2022 (5) TMI 1395 - HC - Central Excise

Adjudication errors lead to order reversal, refund of excess tax, and compliance with court directives.

The court found procedural and substantive flaws in the adjudication process, including the adjudicating authority exceeding its jurisdiction and failing ... Refund of excess service tax and cess - interest under Section 11BB of the Central Excise Act, 1944 - scope of remand / remand directions - reopening assessment beyond remand - failure to grant personal hearing - pre-show-cause consultation under CBEC master circular - no estoppel against statute - verifiability of tax payments by challans / PLAScope of remand / remand directions - reopening assessment beyond remand - Adjudicating authority exceeded the scope of the remand by reopening the entire assessment instead of confining itself to the limited issues remanded by the Commissioner (Appeals-I). - HELD THAT: - The Commissioner (Appeals-I) remanded only two aspects for fresh consideration: (i) the reason for non-sanction of refund of the cess amount and (ii) the question of interest on the refund already sanctioned. Despite this, the adjudicating authority issued a show-cause notice and passed a fresh Order-in-Original that reopened assessment and made findings of short payment of tax, thereby producing effectively two conflicting orders. There was no occasion to reassess matters beyond the limited remit of the remand, and the adjudicating authority has not furnished an acceptable justification for widening the scope. [Paras 10]The adjudicating authority impermissibly went beyond the remand; the Order-in-Original dated 30.06.2020 cannot stand insofar as it reopens the entire assessment.Pre-show-cause consultation under CBEC master circular - failure to grant personal hearing - Failure to issue pre-show-cause consultation and denial of personal hearing vitiated the impugned proceedings insofar as procedural infractions are concerned. - HELD THAT: - It is undisputed that no consultation notice was served prior to issuance of the show-cause notice, contrary to the master circular dated 10.03.2017, and that no personal hearing was accorded before passing the impugned assessment order. Both procedural requirements were not complied with and were not contested by the Revenue before the Court. These procedural infractions undermine the validity of the impugned order. [Paras 6, 9]Proceedings suffered from procedural infirmities because consultation and hearing requirements were not observed.Refund of excess service tax and cess - interest under Section 11BB of the Central Excise Act, 1944 - Petitioner was entitled to (a) sanction of the excess refund actually paid on account of service tax and cess, and (b) statutory interest under Section 11BB for the period specified. - HELD THAT: - The earlier Order-in-Original had sanctioned a refund of Rs.2,32,09,285 and left an amount (cess/tax) unrefunded. The Commissioner (Appeals-I) remanded only the correctness of the withheld cess and the interest claim. Given that the amounts and periods are not in dispute and the adjudicating authority failed to justify non-refund, the Court directed payment of the excess amount actually paid (after correcting a minor calculation error) together with interest. The Court held that statutory interest under Section 11BB is triggered once the statutory period lapses and that a prior communication by the petitioner purportedly renouncing interest does not bar the statutory right to interest. [Paras 11, 12, 14]Respondent directed to (i) pay interest on the sanctioned refund from the date specified, (ii) remit the excess amount found to be paid, and (iii) pay interest on that excess amount from the same date, within two weeks.No estoppel against statute - interest under Section 11BB of the Central Excise Act, 1944 - Petitioner's earlier communication disclaiming claim to interest did not estop it from claiming statutory interest under Section 11BB. - HELD THAT: - The Court held that a voluntary communication by the petitioner that it would not claim interest cannot operate to defeat a statutory right to interest. Once the statutory conditions for payment of interest are met, the Revenue is obliged to pay interest; there can be no estoppel against a statute. [Paras 12]The communication renouncing interest did not preclude payment of statutory interest; interest must be paid as directed.Verifiability of tax payments by challans / PLA - The Revenue's plea that the petitioner failed to produce the Personal Ledger Account (PLA) did not preclude refund because the petitioner