2024 (2) TMI 194 - AT - Central Excise

Tribunal Overturns Orders: Original Authority Lacked Jurisdiction, Appeals Allowed, Demands Invalid Due to Overreach.

The Tribunal set aside the impugned orders, allowing both appeals, as the original authority lacked jurisdiction to reopen assessments beyond the ... Scope of SCN - Extended period of limitation - paid excess duty for a few quarters - paid less amounts for a few quarters - no proposals in the show cause notice for recalculation - HELD THAT:- On regular basis the provisional assessments were finalized and the finalization of provisional assessments were adjudication orders passed by Assistant or Deputy Commissioner. If Revenue was aggrieved by the said orders, the course of action provided by law for Revenue was to prefer appeal against such finalization orders before learned Commissioner (Appeals). After the limitation period for filing of appeal before Commissioner (Appeals) is over, then such assessments orders become final in law and cannot be reopened. In the present case, learned original authority has reopened such assessment beyond the period of limitation and, therefore, the impugned order is not sustainable. Further, learned original authority in this case also did not have jurisdiction to reopen such assessments for the reasons that the proper authority to reopen assessment made by Assistant or Deputy Commissioner under Central Excise law is Commissioner (Appeals). Therefore, the impugned orders are not sustainable. The impugned orders are set aside - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether assessments finalized by Assistant/Deputy Commissioners on provisional cost data (CAS-4) become final after expiry of the statutory limitation for appeal, thereby precluding Revenue from reopening them subsequently. 2. Whether the original adjudicating authority had jurisdiction to reopen and revise such finalized provisional assessments and to issue show cause notices and confirm differential duty and penalties beyond the limitation period. 3. Whether a revenue reworking of quarterly cost submissions that selectively considers only quarters showing underpayment (and ignores quarters showing overpayment) can form the basis of demands when such reworking was not pleaded in the show cause notice. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Finality of assessments finalized by Assistant/Deputy Commissioners after lapse of limitation Legal framework: Provisional assessments under the Central Excise Valuation Rules are finalized by Assistant/Deputy Commissioners based on CAS-4 cost statements; statutory appeal remedy to Commissioner (Appeals) exists within prescribed limitation periods. Once the period for filing an appeal lapses, such orders attain finality in law. Precedent Treatment: No prior authority explicitly cited in the text; the Tribunal treats finalization and the lapse of appeal period as creating final orders not reopenable by Revenue except through prescribed remedies. Interpretation and reasoning: The Tribunal reasoned that the quarterly finalization orders were adjudication orders by Assistant/Deputy Commissioners and, where Revenue did not avail the appellate remedy within limitation, those orders became final. Reopening assessments beyond the limitation without following the statutory appeal procedure is impermissible. Ratio vs. Obiter: Ratio - Finalized provisional assessments that have not been appealed within the statutory period cannot be reopened by Revenue; such orders are final in law. Obiter - None identified on this point beyond application to the facts. Conclusion: The reopening of finalized assessments after the limitation period was impermissible; such finalization precludes subsequent Revenue reassessment absent valid statutory grounds. Issue 2 - Jurisdiction of the original adjudicating authority to reopen assessments and issue show cause notices Legal framework: Jurisdiction to reopen or revise assessments is governed by the statutory scheme; the Commissioner (Appeals) is the proper authority to entertain challenges to assessments finalized by Assistant/Deputy Commissioners. Precedent Treatment: No specific precedent cited; the Tribunal applies statutory allocation of functions to determine authority competence. Interpretation and reasoning: The Tribunal found that the learned original authority lacked jurisdiction to reopen such assessments because the statutory scheme vests the power to challenge or review final assessments in the appellate authorities. Reopening by the original authority therefore exceeded its jurisdiction. Ratio vs. Obiter: Ratio - The original adjudicating authority lacked jurisdiction to reopen finalized provisional assessments and to issue demands/penalties on that basis. Obiter - Remarks on appropriate recourse (appeal to Commissioner (Appeals)) are explanatory of the ratio. Conclusion: The impugned orders were invalid for want of jurisdiction; show cause notices and resulting demands were unsustainable on jurisdictional grounds. Issue 3 - Permissibility of selective reworking of quarterly cost data and scope of show cause notices Legal framework: Principles of natural justice and the limits of a show cause notice require that the grounds on which demand is sought be pleaded; assessments must account for correct legal methodology in valuation and any recalculation should be within the scope of the notice. Precedent Treatment: No authority cited; the Tribunal evaluates whether the original authority confined itself to grounds pleaded and whether it considered netting off quarters with overpayment. Interpretation and reasoning: The Tribunal noted that the original authority reworked cost data and confirmed demands based only on quarters showing underpayment, without accounting for quarters showing overpayment (which would lead to net refund). The appellant contended, and the Tribunal accepted, that such selective treatment, particularly without corresponding proposals in the show cause notice, rendered the demand unsustainable. However, the Tribunal's primary basis for setting aside was limitation and jurisdiction (Issues 1 and 2), with this point reinforcing the view that the reworking was procedurally and substantively flawed. Ratio vs. Obiter: Obiter - While relevant, the finding on selective reworking is subsidiary to the principal ratio regarding finality and jurisdiction; it supports the conclusion but is not the core legal ground. Conclusion: Selective recalculation that ignores quarters with excess duty and that was not the subject of the show cause notice is procedurally improper; coupled with lack of jurisdiction and barred reopening, such recalculation cannot sustain confirmed demands. Overall Conclusion The impugned orders reopening finalized provisional assessments, confirming differential duty and imposing penalties were unsustainable: the assessments had attained finality after lapse of the appeal period; the original authority lacked jurisdiction to reopen them; and the selective reworking of cost data without proper notice was procedurally infirm. The Tribunal set aside the impugned orders and allowed the appeals.