2023 (5) TMI 437 - HC - Central Excise

High Court overturns Tribunal decision on duty demand, emphasizing procedural fairness and legal consistency.

M/s. BENGAL HAMMER INDUSTRIES (P) LTD. Versus UNION OF INDIA & ORS.

The High Court of Calcutta allowed the appeal, setting aside the orders of the Tribunal, first appellate authority, and Joint Commissioner of Central ... Violation of principles of natural justice and fair play - review of own order - refixation of annual capacity of production not appreciated - non-issuance of SCN - opportunity of hearing not provided - HELD THAT:- On perusal of the grounds of appeal filed before the Tribunal by the assessee it is found that specific contention raised by the assessee was that the earlier order passed by the Commissioner attained finality accepted by the department not appealed against the review, the order could not have been done unilaterally by an officer, who is junior in rank than the Commissioner. This contention raised by the assessee was not considered by the Tribunal. Interestingly, identical issue has been raised in respect of the other assessees, who are also carrying on similar production activities and one such case travelled up to the Tribunal in the case of Commissioner of Central Excise-IV vs. Hooghly Ispat Ltd. The Tribunal dismissed the appeal filed by the department and affirmed the order passed by the Commissioner of Central Excise [Appeals] was granted relief in favour of the said assessee. The learned Tribunal pointed out that the availment of MODVAT credit by the said assessee was lawful. It would be beneficial to refer to the decision of the Hon’ble Supreme Court in the case of Birla Corporation Ltd. vs. CCE, [2005 (7) TMI 104 - SUPREME COURT]. The Hon’ble Supreme Court held when a same question arises for consideration on identical fact, the revenue cannot be permitted to take a different stand and it was pointed out that earlier appeal involving the identical issue was not pressed and dismissed and the revenue having taken a conscious decision to accept the principles laid down in the said order cannot be permitted to take opposite stand in a different manner and if the same is permitted, the law will be in a state of confusion and will place parties as well as the assessee in a quandary. Once the department has accepted the orders passed in identical issue considering the scope of the revision of the annual production capacity of those units who are also carrying similar group of activities, the department has precluded from taking a different stand in other cases more particularly, in the case of the assessee. The appeal filed by the assessee is allowed. Issues involved:The appeal under Section 35G of the Central Excise Act, 1944 challenges an order passed by the Customs, Excise & Service Appellate Tribunal regarding the refixation of annual production capacity without due process, raising the question of natural justice and fair play.Consideration of Proceedings Initiated by Joint Commissioner:The main issue is whether the proceedings initiated by the Joint Commissioner, demanding central excise duty based on a refixation of annual production capacity, were legally valid. The Commissioner had initially determined the annual capacity of the appellant under specific rules, but unilaterally revised it following a circular from the Board. This unilateral decision without issuing a show cause notice or granting an opportunity of hearing raised concerns about procedural fairness. The appellant had previously submitted requests regarding the breakdown of alloy and non-alloy steel production, which were considered in determining duty liability. However, subsequent actions by the Joint Commissioner and the issuance of a show cause notice deviated from the initial determination without proper justification.Challenge of Re-Determination and Appeal Process:The appellant contended that the unilateral re-determination of annual production capacity by a subordinate authority, contrary to the Commissioner's original order, was improper. Despite the appellant's submissions and requests for duty liability based on the declared production capacity, the Commissioner revised the capacity without notice. The subsequent appeal process involved dismissal by the Commissioner and the Tribunal based on technicalities rather than addressing the core issue of unilateral revision without proper basis. Comparisons with similar cases where appeals were allowed due to consistent application of principles highlight the lack of justification for deviating from established determinations.Precedents and Legal Standpoint:The Tribunal's failure to address the appellant's key contention regarding the finality of the Commissioner's original determination and the lack of challenge from the department in similar cases raised concerns about consistency and legal principles. The appellant's reliance on Supreme Court decisions emphasizing the importance of consistency in revenue department decisions on identical issues underscored the need for uniform application of legal standards. The appeal was allowed based on the grounds presented, highlighting the necessity for adherence to established legal precedents and procedural fairness in such matters.In conclusion, the High Court of Calcutta allowed the appeal, setting aside the orders of the Tribunal, first appellate authority, and Joint Commissioner of Central Excise. The demand for duty was quashed, emphasizing the importance of procedural fairness and consistency in decisions regarding the determination of annual production capacity under the Central Excise Act, 1944. The substantial question of law was answered in favor of the appellant, ensuring that the legal principles and precedents were upheld in this case.