2016 (5) TMI 512 - HC - Central Excise

Validity of Tribunal s order - Expand of scope of the appeal - Appellant submitted that Tribunal committed a grave error in expanding the scope of the appeal. The Department never served copy of the show cause notice to the appellant company and there was no proposal under the show cause notice of any tax or penalty against the appellant, therefore, the Tribunal could not have expanded the scope of the show cause notice by including the appellant company within the sweep of such proceedings. Department submitted that appellant company and the noticee were one and the same entities and the appellant company is dummy of the noticee company. It was therefore not necessary to hear the appellant separately before taking final decision of appropriation of the duty amount. Held that - the show cause notice, was issued against the original noticee company and there was neither any proposal against the appellant company nor a copy was served to the appellant. Under the circumstances, by supplying a mere copy thereof, the Department cannot initiate proceedings against the appellant. In any case, it was neither the duty nor the authority of the Tribunal to direct so. If, after the Tribunal found that no order adverse to the appellant company could have been passed without a hearing, the Department was inclined to initiate the proceedings against the appellant, it had to take its own decision and issue notice, if even otherwise permissible in law, particularly having regard to the period of limitation prescribed. At any rate, the Tribunal could not have directed the Tribunal to do so and further, such requirement would not be fulfilled by mere supply of a copy of notice in case of another entity. Hence the contention that the appellant, being the dummy of the original noticee, no such separate notice or hearing was needed, simply begs the question. Whether the appellant was dummy or not is a central question and cannot be decided without full participation of the alleged dummy. - Decided in favour of appellant

Summary

Issues involved:
1. Whether the Appellate Tribunal was justified in directing the Excise Authorities to serve a show cause notice to a person after the period of limitation had expired?
2. Whether the Appellate Tribunal can direct the original adjudicating authority to serve a show cause notice on another party and expand the scope of adjudication while remanding an appeal of a different appellant?

Analysis:
1. The appellant challenged an order passed by the Customs Excise and Service Tax Appellate Tribunal (CESTAT) directing the excise authorities to serve a show cause notice to the appellant company. The Tribunal also directed all parties to be reheard by the original authority for determining liability, duty, and penalty. The appellant argued that the Tribunal erred in expanding the scope of the appeal as no show cause notice was served to them, and no tax or penalty proposal was made against them.

2. The Department contended that the appellant company and the noticee were the same entities, making it unnecessary to hear the appellant separately before deciding on the duty amount appropriation. However, the Tribunal found that the Department erred in not hearing the appellant before declaring them a dummy of the noticee. The Tribunal's findings and directions were not challenged by the Department, leading to the conclusion that the recovery order could not have been passed without hearing the appellant.

3. The Tribunal's direction to supply a copy of the show cause notice to the appellant was insufficient to initiate proceedings against them, as the notice was issued against the original noticee company. The Tribunal had no authority to direct the Department to initiate proceedings against the appellant based on a mere copy of the notice. The central question of whether the appellant was a dummy or not required full participation of the alleged dummy, emphasizing the necessity of a separate hearing for the appellant.

4. Ultimately, the Court ruled in favor of the appellant, allowing the appeal and reversing the Tribunal's judgment. The competent authority was instructed to decide the appellant's refund claim before a specified date. The Civil Application was also disposed of in light of the judgment.