 35A of the Central Excise and Salt Act, 1944.
4. Limitation period for issuing a show cause notice.

Issue-Wise Detailed Analysis:

1. Jurisdiction of the appellate authority:
The petitioner challenged the order dated 12.12.1988 made by the Collector of Customs and Central Excise (Appeals), Mumbai, on the grounds that the appellate authority had exceeded its jurisdiction. The appellate authority had concluded that the petitioner and the buyer company were "closely related" and thus fell under Proviso (ii) of Section 4(1)(a) of the Central Excise and Salt Act, 1944. This conclusion was beyond the scope of the original appeal, which was limited to the addition of 30% to the price list for determining the assessable value of goods.

2. Relationship between the petitioner and the buyer company:
The appellate authority's decision was based on the premise that the petitioner and the buyer company were "closely related," thereby influencing the assessable value of the goods. However, the adjudicating authority had previously determined that the petitioner and the buyer company were not related, and this finding was not appealed by the revenue. Therefore, the appellate authority's decision to treat them as related was beyond the scope of the original appeal and lacked jurisdiction.

3. Compliance with procedural requirements under Section 35A of the Central Excise and Salt Act, 1944:
The petitioner argued that the appellate authority's order was procedurally flawed because it did not comply with sub-section (4) of Section 35A, which requires the appellate authority to record in writing the points for determination and the reasons for the decision. Furthermore, sub-section (3) of Section 35A mandates that any order enhancing duty must be preceded by a show cause notice issued by the appellate authority within the prescribed time limit. The appellate authority failed to issue such a notice, rendering its order procedurally invalid.

4. Limitation period for issuing a show cause notice:
The respondent argued that the initial show cause notice issued by the adjudicating authority should be considered substantial compliance with the requirement of the Second Proviso to sub-section (3) of Section 35A. However, the court held that the language of the Second Proviso explicitly requires the appellate authority to issue the notice. The appellate authority cannot rely on a notice issued by the adjudicating authority. Additionally, the maximum limitation period under Section 11A of the Act is six months unless exceptional circumstances extend it to five years. In this case, the limitation period had expired, and the appellate authority had no jurisdiction to issue a show cause notice or pass any order after the expiry of the limitation period.

Conclusion:
The court quashed and set aside the impugned order dated 12.12.1988, ruling that the appellate authority had exceeded its jurisdiction and failed to comply with the procedural requirements under Section 35A of the Central Excise and Salt Act, 1944. The court emphasized that the appellate authority could not issue a show cause notice or pass any order after the expiration of the statutory limitation period. The petition was allowed, and the rule was made absolute with no order as to costs.

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