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TMI BlogADJUDICATION UNDER CENTRAL EXCISE ACT, 1944 – SOME ISSUESX X X X Extracts X X X X X X X X Extracts X X X X ..... ADJUDICATION UNDER CENTRAL EXCISE ACT, 1944 – SOME ISSUES - By: - Mr. M. GOVINDARAJAN - Central Excise - Dated:- 5-12-2015 - - Meaning of adjudication The word adjudication ordinarily means to act and decide judicially. In Zenith Computers Limited V. Commissioner of Central Excise 2014 (5) TMI 182 - BOMBAY HIGH COURT the High Court held that the word acting judicially is not performing some rituals or completing somehow the assigned work but is a serious business. It requires confined application of mind and alertness. It should not be undertaken casually. No one can approach judicial proceedings in a light hearted manner. Jurisdiction An Adjudicating authority cannot adjudicate without jurisdiction conferred on him either by territorial jurisdiction or pecuniary jurisdiction. In Lark Chemicals Private Limited V. Commissioner of Customs, CSI, Airport Mumbai 2014 (6) TMI 299 - CESTAT MUMBAI the Tribunal held that as regards the issue of jurisdiction of the adjudicating authority in the present case, the said point has not been raised before the Adjudicating Authority either at the time of replying to the show cause notice or at the time o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f personal hearing. The appellants participated in the said proceedings without any demur or protest. Only in the appeal filed before the Tribunal, this issue has been raised which is clearly an afterthought. If a point has not been raised before the Adjudicating Authority and has not been considered by the said authority it would be incorrect and inappropriate for the appellate authority to give a finding thereon. No delegation to adjudicate In Commissioner of Central Excise, Bolpur V. SPS Metal Cast Alloy Limited 2012 (1) TMI 119 - CESTAT KOLKATA the Commissioner during the course of adjudication entrusted enquiry to Superintendent of Anti-evasion. The Tribunal held that in the matter of adjudication the power cannot be delegated to subordinate officers and the Adjudicating Authority should himself give his findings. Placing reliance on enquiry conducted by the Superintendent after issue of show cause notice and during course of adjudication in extraneous to show cause notice, in absence of any corrigendum. Deciding the case, by relying on conclusion of Superintendent amounts to non application of mind. Demand in show cause notice Issuing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notice is a must before adjudication. The show cause notice should clearly indicate the demand of duty under relevant section. In Sunita Ispat Private Limited V. Commissioner of Central Excise 2014 (4) TMI 1028 - ALLAHABAD HIGH COURT the Adjudicating Authority confirmed the demand of duty based on unaccounted purchase of scrap. The High Court held that when in the show cause notice the duty was not demanded on the basis of unaccounted purchase of scrap, the demand on that basis could not be confirmed in the order-in-original. There must be a demand on the show cause notice to be confirmed in the order. Second show cause notice In Shreeji Colourchem Industries V. Commissioner of Central Excise Customs, Vadodara 2008 (11) TMI 610 - CESTAT AHMEDABAD the Tribunal held that second show cause notice on same issue and period is not sustainable even though it was issued after gathering additional investigation/information/material. Theoretically or hypothetically, if Revenue in course of further investigation finds some more material and evidence against assessee, they cannot be allowed to issue a third show cause notice in respect of same alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and for the same period on ground that further investigations have revealed more evidences. It was held that adjudication cannot be allowed to take place in a piece meal manner. Principles of Natural Justice Issuing show cause notice is not only enough for adjudication. Reasonable opportunity of being heard is given to the assessee. The assessee is entitled to give reply to the show cause notice refuting the allegations contained in the show cause notice along with the relied documents and case laws. The assessee is to confirm the reply that he wants to be heard in person. Violation of the principles of Natural Justice by the Adjudicating Authority will be liable to be set aside in the appeal. In New Tobacco Company Limited V. Union of India 2014 (2) TMI 550 - GAUHATI HIGH COURT exemption granted vide Notification No. 32/99-CE was withdrawn retrospectively by Section 154 of the Finance Act, 2003 . Show cause notice for rejection of refund was issued in 2001. CESTAT granted assessee opportunity of arguments only on stay application and rejected the refund relying on R.C.Tobacco Private Limited 2005 (9) TMI 80 - SUPREME COURT OF INDIA whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch had held retrospective withdrawal of exemption. The Tribunal held that there was no violation of Natural Justice. The assessee was not entitled to any further hearing in view of statutory scheme being upheld by Supreme Court. The assessee s plea that upholding of retrospectivity of withdrawal of exemption by Supreme Court did not debar Adjudication Authority from going into question of retrospectivity being arbitrary and not applicable to impugned case. In Commissioner of Customs Central Excise, Chattisgarh V. Raigarh Enterprises 2012 (7) TMI 511 - CHATTISGARH HIGH COURT it was held that if the taxing authorities did not consider