2018 (2) TMI 1404 - HC - Central Excise

Court Upholds Order for Special Audit under Central Excise Act

The court upheld the order issued under Section 14AA of the Central Excise Act, 1944, finding that the respondent No.1 complied with legal obligations and ... Order under Section 14AA of the Central Excise Act, 1944 - case of the petitioner/assessee company is that the order does not provide reasons enough to support the formation of belief by the respondent No.1 that the utilisation/availing of the credit duty by the petitioner/assessee company falls under any of the conditions stipulated by Section 14AA(1)(a) and (b) thereof - Held that: - identical issue decided in the case of [1976 (3) TMI 1 - SUPREME Court], where it was held that majority of the learned judges in the High Court, in out opinion, were not in error in holding that the said material could not have led to the formation of the belief that the income of the assessee-respondent had escaped assessment because of his failure or omission to disclose fully and truly all material facts. This Court finds that the respondent No.1 has applied his mind to the record, heard and considered the facts presented in defence of the petitioner/assessee - petition dismissed. Issues:Challenge to order under Section 14AA of the Central Excise Act, 1944 - Lack of reasons to support belief by respondent No.1 - Violation of principles of natural justice - Requirement of reasons for reference under Section 14AA - Compliance with obligations under the order of Court dated 6th December, 2016 - Application of mind by respondent No.1 - Sufficiency of reasons to trigger reference under Section 14AA.Analysis:The writ petition challenges an order issued under Section 14AA of the Central Excise Act, 1944 by the Commissioner, Central Excise Kolkata-II Commissionerate. The petitioner argues that the order lacks sufficient reasons to support the belief by the respondent No.1 regarding the utilization of credit duty falling under the conditions stipulated by Section 14AA(1)(a) and (b). Reference is made to a previous judgment emphasizing the obligation to pass a reasoned order and adhere to the principles of natural justice while exercising powers under Section 14AA.The petitioner contends that the respondent No.1 did not provide adequate reasons for the reference to a special audit under Section 14AA, as required by law and the previous court order. However, the respondent argues that the order was reasoned, considering the overutilization of credit by the petitioner in later years compared to earlier years. The respondent asserts that detailed evidence will be available after the special audit and urges the petitioner not to anticipate negative conclusions.The court refers to legal precedents regarding the formation of belief under revenue statutes, emphasizing that the sufficiency of reasons for the belief is not justiciable, as long as there are reasonable grounds for the authority to form the belief. The court finds that the respondent No.1 applied his mind, heard the defense presented by the petitioner, and the reference meets the legal threshold required for the formation of belief under Section 14AA. Consequently, the court dismisses the writ petition, stating that no further relief can be granted.In conclusion, the court upholds the order under Section 14AA, finding that the respondent No.1 complied with the obligations under the law and the previous court order. The judgment emphasizes the importance of reasons for belief in revenue statutes and the subjective satisfaction of the assessing officer in forming such belief.