Dishonest adjudication exercise - Commissioner defying Tribunal's directions and passing an order which should never have been passed - Cost of Rs 10,000 imposed: CESTAT
By TIOL News Service
NEW DELHI, MAR 05, 2015: THE appellants are engaged in the manufacture of dutiable glassware (tableware and kitchenware) as well as exempted articles of glass (glass articles manufactured by mouth blown process).
The appellant availed CENVAT credit of excise duty paid on inputs-Soda Ash and other chemicals and capital goods and service tax paid on input services viz. GTA services availed for transportation of the inputs upto the factory premises and the service of pipeline transportation of the gas received in the factory.
The department took a view that since common inputs/input services were used in manufacture of dutiable and exempted goods and separate accounts/inventory was not maintained the assessee is required to pay an amount equal to 5%/10% of the sale value of exempted goods in terms of rule 6 of CCR.
SCNs for recovery of a total amount of Rs.2.25Crores [2.09 Cr + 16L] for the period from 1.4.2005 to 31.08.2009 &1.9.2009 to 31.03.2010 were issued.
With effect from 01.04.2008 manufacturers who were not maintaining separate accounts of consumption were given an option to reverse the credit attributable to manufacture of exempted final product by following procedure specified in rule 6(3A). By Finance Act, 2010, a retrospective amendment was made to Rule 6 of CCR, 2004 w.e.f. 10.09.2004 giving assessees an option of reversing of attributable CENVAT credit instead of paying 5%/10% amount & subject to production of Chartered Accountant's certificate in this regard.
The CCE, Kanpur adjudicated both the SCNs under a common order. In respect of the first SCN he confirmed a demand of 80 lakhs and dropped the amount of Rs.1.29 Cr as the application filed by the assessee under s. 73 of the FA, 2010 was accepted by him for the period 01.04.2005 to 31.03.2008. The second demand was confirmed as such. Interest and penalties were imposed in good measure.
In appeal, the CESTAT had remanded the matter for re-quantification of the demand observing that after retrospective amendment to Rule 6(3) of CCR, 2004 by Section 73 of the Finance Act, 2010, there was no scope for demanding from the assessee an amount equal to 5% /10% of the sale value of the exempted final product, if the assessee is ready to reverse the actual CENVAT credit attributable. The Tribunal also observed that Commissioner has not given any proper reason for denying the benefit for the period April, 2008 to March, 2010 and that if the calculation submitted by the appellant is not correct, the Commissioner has to calculate the credit amount to be reversed explaining the method he proposes to adopt after giving an opportunity of being heard. The Tribunal also set aside the penalty on the appellants on the ground that since the matter involved interpretation of law the penalty on them is not called for.
In de novo proceedings, the Commissioner confirmed the demand of Rs.80 lakhs for the period 1.4.2008 to August 2009 and Rs.16 lakhs for the period September, 2009 to March, 2010 along with interest and also imposed penalty of the same amount u/r 15 of the CCR, 2004.
The appellant is before the CESTAT in the second round.
They have also filed an application for considering additional evidences and which are documents obtained under the RTI Act, 2005 viz. letters of the jurisdictional R/S to the AC, C.EXas well as the Superintendent (Adjudication) supporting the appellant's contention that during the period of dispute, they had not taken CENVAT credit in respect of the quantity of inputs/input service used in or in relation to the manufacture of exempted final products.
The Bench noted that the additional evidences go to the root of the matter and, therefore, allowed the miscellaneous application.
On the subject appeal, after hearing the submissions, the Bench inter alia observed -
++ We notice that in the de novo order, the directions of the Tribunal in the remand order mentioned above have been duly noted in para- 4,5 & 6 of the Commissioner's order, wherein it is also mentioned that the final order as well as misc. order have been accepted by the Committee of Commissioners.
++ However, what we find is that the Commissioner disregarding the appellant's plea that during the period from April, 2008 to March, 2010 they had not taken the CENVAT credit in respect of the input/input services used in or in relation to the manufacture of exempted final products, not only confirmed entire demand on the basis of 5%/10% value of the exempted final products disregarding the directions of the Tribunal to determine the amount payable, if any, on proportionate basis, as after retrospective amendment, there is no scope for demanding from the assessee 10%/15% of the sale price of the exempted final products, but has also decided to impose penalty of equal amount on the appellant.