it proper to grant any tax benefit under the Act to an assessee or when it was noticed that the assessee has availed of wrong benefit to which they were not entitled then principle of Natural Justice demand that they should have been served with proper show cause notice setting out there in the reasons for withdrawing such benefit and then after obtaining reply from the assessee an order should have been passed. Order of Adjudicating Authority was rightly set aside by the Commissioner (Appeals) and the Tribunal. Non furnishing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied documents The assessee is entitled to request for the copies of documents relied on by the Department for giving suitable reply to the show cause notice. Failure to supply the same will amount to violation of the Principles of Natural Justice. In Union of India V. Lampo Computer (P) Limited 2014 (4) TMI 1032 - KARNATAKA HIGH COURT the High Court observed the Tribunal s order. The CEGAT in their final order dated 12.02.2002 remanded the case to the original authority on the ground that the order suffers from denial of principles of Natural Justice. There was a specific direction to supply the documents relied upon by the Department in the show cause notice. However on going through the de novo order, the Tribunal found that the directions of CEGAT have not been complied with, presumably due to the fact the said documents have been lost by the Department. Under these circumstances, the Tribunal did not accept the Adjudicating Authority s observations that these documents are not relied upon. The Tribunal held that once the show cause notice mentions that certain documents are relied on the Department should take utmost care to preserve them and furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh copy of the documents to the party. Non furnishing of relief on documents is clearly a violation of denial of principles of Natural Justice. The de novo order also suffers from the vice of denial of principles of Natural Justice as the original order. The High Court directed the Tribunal to examine the effect of non supply of the documents relief upon by the Department in the show cause notice and also to consider whether the documents have any bearing on the outcome of the case. In Vishnu Steels V. Union of India 2013 (5) TMI 482 - BOMBAY HIGH COURT the Adjudication order was passed without waiting for receipt of documents applied for by assessee as being relied upon in the show cause notice and for which Superintendent (Adjudication) had written twice to ADG. It was passed despite intimation of assessee that they were approaching the Settlement Commission. The High Court held that the Adjudication Authority has proceeded in undue haste, without waiting for supply of documents to assessee and even after being informed that assessee was in all likely to move Settlement Commission. The High Court set aside the adjudication order to avoid parallel proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs. In Santogen Silks Mills Limited V. Commissioner of Central Excise, Vapi 2010 (10) TMI 940 - CESTAT AHMEDABAD it was held that the case adjudicated without supplying relied upon document is violation of principles of Natural Justice. The Tribunal remanded the case for fresh adjudication. Cross examination In Mahek Glazes Private Limited V. Union of India 2013 (7) TMI 128 - GUJARAT HIGH COURT it was held that request for cross examination is to be dealt within separate order and cannot be decided along with final adjudication order. The assessee has right to be told whether such application was being granted or refused before final order was passed. When prayer for cross examination has been made which was reasonably expected to be granted, assessee cannot be expected to participate in adjudication proceedings up to final stage. If adjudicating authority was of the opinion that the request was not tenable, he could have rejected it and if he was inclined to accept it, he himself could not have finally disposed of show cause notice proceedings. In either case, assessee had right to know outcome of their application. Merely because Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was of opinion that request was belated he could not deal with it only in final order. In Vulcan Industrial Engineering Co. Limited V. Union of India 2013 (8) TMI 502 - GUJARAT HIGH COURT the petitioner requested for cross examination of all persons whose statement had been recorded and the Adjudicating Authority that he would take decision on the request and it would communicate to the petitioner. However order-in-original was passed without deciding request for cross-examination. The High Court held that without dealing with and disposing of application for cross examination the Adjudicating Authority could not have finally adjudicated the issue. If the Adjudicating Authority was of opinion that the request for cross examination was not tenable, by giving reasons he could have rejected it. Merely because Adjudicating Authority was of the opinion that assessee had made such a request somewhat belatedly, could not permit him to deal with such application only in final order itself. In Bird Audio Electronics V. Commissioner of Central Excise, Delhi 2013 (9) TMI 90 - CESTAT NEW DELHI the Tribunal held that this is the case of wrong availment of CENVAT c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit and the department obtained a statement from the owner of the vehicle in which impugned consignments were claimed to be transported. The cross examination of the owner should be