2018 (10) TMI 21 - HC - Central Excise

Maintainability of appeal - Section 35G of CEA - Scope of SCN - Valuation - IC Engines and parts thereof which are captively consumed - Rule 6(b)(ii) of the erstwhile Central Excise (Valuation) Rules 1975 applied - Revenue objected on the ground Rule 6(b)(ii) of the Valuation Rules has not been properly applied, as various expenses which need to be included are not included to arrive at the cost of production of I.C. Engines and parts thereof - Revenue Neutrality. Held that - The question of valuation though raised in the Appeal before it, was not examined by the Tribunal. This as the Appeal was allowed on account of Revenue neutrality making the question of appropriate valuation academic in the present facts - the impugned order does relate to the valuation of goods for the purposes of assessment. Hon'ble Supreme Court decision in Steel Authority of India Ltd. 2017 (4) TMI 881 - SUPREME COURT has held that where an issue relating to valuation for purpose of assessment arises and the order is passed in breach of natural justice, then the Apex Court will admit the Appeal. The submission that if this Appeal is admitted today then at the final hearing, if this Court holds that the issue of valuation has to be gone into it, the only order would be to remand the appeal to the Tribunal to decide the issue of valuation. This submission proceeds on the basis that the Appellate Authority while disposing of an Appeal which is in breach of principle of natural justice is only required to set aside the order and restore it to the Lower Authority for passing a fresh order. This submission is not based on provision which restricts the power of an Appellate Authority. Needless to state when there is any breach of natural justice is alleged, the Appellate Authority would have to examine the underlying dispute and find out whether on facts any prejudice is caused to the party or is the remand going to be an empty formality in the facts of this case. Maintainability of appeal - Held that - When Section 35G of the Act very clearly excludes our jurisdiction in respect of the orders of the Tribunal relating to the rates of duty and the value of goods for the purposes of assessment, among other things, we cannot entertain an Appeal on the above issue on ground of perceived hardship. Appeal not maintainable in view of Section 35G of the Act - appeal dismissed as not maintainable.

Summary

Issues:
- Appeal challenging order of Customs, Excise and Service Tax Appellate Tribunal under Section 35G of the Central Excise Act, 1944.
- Dispute regarding valuation of IC Engines and parts for captively consumed goods.
- Tribunal's decision based on revenue neutrality.
- Grievance of Revenue regarding non-consideration of valuation issue.
- Applicability of Section 35G and maintainability of the Appeal before the High Court.

Analysis:

1. The appeal challenges the Tribunal's order dated 13th January 2017, focusing on three key questions of law. The Revenue's primary concern is whether the Tribunal was correct in deciding the issue based solely on revenue neutrality, neglecting the valuation aspect raised by the Revenue.

2. The dispute revolves around the appropriate valuation of IC Engines and parts consumed internally, with the Revenue contesting the Respondent's valuation method. The Revenue argues that certain expenses were not considered, leading to a demand for differential duty payment on the captively consumed goods.

3. The Tribunal's order allowed the Respondent's appeal, emphasizing revenue neutrality and overlooking the valuation issue. The Tribunal's decision was based on the understanding that the duty paid on the consumed goods would be credited to the Respondent's tractor divisions, thereby maintaining revenue neutrality.

4. The High Court raised concerns about the Tribunal's failure to address the valuation issue, which was a crucial aspect of the appeal. The Court referred to a Supreme Court decision highlighting the necessity for a direct nexus to duty determination or valuation for the admission of such appeals.

5. The Revenue argued that the Tribunal's order breached natural justice by not addressing the valuation issue, suggesting that if admitted, the Court could remand the matter back to the Tribunal for valuation determination.

6. The Court acknowledged that the issue of valuation was not examined by the Tribunal, despite being raised. The Court cited the Supreme Court decision to support the view that an issue related to valuation for assessment purposes should be addressed, especially if there is a breach of natural justice.

7. The Court rejected the Revenue's argument that undue hardship justifies High Court intervention, emphasizing that jurisdiction is bound by statutory provisions. The Court concluded that the Appeal was not maintainable under Section 35G and advised the Revenue to seek remedy from the Supreme Court.

In summary, the High Court dismissed the Appeal challenging the Tribunal's order based on revenue neutrality, highlighting the importance of addressing valuation issues and the limitations of High Court jurisdiction under Section 35G of the Act.