2020 (1) TMI 896 - HC - Central Excise

Special Audit - Section 14AA of the Central Excise Act, 1944 - allegation of over-utilisation of credit of duty by the assessee in the relevant period - HELD THAT - The order dated December 06, 2016, passed in the earlier round of writ petition, cannot be construed to mean that the learned Single Judge directed the Commissioner, Central Excise, Kolkata II to pass the reasoned order, though such Commissioner may have had no authority to pass an order for special audit under Section 14AA of the Central Excise Act, 1944 at the relevant point of time. The Revenue admits that at the time of passing the order dated June 06, 2017, the power to pass an order for Special Audit under Section 14AA of the Central Excise Act, 1944 was taken away from the Commissioner, Central Excise, Kolkata II and the said power was vested with the Commissioner, Audit I, Central Excise, Kolkata. It is elementary that a mandamus does not command any obligation to be performed neither authorises any authority to exercise power de hors the statute. When the learned Single Judge had remanded the matter to the Commissioner for fresh consideration, such exercise should have been carried out by such Commissioner who at that point of time was vested with such power under Section 14AA of the Central Excise Act, 1944. It is true that the assessee did not raise any issue as to the jurisdiction at the time of hearing before of the Commissioner, Central Excise, Kolkata II. In the present writ petition also, the lack of jurisdiction of the said Commissioner has neither been specifically pleaded nor argued at the time of hearing. But at the same time it must be noticed that at the relevant point of time the said Commissioner was divested of the power under Section 14AA of the Central Excise Act, 1944. The order passed by the said Commissioner was without authority The relevant audit Commissioner, empowered under Section 14AA of the Central Excise Act, 1944, after promulgation of the Central Goods and Services Tax Act, 2017, is directed to pass a reasoned order after giving due opportunity of hearing to the assessee - Appeal allowed.

Issues:
1. Validity of the order for special audit under Section 14AA of the Central Excise Act, 1944.
2. Jurisdiction of the Commissioner, Central Excise, Kolkata - II to pass the order for special audit.
3. Compliance with principles of natural justice in passing the impugned order.
4. Transfer of the case to another Commissioner for further action.
5. Allegations of over-utilization of credit of duty by the assessee.

Issue 1: Validity of the order for special audit under Section 14AA of the Central Excise Act, 1944:
The High Court considered the validity of the order dated June 06, 2017, directing a special audit against the assessee. The assessee contended that there was no excess utilization of duty credit, challenging the legality of the order. The Revenue argued that there was sufficient material to believe in over-utilization, justifying the special audit. The Court noted the participation of the assessee in the proceedings without questioning jurisdiction. Ultimately, the Court set aside the order and directed the relevant audit Commissioner to pass a reasoned order after providing a hearing.

Issue 2: Jurisdiction of the Commissioner, Central Excise, Kolkata - II:
The Court analyzed the jurisdiction of the Commissioner to pass the order for special audit. It was highlighted that at the time of passing the order, the power to issue such orders had been transferred to another Commissioner. The Court emphasized that a mandamus does not authorize an authority to act beyond statutory powers. As the original Commissioner lacked the authority to issue the order, the Court ruled the order dated June 06, 2017, as void.

Issue 3: Compliance with principles of natural justice:
The Court examined the compliance with principles of natural justice in passing the impugned order. Referring to a previous order that set aside a similar order due to lack of hearing, the Court found that the Commissioner had considered the facts presented by the assessee and met the requirements of natural justice. Consequently, the Court upheld the order for special audit.

Issue 4: Transfer of the case to another Commissioner:
The Court addressed the issue of transferring the case to another Commissioner for further action. It was noted that the power to pass an order under Section 14AA had been vested in a different Commissioner at the time of passing the impugned order. The Court emphasized that the exercise of power by the original Commissioner was illegal, leading to the order's invalidation.

Issue 5: Allegations of over-utilization of credit of duty:
The Court considered the allegations of over-utilization of duty credit by the assessee. While the Revenue argued in favor of a special audit based on this allegation, the Court found that the order for special audit was invalid due to jurisdictional issues. The Court directed the competent audit Commissioner to conduct the audit and pass a reasoned order after providing a hearing to the assessee.

In conclusion, the High Court of Calcutta examined various issues concerning the validity of an order for special audit under the Central Excise Act, 1944. The Court emphasized the importance of jurisdiction, compliance with natural justice principles, and proper authority in issuing such orders. Ultimately, the Court set aside the impugned order and directed the competent audit Commissioner to conduct the special audit in accordance with the law and after providing due opportunity of hearing to the assessee.

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