allowed. The Department having obtained his statement and relied on it, could not plead that he was a beneficiary and not likely to depose against assessee who had benefited from alleged fraud. If his cross examination indicated that he could not be trusted, it has to be explained by the Adjudicating Authority, but such a presumption without cross examination is unacceptable. The Tribunal held that the entire statement of deponent discarded as untested evidence. In Commissioner of Central Excise, Allahabad V. Govind Mills Limited 2013 (8) TMI 649 - ALLAHABAD HIGH COURT it was held that the assessee was entitled to cross examine that person as well as Excise Officer and in absence thereof report of excise officer and alleged confession could not be relied on. It was more so as person making confession was available and alleged that his statement was recorded under duress. Section 9D of Central Excise Act, 1944 was not applicable as if applied in case person was dead or could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be found or incapable of giving evidence or is kept out of way by adverse party. Writ petition Generally the High Court will invoke writ jurisdiction at the stage of issuing show cause notice unless it has been issued without jurisdiction or in gross violation of laws. In M.J. Engineers V. Union of India 2014 (9) TMI 474 - Punjab and Haryana High Court , the High Court held that as a mere notice has been served calling upon the petitioner the show cause against the proposed levy of duty, are not inclined to entertain the petition. However, as representation filed by the petitioner regarding clarification of PTO Shafts is pending consideration before the CBE C, New Delhi the Writ petition is disposed of by directing the said authority to decide the representation within one month of receipt of a certified copy of the order. The petitioner, while filing reply to show cause notice would be at liberty to pray before the Adjudicating Authority that adjudication of the notices may await outcome of any clarification that may be issued by the CBE C. Dispatch of order In Vishnu Steels V. Union of India 2013 (5) TMI 482 - BOMBAY HIGH COURT the High Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the Adjudication order cannot be regarded as complete merely upon signing of order by the Adjudicating Authority. If the Adjudication Authority were to keep order in his own drawer without dispatching to assessee, latter would have no means of knowing of its making. Adjudication order must be placed by Adjudication Authority out of his control by dispatching it to assessee. After that stage is achieved the Adjudication Authority ceases to have any locus penitentiae and there is no possibility of Adjudication Authority tearing of the order or making a different order. Corrigendum to order-in-original In Garden Silks Mills Limited V. Commissioner of Central Excise Service Tax 2014 (2) TMI 917 - CESTAT AHMEDABAD the Tribunal held that the Adjudication Authority becomes functus officio , as soon as he passes order-in-original. Corrigendum issued replacing entire findings on order-in-original seems to inconsistent with law. Order-in-original and corrigendum is liable to be set aside under Section 33 of Central Excise Act, 1944 . In Kilitch Drugs (India) Limited V. Commissioner of Central Excise, Mumbai IV 2012 (7) TMI 54 - CESTAT, MUM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BAI the appellant M/s Kilitch Company (Pharma) Limited is manufacturing P P medicament on job work basis for M s Kilitch Drugs (India) Limited. Show cause notice was issued to both the appellants demanding differential duty by rejecting the valuation arrived at by the appellants M/s Kilitch Company (Pharma) Limited. Both the appellants filed reply to show cause notices. The Adjudicating Authority confirmed the demand recoverable from M/s Kilitch Drugs (India) Limited along with interest and impugned penalty on M/s Kilitch Company (Pharma) Limited. Both the appellants preferred appeal before Commissioner (Appeals). Therefore the Adjudication Authority issued a corrigendum to the effect that in the adjudication order the name of the party mentioned in para 23 (ii) of the adjudication order i.e., M/s Kilitch Drug (India) Limited may be read as M/s Kilitch Company (Pharma) Limited. The Tribunal held that the corrigendum by which duty stands confirmed against M/s Kilitch Company (Pharma) limited cannot be considered as corrigendum. It is total departure from confirmation of demand in adjudication order. The Tribunal set aside the order and remanded the case to the Adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udication Authority to decide the case afresh. Binding precedents In E.I. Dupont India Private Limited V. Union of India 2014 (5) TMI 128 - GUJARAT HIGH COURT the High Court held that the decisions of higher appellate authorities/courts are binding in Adjudication proceedings. Binding decisions on identical questions of law are repeatedly ignored by lower authorities despite clear and specific and authoritative pronouncements to this effect by higher authorities/courts. The High Court further directed the C.B.E. C to issue a detailed circular to all adjudicating authorities as to binding effect of orders passed by higher appellate authorities/Courts. Accordingly C.B.E. C issued circular vide circular No. 201/01/2014-CX/6, dated 26.06.2014 instructing adjudicating authorities to follow the decisions of higher appellate authorities/Courts scrupulously to avoid unnecessary litigation as well as adverse observation of the High Courts. In Clari s Life