++ We are of the view that this order of the Commissioner is not only without application of mind whatsoever but is also in contumacious disregard of the decision of the Tribunal.
++ When the Tribunal has given a clear finding in the remand order that for the period from April, 2008 to March, 2010, the appellant would be required to pay an amount equal to the CENVAT credit involved in respect of the input/input services used in the manufacture of exempted final products and the Tribunal also decided that in the circumstances of the case, imposition of penalty is not called for and had set aside the penalty, the Commissioner in the de novo proceedings could not have ordered determination of quantum of demand under Rule 6(3)(i) on the basis of 5%/10% of the sale value of the exempted final products and could not have decided to impose penalty of equal amount.
++ Commissioner has maintained total silence on the pleas of the Appellant, as recorded in para 8 of her order, that during the period of dispute, they had been maintaining separate account for receipt and consumption of the inputs & input services meant for the manufacture of exempted final products and they had not taken CENVAT credit in respect of inputs/input services used in the manufacture of exempted goods.
++ This plea of the Appellant stands confirmed by the verification report dated 6.8.2013 of the Range Superintendent to Superintendent (Tech.), Central Excise Division, Agra and the report sent by AC, Agra to AC (Adjudication), Headquarters office, Kanpur, according to which during 2008-2009 and 2009-2010, the credit not taken in respect of inputs/input services used in or in relation to manufacture of exempted final products was more than the credit required to be reversed in terms of the formula of sub-rule (3A) of Rule 6. If this is correct, there was absolutely no need to initiate the proceedings under Rule 6(3).
++ We also fail to understand as to why the Range Superintendent's report which had been forwarded to AC (Adjudication) by AC, Agra vide his letter dated 30.08.2013 has been totally ignored by the Commissioner in her order dated 12.12.2013.
++ In any case, when this issue had been decided by the Tribunal in the remand order and Tribunal had directed for determination of the amount payable under Rule 6(3) in proportion to the use of inputs/input services in or in relation to manufacture of exempted final products, the Commissioner in de novo proceedings could not go into this question again. The impugned order thus, besides being in contumacious disregard of the Tribunal's order also appears to be the outcome of a dishonest exercise of adjudication function.
++ The conduct of the Commissioner in passing the impugned order…is depreciable…. The order is in contumacious disregard of the Tribunal's directions, besides having been passed by totally disregarding the Appellant's plea…
++ It is this type of irresponsible adjudication which is burdening this Tribunal with mounting pendency, besides increasing the cost of compliance with the tax laws for the assessees.
++ Safeguarding the interests of the Revenue does not mean that a duty demand must be confirmed ignoring the facts on record, pleas made by the assessee and the judgments of the Tribunal and the courts.
++ Such irresponsible exercise of adjudication not only represents a cost for the assessee, who has to waste his time and money in pursuing the appeals, but also a cost for the Tribunal being run with tax payer's money, which has to waste its time in deciding appeals against orders which should never have been passed.
++ What we find disturbing is that the tendency to pass such irresponsible adjudication orders is increasing and if unchecked, it would result in collapse of the dispute resolution mechanism and no amount of increase in the number of benches can bring down the increasing pendency of appeals. We, therefore, hold that ends of justice require that some cost is imposed on the Commissioner in this matter.
++ In our view this principle (of imposing costs) will apply in a case where the Commissioner defying the Tribunal's direction and ignoring the provisions of law passes an order which should never have been passed and thereby forcing the assessee to file appeal before the Tribunal.
The CESTAT, therefore, imposed a cost of Rs.10,000/- on the Respondent Commissioner and made it clear that the same is to be paid by the Commissioner who has adjudicated the matter . The amount of cost is to be paid to the Registry of the Tribunal within four weeks.
The registry was also directed to send a copy of the order to the Chairman, Central Board of Excise & Customs for information.
(See 2015-TIOL-428-CESTAT-DEL)
