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TMI Blog2023 (6) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... of Chapter V of the Finance Act, in hearing the appeals and making order under section 85, the Commissioner (Appeals) shall exercise the same powers and follow the same procedure as he exercises and follows in hearing the appeals and making orders under the Excise Act. Whether the powers conferred upon the Commissioner (Appeals) under the second proviso to section 35A(3) of the Excise Act could have been exercised by the Commissioner (Appeals), while hearing an appeal under section 85 of the Finance Act against an order confirming the demand of service tax proposed in the show cause notice, to issue a fresh notice to the appellant under section 73 of the Finance Act? - HELD THAT:- It is section 35(A) of the Excise Act that deals with procedure of appeals before the Commissioner (Appeals). Sub-section (3) of section 35A of the Excise Act provides 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 but an order enhancing any penalty or fine in lieu of confiscation or reducing the amount of refund shall not be passed unl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot assume to himself all the powers conferred under various sections of the Finance Act, only for the reason that he can 'pass such order, as he thinks fit'. The Gujarat High Court in COMMISSIONER OF SERVICE TAX VERSUS VERSUS ASSOCIATED HOTELS LIMITED [ 2014 (4) TMI 406 - GUJARAT HIGH COURT ] examined the provisions of sub-sections (4) an (5) of the Finance Act as also sub-section (3) of section 35A of the Excise Act and observed that though sub-section (5) of section 85 of the Finance Act may require the Commissioner (Appeals) to follow the same procedure and exercise the same powers in making orders under section 85(4) of the Finance Act as under the Excise Act in appeals, but as sub-section (5) starts with the expression subject to the provision of this Chapter and sub-section (4) of section 85 of the Finance Act itself contains the width of the powers of the Commissioner (Appeals) in hearing the appeal under section 85, the scope of such power cannot be curtailed by reference to section 85(5) of the Finance Act. The Commissioner (Appeals) did not have the power to issue the notice under section 73(1) of the Finance Act. The notice dated 29.12.2020, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso to section 35A(3) of the Central Excise Act 1944 [the Excise Act] and section 73 of the Finance Act confirmed the demand of Rs. 37,05,65,104/- proposed in the notice dated 29.12.2020 with interest and penalty. 2. The appellant is engaged in the manufacture of winding wire, plastic cable and SS wire. In addition to the manufacturing activity, the appellant is also engaged in providing turnkey project services and erection and commissioning services, mainly to electricity distribution companies. 3. It transpires from the records that earlier, pursuant to an audit of the records of the appellant, a show cause notice dated 07.09.2017 was issued to the appellant proposing a demand of Rs. 1,70,89,498/- under rule 6(3A) of the CENVAT Credit Rules, 2004 [the 2004 Credit Rules] on the ground that apart from manufacturing excisable goods (on which appropriate excise duty was paid) and provision of output services (on which appropriate service tax was paid), the appellant was also engaged in trading of goods in such turnkey projects, which would qualify as 'exempted service' and accordingly, CENVAT credit was liable to be reversed under rule 6(3A) of the 2004 Credit Rules. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice Tax amounting to Rs. 37,05,65,014/- during the period October, 2014 to June, 2017 (Annexure-A) (RUD-1) in contravention of the provisions of Section 66B, 67,68 of the Finance Act, 1994 read with rules made thereunder. xxxxxxxxxxx 20. From the above, it appears that, the assessee failed to discharge the service tax liability as discussed in the preceding paragraphs. xxxxxxx. It appears that there has been a deliberate act by the assessee to suppress their correct taxable value in order to intentionally short pay and evade the service tax payment to the Govt. exchequer and not following the provisions of the law. Had the department not initiated the inquiry/investigation against them in the instant case, the said short payment of Service Tax would have remained unnoticed and unearthed, therefore, the extended period of limitation as contained under the proviso to Section 73(1) of the Finance Act, 1994 read with Section 6 of The Taxation And Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, appears to be invokable in the instant case for recovery of Service tax amounting to Rs. 37,05,65,014/- read with Section 73A of the Finance Act, 1944. Further i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of- (a) fraud; or (b) collusion; or (c) willful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words thirty months , the words five years had been substituted. Explanation .-Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of thirty months or five years, as the case may be. (1A) Notwithstanding anything contained in sub-section (1) (except the period of thirty months of serving the notice for recovery of service tax), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t provides that the Commissioner (Appeals) shall hear and determine the appeal and pass such orders as he thinks fit and such orders may include an order enhancing the service tax, interest or penalty. Sub-section (5) of section 85 of the Finance Act provides that subject to the provisions of Chapter V of the Finance Act, in hearing the appeals and making order under section 85, the Commissioner (Appeals) shall exercise the same powers and follow the same procedure as he exercises and follows in hearing the appeals and making orders under the Excise Act. 13. Section 35 of the Excise Act deals with appeals to Commissioner (Appeals), while section 35A deals with the procedure in appeal. The relevant portion of section 35A of the Excise Act, is reproduced below: Section 35A. Procedure in appeal.- (1) xxxxxxx (2) xxxxxxx (3) 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: PROVIDED that an order enhancing any penalty or fine in lieu of confiscation or confiscating goods of greater value or reducing the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85 provides that the Commissioner of Central Excise (Appeals) shall exercise the same powers and follow the same procedure as he exercises and follows in hearing the appeals and making orders under the Excise Act, but the said powers are subject to the provisions of Chapter V of the Finance Act; (ii) From a combined reading of sub-sections (4) and (5) of the Finance Act, it is clear that a reasonable opportunity of showing cause has to be given by the Commissioner (Appeals) before enhancing the service tax, interest or penalty but such enhancement has to be within the bounds of the subject-matter of the notice already issued and a fresh notice cannot be issued by Commissioner (Appeals). In other words, only such powers provided under the Excise Act can be exercised by the Commissioner (Appeals) which are not in conflict with the provisions of Chapter V of the Finance Act. In support of this contention reliance has been placed on the decisions of the Supreme Court in South India Corporation (P) Ltd. (In all Appeals) vs. Secretary, Board of Revenue Trivandrum and Another AIR 1964 SC 207, and Union of India vs. Brigadier P.S. Gill 2012 (279) E.L.T. 321 (S.C.).; (iii) This inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that the provisions of section 35A(3) of the Excise Act are not applicable to section 85 of Finance Act, the powers of Commissioner (Appeals) under section 85 of the Finance Act are very wide as he can pass such orders as he thinks fit and there is no restriction on the power of Commissioner (Appeals) to issue a fresh notice; and (iv) The appellant is not correct in stating that the service tax liability had been correctly discharged or that the extended period of limitation was not correctly invoked. 18. The contentions advanced by the learned counsel for the appellant and the learned special counsel for the department have been considered. 19. As noticed above, section 85 of the Finance Act deals with appeals to the Commissioner (Appeals) and provides that any person aggrieved by any decision of the adjudicating authority may appeal to the Commissioner (Appeals). Sub-section (4) provides that the Commissioner of Central Excise (Appeals) shall hear and determine the appeal and, subject to the provisions of Chapter V, pass such orders as he thinks fit and such orders may include an order enhancing the service tax, interest or penalty, but such an order enhancing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention of learned special counsel for the department, however, is that there is no reason to restrict the power of the Commissioner (Appeals) while hearing an appeal under the Finance Act to sub-section (4) of section 85 and exclude the power of the Commissioner (Appeals) under the second proviso to sub-section (3) of section 35A of the Excise Act, as made applicable by virtue of sub-section (5) of section 85 of the Finance Act, to issue a fresh notice and in any event sub-section (4) of section 85 the Finance Act is wide enough to confer power on the Commissioner (Appeals) to issue a fresh notice demanding service tax that was short paid. 22. The second contention of the learned special counsel appearing for the department that there is enough power with the Commissioner (Appeals) under sub-section (4) of section 85 of the Finance Act to issue a notice to the appellant requires to be examined first, because if this is decided in favour of the department, it may not be necessary to examine the first contention raised on behalf of the department. 