Sciences Limited V. Union of India 2014 (1) TMI 1467 - GUJARAT HIGH COURT the High Court held that the question of computation of education cess and secondary higher education cess was decided finally by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in favor of the petitioner. Such decision of Tribunal holds the field. Such decision of the Tribunal would be binding on the Adjudicating Authority. Even if the department is of the opinion that the issue is not free from doubt, it is not open to the Adjudicating Authority go ignore the binding precedent. Adjudication Authority acts as a quasi judicial authority. He is bound by law of precedent and binding effect of the order passed by higher authority or Tribunal of supreme jurisdiction Beyond the scope of show cause notice The Adjudicating Authority is bound to decide on the duty demanded in the show cause notice and his decisions should be within the allegations framed in the show cause notice. Beyond that the Adjudicating Authority is having no power to adjudicate. In Balakrishna Industries Limited V. Commissioner of Central Excise, Jaipur- I 2011 (11) TMI 555 - CESTAT NEW DELHI the appellant applied to the department for outside storage of the finished goods manufactured by them under Rule 4(4) of the Central Excise. Permission was granted. The appellant renewed the same from time to time. A show cause notice was issued to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant proposing for withdrawal of the permission on the ground that they had been enjoying this facility for the past five years continuously without making efforts to create storage facility in their factory as required by law and that the permission under Rule 4(4) can be granted only in exceptional circumstances and the same cannot be sort of perpetual and cannot be confined to continue beyond a reasonable period. The Adjudicating Authority confirmed the show cause notice and withdrew the permission. It also held that during the period till 2011 in respect of domestic clearances from the outside storage place, interest would be chargeable from the appellant at the applicable rate for delay in payment of duty for the period from the date of removal from the factory to the date of clearance from the outside storage facility. The Tribunal found that the ground taken by the Revenue that such outside storage facility under Rule 4(4) continuously for several years amounts to enjoying the warehousing facility under Rule 20 of Central Excise Rules was not taken in the show cause notice. The Tribunal held that the Adjudicating Authority cannot travel beyond the show c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause notice and invoke Rule 20 of the Central Excise Rules, 2002 when show cause notice is issued for permission under Rule 4(4). In Global Energy Food Industries V. Commissioner of Central Excise, Ahamedabad 2014 (7) TMI 26 - CESTAT AHMEDABAD the Tribunal observed that the show cause notices specifically mentioned that interest is not required to be paid by the appellant. By confirming interest in order-in-original Adjudicating Authority has gone beyond the scope of the show cause notice. Chartered Accountant s certificate In Dabur India Limited V. Commissioner of Central Excise, Ghaziabad 2013 (4) TMI 467 - CESTAT NEW DELHI the appellant is a multinational, multi products company with turnover of more than ₹ 4,000 crores. The appellants have produced a certificate from a Chartered Accountant certifying the correctness of deduction claimed. If the Adjudicating Authority is not satisfied with the certificate, the Tribunal held that he may cause verification as deemed necessary by him. The Adjudicating Authority may not have the required accounting expert to verify the calculation submitted in respect of the company with huge turnover a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd complexities. If that be the case the appropriate steps would be to engage a person with the required expertise either from within the department or from outside and get the calculation verified. Calling for truck loads of documents to be produced before the Adjudicating Authority may not help in any manner and the Adjudicating Authority is directed not to do so. What is required to be done is to verify the books of account and the relevant bills on test check basis or as exhaustively as the Adjudicating Authority may desires to satisfy himself or to the satisfaction of the person nominated by him, to be carried out at the place where the appellants are maintaining such records. If the Adjudicating Authority is rejecting the certificate given by the Chartered Accountant reasons why the certificate is factually not correct should be recorded. Withdrawal of an adjudication order In GARG Industries V. Commissioner of Central Excise Service Tax, Noida 2014 (9) TMI 865 - CESTAT NEW DELHI the Adjudicating Authority withdrew the adjudication order dated 30.03.2009 confirming duty and penalty when challenged by appellant before Supreme Court. Fresh proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were initiated by issue of fresh show cause notice and adjudicated upon show cause notice, confirming duty and impugned penalty which was under challenge before the Tribunal. The Tribunal held that there is no power, authority or jurisdiction consecrated under the provisions of Central Excise Act, 1944 enabling withdrawal of an adjudication order. There is no power that inheres in adjudicating authority to review its own order. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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