produced challans which made the claimed payments verifiable. - HELD THAT: - The Court found the Revenue's contention untenable in view of the challans produced by the petitioner showing deposits of tax and cess. The amounts claimed were thus verifiable by reference to those challans and could not be rejected merely on the ground that a PLA copy was not filed. [Paras 13]The absence of a PLA copy did not justify denying the refund where payment challans were available and verifiable.Final Conclusion: Writ petition allowed. The Court held that the adjudicating authority exceeded the scope of remand and committed procedural lapses by not issuing the prescribed pre-show-cause consultation and by denying personal hearing; directed payment of interest on the earlier sanctioned refund and remittance of the excess amount actually paid (with interest) within two weeks, and otherwise disposed of the petition in the terms set out. Issues Involved:1. Jurisdiction of the officer passing the impugned order.2. Requirement of pre-show cause notice consultation.3. Provision of personal hearing to the petitioner.4. Scope of adjudication as per the remand order.5. Accuracy of the facts in the show cause notice.6. Refund of the cess amount and interest thereon.7. Short payment of tax and penalties imposed.Issue-wise Detailed Analysis:1. Jurisdiction of the Officer:The petitioner contended that the impugned order dated 30.06.2020 was passed by an officer who lacked jurisdiction. According to the petitioner, demands exceeding Rs.50,00,000/- should be adjudicated by an Additional/Joint Commissioner or a Commissioner if the demand exceeds Rs.2,00,00,000/-. This argument was supported by paragraph 11.1 of the CBEC circular dated 10.03.2017.2. Requirement of Pre-Show Cause Notice Consultation:The petitioner argued that no pre-show cause notice consultation was carried out, despite the demand exceeding Rs.50,00,000/-. This was a requirement under paragraph 5 of the CBEC circular dated 10.03.2017. The court noted that this procedural lapse was not disputed by the respondent.3. Provision of Personal Hearing:The petitioner asserted that no personal hearing was provided before the impugned order was passed. The court found that this procedural infraction was also not contested by the respondent.4. Scope of Adjudication as per the Remand Order:The petitioner claimed that the adjudicating authority exceeded the scope of the remand order issued by the Commissioner (Appeals-I) on 30.05.2019. The remand was limited to examining the refund of cess amounting to Rs.36,94,642/- and the issue of interest on the refund amount. However, the adjudicating authority issued a fresh show cause notice and broadened the scope, which included additional tax demands and penalties.5. Accuracy of the Facts in the Show Cause Notice:The petitioner argued that the impugned show cause notice was based on inaccurate facts, particularly regarding the payment of service tax amounting to Rs.2,40,03,002/-. The petitioner provided evidence that this amount had already been paid.6. Refund of the Cess Amount and Interest Thereon:The petitioner sought a refund of the excess service tax and cess paid. The court noted that the initial Order-in-Original dated 03.01.2019 had sanctioned a refund of Rs.2,32,09,285/- but denied the refund of Rs.36,94,642/- attributable to cess. The Commissioner (Appeals-I) had remanded the matter to address this issue. The court directed the respondent to refund the excess amount paid towards tax and cess amounting to Rs.36,27,615/- and to pay interest on the refunded amount at the rate of 6% per annum from 02.02.2018 to 03.01.2019.7. Short Payment of Tax and Penalties Imposed:The adjudicating authority, in the impugned order dated 30.06.2020, concluded that the petitioner had short-paid taxes amounting to Rs.2,15,39,257/- and Rs.1,03,05,282/-. Additionally, penalties were imposed for late filing of service tax returns. The court found that the adjudicating authority had reopened the entire assessment, which was beyond the scope of the remand order.Conclusion:The court found several procedural and substantive flaws in the adjudication process. It held that the adjudicating authority had exceeded its jurisdiction and failed to comply with procedural requirements, such as pre-show cause notice consultation and personal hearing. The court set aside the impugned order and directed the respondent to refund the excess amount paid towards tax and cess along with interest. The writ petition was allowed, and the respondent was ordered to comply with the court's directions within two weeks.