ORDER BEYOND SCOPE OF APPEAL

[Mr. M. GOVINDARAJAN]

In taxation matters, if there is a short levy of tax or short payment of tax, or non levy of tax or nonpayment of tax or erroneous refund of tax, the Authority concerned can issue show cause notice the assessee for the recovery of the said amount. The show cause notice is to be issued within the limitation period. The extended period of limitation can be invoked if the nonpayment of tax is due to the reason of fraud, suppression of fact etc., The show cause notice is to indicate the correct details of tax and correct provisions of sections. The Assessing Office cannot travel beyond the scope of the show cause notice.

The above said principle is also applicable to the appeal matters. The memorandum of appeal should consist the contentions on the facts against which appeal is filed. The appellant cannot add more grounds of relief in the appeal which has not been dealt with in the original proceedings. The Appellate Authority is also to decide the appeal as per the facts contained in the memorandum of appeal. The order of the Appellate Authority should not be beyond the scope of the appeal.

In ‘Jeevan Diesels & Electricals Limited V. Commissioner of Central Excise, Customs & Service Tax, Bengaluru- III’ – 2017 (2) TMI 58 - KARNATAKA HIGH COURT the appellant is the manufacturer of diesel generator sets, which is dutiable goods. The appellant sold some DG sets to the Horticulture University. Exemption was available to such sales under central excise notification dated 01.03.1997. Hence the said diesel sets were cleared without payment of duty. The Revenue issued show cause notice calling upon the appellant to show cause as to why the exemption availed of should not be held as erroneous and as to why the duty on the excisable goods of the DG sets should not be demanded.

The appellant filed reply to the said show cause notice. The Assistant Commissioner vide his order dated 20.05.2013 disallowed the benefits of the notification and called upon the appellant to pay the duty of ₹ 36,927/- along with interest. Equal amount of penalty was also imposed on the appellant.

The appellant filed appeal before Commissioner (Appeals) against the order of Assistant Commissioner. The Commissioner (Appeals) allowed to the appeal to the extent of set asiding the penalty imposed on the appellant. Further appeal was preferred to by the appellant before the Tribunal. The Tribunal held that inasmuch as the exemption is being held in favor of the assessee, as a consequence, the assessee would be entitled to the CENVAT credit of duty paid on various inputs used in the manufacture of DG sets. As such the lower authorities would examine as to whether the appellant has availed wrong CENVAT credit and the appellant would be duty bound to reverse the same.

Against the order the appellant filed this appeal before Karnataka High Court. The appellant raised four substantial questions before the High Court. But the High Court considered that only one question can be taken for the purpose of this appeal-

Whether the Hon’ble Tribunal – CESTAT, Bengaluru is justified in making unwanted and unjustified observations regarding the non entitlement of CENVAT credit by the appellant and the reversal of input CENVAT credit by appellant herein, in the absence of objections/appeal from the respondent department or in the appeal memo of the appellant, thus going beyond pleadings?

The High Court observed that no counter appeal has been filed by the Department against the order of the Tribunal. Therefore the High Court did not consider discussing the aspect as to whether the exemption is available by the assessee or not. The only question to be discussed is whether the Tribunal is justified in making the above said observations while finally disposing of the appeal or not.

The High Court observed that when the issue was only limited to the entitlement of exemption available to the appellant or not, the Tribunal ought to have limited its judicial scrutiny to that extent only. The Tribunal could have examined the aspects only in two contingencies-

• If there was any cross appeal by the Department, which was not there; and
• Such aspect was also examined by the first authority, which had issued the show cause notice.

When the first authority had issued the show cause notice and confirmed the demand, it did not examine the alternative aspect of liability to pay the duty even if exemption was available or the reversal of the input CENVAT credit even if exemption was available. The High Court further observed that the Tribunal was beyond the subject matter of the appeal and could be said as exceeding the power of the Tribunal, more particularly, when there was no cross appeal by the Department. The Tribunal did not only relegate the authority to examine the said aspects but has made a concluding observations that as a consequence of the exemption available, the assessee would not be entitled to the CENVAT credit of dutypaid on various inputs used in the manufacture of DG sets. If the Tribunal has already recorded the conclusion, no useful purpose would be served while remanding the matter. But on the contrary, the remand, if any, may be interpreted for the calculation of the figures, but not for examining the aspect of availability of CENVAT credit or otherwise.

The High Court held that the Tribunal exceeded the scope of the appeal. Hence the observations made by the Tribunal in their order cannot be sustained. The High Court allowed the appeal of the appellant.