RE-ADJUDICATION

[Mr. M. GOVINDARAJAN]

Adjudication is the legal process by which an arbiter or judge reviews evidence and argumentation including legal reasoning set forth by opposing parties or litigants to come to a decision which determines rights and obligations between the parties involved.  Three types of disputes are resolved through adjudication:

1. Disputes between private parties, such as individuals or corporations.
2. Disputes between private parties and public officials.
3. Disputes between public officials or public bodies.

In taxation matters many a case has been remanded to the lower authority by the higher authorities for various reasons.  The remanding may be to the next lower appellate authority or it may be to the original adjudicating authority.  If the case is remanded to original Adjudicating Authority the remanding order is to indicate about the nature of adjudication to be carried out whether de novo proceedings to be initiated or to adjudicate particular aspect as specified in the remanding order by the higher appellate authority. 

In this article some case laws related to re-adjudication is discussed.

Restricted order of remand

In ‘Commissioner of Customs V. National Steel & Agro Industries Limited’ – 2015 (9) TMI 511 - BOMBAY HIGH COURT the matter in dispute was adjudicated by the Adjudicating Authority and in the earlier round the Tribunal passed an order for remanding the matter. The Adjudicating Authority in the re-adjudication process passed order which was set aside by the Tribunal on the appeal filed by the assessee. The Revenue approached the High Court. The Revenue contended that when the Tribunal has remanded the matter back to the Commissioner for de novo consideration, then nothing can be said to be concluded by such an order. It was open to the Commissioner to readjudicate the show cause notice in its entirety. The Tribunal has erroneously held that the remand was for specific and limited purpose. The assessee contended that the remand was for a limited purpose. The Tribunal did not permit the re-opening of any concluded issue.  The Tribunal concluded the issue as to whether the activity of the assessee amounts to manufacture. The remand was for a specific purpose and only to re-relate to utilization of imported materials with the terms of Advance Licensing Scheme. In such circumstances the other issue which was concluded could not have been re-opened and the Tribunal rightly interfered in such an exercise of the adjudicating authority. The appeal therefore does not deserve to be admitted as it does not raise any substantial question of law.

The High Court found that the Tribunal had clearly concluded the issue that the activity of the assessee could be termed as ‘manufacture’. The only limited issue and which was being dealt with by the Tribunal is whether the assessee has produced documents to satisfy the imported materials under the Advance Licensing Scheme have been correctly utilized as per the terms and conditions of the scheme read with relevant notification.  The High Court held that in the teeth of restricted order of remand the Adjudicating Authority could not have travelled beyond it. The Tribunal noticed in the order under challenge that the Adjudicating Authority did travel beyond its earlier direction.  The High Court dismissed the appeal.

Remanding order subject to payment of duty

In ‘Terumo Penpol Limited V. Commissioner of Customs (Appeals), Chennai’ – 2015 (6) TMI 500 - MADRAS HIGH COURT the petitioner challenged the order of Commissioner (Appeals) in the present writ petition. The Commissioner (Appeals) agreed with the contentions of the petitioner, set aside the original order and at the instance of the Revenue the Appellate Authority remanded the matter back to the Original Adjudicating Authority. The Appellate Authority further directed to pay EDD equivalent to 5% of the assessable value till the issue of fresh order. The petitioner contended that while remanding the matter, the Commissioner (Appeals) has no authority to direct the petitioner to pay EDD equivalent to 5% of the assessable value since the entire issue has to be revised by the Original Adjudicating Authority afresh for a reason that when there is a direction to reconsider the issue by the Original Au8thority giving direction to the petition to pay EDD equivalent to 5% of the assessable value will definitely bear some influence on the merits of the matter.

The Revenue opposed the petition since the petitioner has alternative remedy by filing appeal before Tribunal on payment of 10% of the duty demanded.  The High Court did not accept the contentions of the Revenue since when the matter is remanded back to the Original Adjudicating Authority all the issues are to be adjudicated afresh, without being influenced by any of the observation. While so, viewing the impugned order, direction given to pay EDD equivalent to 5% of the assessable value, against the petition will prejudice the mind of original Adjudicating Authority while deciding the issue. The High Court deletes the portion of the order directing to pay EDD equivalent to 5% of the assessable value.

Ignoring the directions in remand order

In ‘Raj Kumar Mundra V. Commissioner of Customs, Kandla’ – 2013 (8) TMI 885 - CESTAT AHMEDABAD the Tribunal observed from the order passed by the Adjudicating Authority that the order has been passed by totally ignoring the directions given to it by CESTAT. If the Adjudicating Authority had any reservations about the non execution of directions given by CESTAT, then either a suitable modification application should have been field against the remand order before CESTAT or an appeal should have been filed by the Revenue before the appropriate appellate authority. The attitude depicted by the Adjudicating Authority clearly shows that he has clearly by passed the remand directions given by the Tribunal in re-adjudication process.

In ‘Hit Kari Hitech Fibres Private Limited V. Commissioner of Central Excise, Raigad’ – 2013 (9) TMI 651 - CESTAT MUMBAI the Tribunal held that while re-adjudicating the case the Commissioner should have consider the issue of valuation of impugned goods raised before Commissioner, particularly when the Department itself has determined the assessable value for the period July 2002 to December 2004 on the basis of 115% or 110% of cost of production under Valuation Rules. Since the impugned goods are captively and are not comparable to goods cleared by them from their factory, value is to be determined as per Valuation Rules. The Tribunal directed the Commissioner to re-determine the value of impugned goods as per Valuation Rules. The Commissioner will also consider the imposition of penalty after re-determination of duty.

Adopting the principles of Natural Justice

In ‘Kamtech International Private Limited V. Commissioner of Customs (I&G)’ – 2012 (12) TMI 153 - SUPREME COURT the grievance of the appellant is that the Adjudicating Authority is requested to re-quantify the short levy of customs duty on the basis of prices quoted by M/s Export Management Service Group to M/s Kamtech but at no point of time the appellants were confronted with the said information. The appellant prayed that the Adjudicating Authority may be directed to supply copies of all the documents which are likely to be relied upon for the purpose of fresh adjudication to avail the appellants to meet the Revenue’s case.  The Supreme Court directed that while examining the case for the purpose of quantification of short levy the Adjudicating Authority shall supply all the documents, on which it proposes to place reliance, to the appellants. It will be open to the appellants to furnish their explanation thereon. They would also be permitted to lead additional evidences in support of their claim.

In ‘Union of India V. Lampo Computers (P) Limited’ – 2014 (4) TMI 1032 - KARNATAKA HIGH COURT in the re-adjudication proceedings, in regard to remand order, despite the Tribunals specific directions, the copies of documents relied upon were not provided to the appellants. The impugned order deciding the appeal without such documents or without examining whether such documents have any effect on merits of the case was set aside. The Tribunal was directed to decide the case on merits after examining the effect of non supply of documents relied upon by the department in show cause notice.