2019 (7) TMI 1100 - HC - Central Excise

Classification of the imported machine - Cyclotron - whether it falls under CETH 28444000 of the said Act attracting Excise Duty at a higher rate or whether it will fall under CETH 30063000 as 'diagnostic reagent' attracting a lower rate of duty? - HELD THAT - We do not find any merit in the contention raised by the learned counsel for the appellant that the Commissioner (Appeals), while dealing with the first appeal of the appellant, had no power to assess the duty on the machine Cyclotron imported in terms of the Show Cause Notice issued by the Adjudicating Authority himself, but assessed the duty at a lesser rate while passing the original adjudicating order. The powers of the first Appellate Authority are clearly defined in Section 35A(3) of the Act, which clearly stipulates that the Commissioner (Appeals) shall, after making such further inquiry as may be necessary, pass such order, as he thinks just and proper, confirming, modifying or annulling the decision or order appealed against. The determination of duty with relation to particular Entry of the Central Excise Act was well within the power of the first Appellate Authority as well and therefore, even if the appellant filed an appeal against the lower rate of duty than the one proposed in the Show Cause Notice, it does not prevent the Commissioner (Appeals) from restoring a higher demand of duty in terms of the Show Cause Notice issued to the Appellant by the Adjudicating Authority. The Commissioner (Appeals) has given his own reasons for assessing the duty under the particular Entry No.28444000. The Appellate Authority was not bound by the demand of lower rate of duty under CETH 30063000 by the Adjudicating Authority. Petition dismissed.

Issues Involved:
1. Classification of the imported machine "Cyclotron" under the Central Excise Tariff Act.
2. Jurisdiction and powers of the first Appellate Authority.
3. Appropriateness of the appellant directly approaching the High Court instead of the Tribunal.
4. Adherence to principles of natural justice in the adjudication process.
5. Applicability of limitation under Section 11A of the Central Excise Act.

Issue-wise Detailed Analysis:

1. Classification of the Imported Machine "Cyclotron":
The core issue revolves around the classification of the machine "Cyclotron" under the Central Excise Tariff Act. The Adjudicating Authority initially classified the machine under CETH 30063000 as a "diagnostic reagent," attracting a lower duty of ?36,64,506/-. However, the Commissioner (Appeals) reclassified it under CETH 28444000 as "radioactive elements," demanding a higher duty of ?78,19,339/-. The learned single Judge found that the Adjudicating Authority had traversed beyond the scope of the show cause notice without putting the appellant on notice, thus violating principles of natural justice. Consequently, the matter was remitted back to the Adjudicating Authority for reconsideration.

2. Jurisdiction and Powers of the First Appellate Authority:
The appellant contended that the Commissioner (Appeals) had no jurisdiction to demand a higher duty than proposed in the show cause notice. However, the Court clarified that under Section 35A(3) of the Act, the Commissioner (Appeals) has wide powers to confirm, modify, or annul the decision of the Adjudicating Authority. The Court emphasized that these powers are co-extensive with those of the Adjudicating Authority, allowing the Commissioner (Appeals) to reassess the duty as deemed just and proper.

3. Appropriateness of Directly Approaching the High Court:
The appellant bypassed the regular appellate remedy by directly approaching the High Court instead of filing a second appeal before the Customs Excise and Service Tax Appellate Tribunal (CESTAT). The Court disapproved of this approach, stressing that the appellant should have exhausted the statutory remedy provided under Section 35B of the Act before invoking the writ jurisdiction of the High Court.

4. Adherence to Principles of Natural Justice:
The learned single Judge observed that the Adjudicating Authority's classification decision was made without issuing a proper show cause notice, thereby violating principles of natural justice. The Court directed the Adjudicating Authority to reconsider the classification issue after issuing a proper notice and obtaining expert opinions, ensuring that the appellant is given a fair opportunity to present their case.

5. Applicability of Limitation under Section 11A:
The appellant argued that the direction to issue a fresh show cause notice would be barred by limitation under Section 11A of the Act. However, the Court clarified that the remand did not necessitate a fresh initiation of proceedings. The original show cause notice dated 03.05.2016 remains valid, and the matter is to be reconsidered in light of this notice. Therefore, the limitation under Section 11A does not apply to the remanded proceedings.

Conclusion:
The Court dismissed the appeal, upholding the learned single Judge's decision to remit the matter back to the Adjudicating Authority for fresh adjudication. The Court found no merit in the appellant's contentions regarding the powers of the Commissioner (Appeals), the bypassing of the statutory appellate remedy, and the applicability of the limitation period. The directions to ensure adherence to principles of natural justice and to reconsider the classification issue with proper notice were deemed appropriate and justified.

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