2016 (8) TMI 126 - HC - Central Excise

Cenvat Credit - demand raised on the allegation that in Unit I of the appellant has cleared credit availed raw materials, without proper invoices and attributed shortage of the stock - validity of retracted statement - Held that - Though show cause notices have been issued by the original authority, for the shortage of raw materials noticed, which includes, allegation of clandestine removal of raw materials, the finding of the original authority against the revenue, on the latter, is clear. When the department has not chosen to challenge the finding of the original authority, on the allegation of clandestine removal of raw materials nor filed any cross-objection to the appeal filed by the assessee, we are of the view that the finding rendered, by the original authority, in favour of the assessee, has reached finality. As rightly contended by the learned counsel for the appellant, instead of addressing the issue, as to whether, the appellate authority had acted beyond the scope of the appeal, and exceeded in his jurisdiction, the Tribunal passed an order, impugned before us, elaborating, as to how, adjudication has to be done, with reference to the aspect of clandestine removal of raw materials, which in our considered opinion, is jurisdictionally erroneous. On the facts and circumstances of the case, we hold that the directions issued by the appellate authority and that of the Tribunal, run contrary to the principle of no reformatio in peius . Decided partly in favor of appellant with direction of re-adjudicate the issue to the limited extent.

Issues Involved:
1. Jurisdiction of appellate authority and Tribunal to interfere with parts of the adjudicating authority's order not under appeal.
2. Scope of remand orders by the Tribunal and the appellate authority.
3. Legitimacy of the Tribunal's directions to the adjudicating authority regarding stock verification and alleged clandestine removal of raw materials.
4. Principle of "no reformatio in peius" in the absence of departmental appeal or cross-objections.

Detailed Analysis:

1. Jurisdiction of Appellate Authority and Tribunal:
The appellant argued that the appellate authority and Tribunal exceeded their jurisdiction by addressing issues not appealed by the department. The original adjudicating authority had found insufficient evidence of clandestine removal of raw materials based on 36 loose slips, and this finding was not appealed by the department. The High Court agreed, stating that the appellate authority and Tribunal acted beyond their scope by revisiting the issue of clandestine removal, which had already been settled in favor of the appellant.

2. Scope of Remand Orders:
The appellant contended that the remand orders issued by the appellate authority and Tribunal were beyond their jurisdiction, especially since the first appellate authority had no power to remand under Section 35A of the Central Excise Act, 1944. The High Court found that the directions to reconsider the aspect of clandestine removal were beyond the scope of the appeal and thus exceeded the jurisdiction of the appellate authority.

3. Legitimacy of Tribunal's Directions:
The Tribunal's directions included verifying the stock in light of a power cut during inventory, reconciling computer and physical stock records, and considering the evidentiary value of loose slips and notebooks found during the search. The High Court held that these directions were unnecessary and beyond the Tribunal's jurisdiction since the issue of clandestine removal had already been settled and not appealed by the department.

4. Principle of "No Reformatio in Peius":
The High Court emphasized that the appellant should not be placed in a worse position due to their appeal, invoking the principle of "no reformatio in peius." The Tribunal's directions to reconsider the issue of clandestine removal, which had been resolved in favor of the appellant, violated this principle. The High Court concluded that the appellant's position should not be worsened by their own appeal, especially in the absence of a departmental appeal or cross-objections.

Conclusion:
The High Court set aside the directions of the appellate authority and the Tribunal regarding the alleged clandestine removal of raw materials. The adjudication was confined to the directions in Paragraphs 7.1 and 7.2 of the Tribunal's order, focusing solely on the shortage of raw materials. The Civil Miscellaneous Appeal was partly allowed, and the case was remanded to the adjudicating authority to address the physical inventory and computer records as per the Tribunal's limited directions.

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