23. To examine this contention, it is necessary to examine the provisions of section 85(4) of the Finance Act. It provides that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a show cause notice is the foundation in the matter of levy and recovery of duty, penalty and interest and if Rule 7 of the Valuation Rules, 1975 was not invoked in the show cause notice, it would not be open to the Commissioner to invoke the said Rule. 27. The same view was reiterated by the Supreme Court in Commissioner of Central Excise, Bangalore vs. Brindavan Beverages (P) Ltd. [Appeal (Civil) 3417-3425 of 2002 decided on 15.06.2007]. 28. In Nestor Pharmaceuticals Ltd. vs. Commissioner of Central Excise, Delhi 2000 (116) E.L.T. 477 (Tribunal), a Division Bench of the Tribunal observed that the Commissioner (Appeals) cannot go beyond the scope of the show cause notice and that no matter can be decided on a ground other than the grounds raised in the show cause notice and for this reason the impugned order was set aside. 29. In Tata Johnson Controls Automotive vs. Commissioner of Customs, Mumbai 2004 (167) E.L.T. 93 (Tri.-Mum.) a Division Bench of the Mumbai Tribunal observed that it was not open to the Commissioner (Appeals) to make out a new case in the order passed by the Commissioner and, therefore, the order passed by the Commissioner (Appeals) was set aside on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed in the show cause notice is for Rs. 100/- and the adjudicating authority confirms the demand for Rs. 75/- only, it will be open to the Commissioner (Appeals) to enhance the duty by another amount upto Rs. 25/-, after providing an opportunity to the appellant to show cause, even in an appeal filed by an assessee against the confirmation of demand of Rs. 75/-. 34. In this connection reliance can be placed on the decision of the Supreme Court in Commissioner of Income Tax, Calcutta vs. Rai Bahadur Hardutroy Motilal Chamarai 2002-TIOL-756-SC-IT-LB, wherein it was observed: The principle that emerges as a result of the authorities of this Court is that the Appellate Assistant Commissioner has no jurisdiction, under section 31(3) of the Act, to assess a source of income which has not been processed by the Income-tax Officer and which is not disclosed either in the returns filed by the assessee or in the assessment order , and therefore the Appellate Assistant Commissioner cannot travel beyond the subject-matter of the assessment. In other words, the power of enhancement under section 31(3) of the Act is restricted to the subject-matter of assessment or the sources of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in hearing the appeals and making orders under the Excise Act. Thus, the exercise of the powers by the Commissioner (Appeals), while hearing an appeal under sub-section (4) of section 85 of the Finance Act, are subject to the provisions of Chapter V of the Finance Act, which contains sections 66 to 96. The power available to a Commissioner (Appeals) under sub-section (5) of section 85 would, therefore, be subject to, amongst others, the provisions of sections 83 and sub-section (4) of section 85 of the Finance Act. The phrase 'subject to the provisions of this Chapter', therefore, assumes importance. 40. P. Ramanatha Aiyar's The Law Lexicon-Third Edition 2012 explains the meaning of the phrase 'subject to the provisions of this Act' in the following manner: The expression 'subject to the provisions of this Act' merely means that if there are any provisions regulating the Board in the matter of supplying electricity to any person not being a licensee, then the supply by the Board will be subject to those provisions. There is no provision which regulates the Board in the matter of the charges which it may fix for the supply of electricity. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er an aggrieved party can file an appeal against a final decision or order of the Tribunal under section 30 of the Armed Forces Tribunal Act without taking resort to the procedure prescribed under section 31 of the said Act because of the expression 'subject to the provisions of section 31'. The relevant provisions of section 30 and 31 of Armed Forces Tribunal Act are, therefore, reproduced below: 30. Appeal to Supreme Court . - (1) Subject to the provisions of Section 31, an appeal shall lie to the Supreme Court against the final decision or order of the Tribunal (other than an order passed under Section 19): Provided that such appeal is preferred within a period of ninety days of the said decision or order: Provided further that there shall be no appeal against an interlocutory order of the Tribunal. (2) An appeal shall lie to the Supreme Court as of right from any order or decision of the Tribunal in the exercise of its jurisdiction to punish for contempt: xxxxxxxxx 31. Leave to appeal. - (1) An appeal to the Supreme Court shall lie with the leave of the Tribunal; and such leave shall not be granted unless it is certified by the Tribunal that a poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that if there is a conflict or inconsistency between the two, the provisions of Chapter V of the Finance Act shall prevail. 47. It is keeping in mind the aforesaid discussion, that the relevant provisions of the Finance Act would have to be examined. 48. Sub-section (4) of section 85 of the Finance Act comprehensively deals with the powers of the Commissioner (Appeals) in hearing appeals and making orders. The provisions of sub-section (5) of section 85 of the Finance Act are subject to the provisions of Chapter V of the Finance Act, which would include sub-section (4) of section 85. In such a situation, when comprehensive powers have been given to the Commissioner (Appeals) under sub-section (4) of section 85 of the Finance Act, the Commissioner (Appeals) would not have the power to issue a notice contemplated under section 73(1) of the Finance Act. This finds support from the judgments of Courts which have dealt with the provisions of sub-sections (4) and (5) of the Finance Act and section 35A (3) of the Excise Act, while examining the powers of the Commissioner (Appeals) under sub-section (4) of section 85, though in a different context relating to the power of remand to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the provisions of section 35A (3) of the Excise Act, after an amendment was made on 11.05.2001. It is in this context that the Madras High Court observed that sub-section (3) of the 35A of the Excise Act cannot be superimposed into sub-section (5) of 85 of the Finance Act, as sub-section (4) of 85 Finance Act provides for the manner in which the Commissioner (Appeals) shall hear and determine the appeal and this only states that he can pass such orders as he thinks fit. The relevant portion of the judgment is reproduced below: 18. The argument of the Learned Counsel for the petitioner is that prior to 2001, Section 35A(3) specifically provided that the Commissioner (Appeals) may pass such order as he thinks fit confirming, modifying or annulling the decision or order appealed against, or may refer the case back to the adjudicating authority for such directions for a fresh adjudication or decision and those power was taken away when Section 35A(3) was substituted by Finance Act, dated 11-5-2001 and since sub-section (5) of Section 85 of the Finance Act directs the Commissioner of Central Excise (Appeals) to follow the procedures under the Central Excise Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Finance Act, all the powers of the Commissioner (Appeals) while exercising powers under 35A of the Excise Act, section 35A could have been inserted in section 83 of the Finance Act. The exclusion of section 35A of the Excise Act in section 83 of the Finance Act and making the provisions of section 85(5) of the Finance Act subject to the provision of Chapter V of the Finance Act also support the contention advanced by the learned counsel for the appellant that the Commissioner (Appeals), while hearing an appeal under sub-section (4) of section 85 of the Finance Act, would not have the power to issue a notice under section 73 (1) of the Finance Act. 52. What, therefore, transpires is that only such provisions of the Excise Act dealing with hearing appeals and making orders would be available to a Commissioner (Appeals) under sub-section (4) of section 85 which are not in conflict or inconsistent with any of the provisions of Chapter V of the Finance Act. To enumerate some of such powers, which may be available to Commissioner (Appeals), reference can be made to sub-sections (1), (2), (4), (4A) and (5) of section 35A of the Excise Act which provide that the Commissioner (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X
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