2025 (8) TMI 270 - HC - Customs

Appellate Authority Cannot Reverse Unchallenged Findings on Refund Limitations Under Section 128A(3) Customs Act

The HC held that the Appellate Authority erred in reversing the adjudicating authority's positive finding that the refund application was within the ... Authority of Commissioner (Appeals) - Adjudicating Authority specifically returned the finding that the refund application was filed within the prescribed period of limitation. Still, it rejected relief to the respondent based on its interpretation of the Board's Circular dated 29 April 2013, i.e. on merits. - The Appellate Authority, by its order dated 26 March 2018, upheld the adjudicating authority’s order, not only agreeing with its interpretation of the Board's Circular but also concluding that the refund application was barred by limitation. HELD THAT:- Admittedly, the adjudicating Authority in this case had returned a positive finding that the refund application was within the prescribed period of limitation. The appellant did not challenge this finding. In the respondent’s appeal, the Appellate Authority could not have reversed this finding. The provisions of Section 128A (3) of the Customs Act do not ordinarily empower the Appellate Authority to reverse findings favouring the appellant, in the absence of any challenge to such findings by the respondents. The expression “after making such further inquiry” is not broad enough to ordinarily empower the Appellate Authority to undertake any such exercise. The finding on limitation, favoring the Respondent herein, involved a mixed question of law and fact. The two provisos to Section 128A(3) deal with the power of the Appellate Authority to enhance any penalty or to deal with issues of short levy or erroneous refunds. The Legislature has specifically conferred such powers on the Appellate Authority, and that too, subject to compliance with certain pre-conditions - The fact that the Legislature needed to enact specific provisions for increasing penalties or addressing issues of short levy or erroneous refunds indicates that, under the main clause to which these provisos relate, there was no authority to reverse findings in the appellant’s favour without contesting those findings. The Tribunal’s view that the Appellate Authority has exceeded its powers cannot be faulted and gives rise to no substantial question of law. The Tribunal, in this case, was accordingly justified in ordering a limited remand, further clarifying that the Appellate Authority must now confine itself only to the issue of interpretation of the Board's Circular, i.e. on merits and not on limitation - Appeal dismissed. ISSUES: Whether the appellate authority under Section 128A(3) of the Customs Act has the power to pass necessary orders 'after making such further inquiry as may be necessary,' including confirming, modifying, or annulling the decision appealed against, even if the issue was not challenged by the appellant.Whether findings in the adjudicating authority's original order attain finality and are beyond the appellate authority's jurisdiction when the matter is pending before the appellate authority for complete determination. RULINGS / HOLDINGS: The appellate authority under Section 128A(3) of the Customs Act does not ordinarily have the power to reverse findings favoring the appellant that were not challenged by the respondents; the expression 'after making such further inquiry as may be necessary' does not broadly empower the appellate authority to undertake such reversal.The adjudicating authority's finding on limitation, which was favorable and unchallenged, cannot be overturned by the appellate authority; such findings attain a degree of finality pending appeal and cannot be reopened without a challenge.The Tribunal correctly held that the appellate authority exceeded its jurisdiction by extending the scope of appeal to include limitation when the issue was not contested, and therefore ordered a limited remand confined only to the issue of interpretation of the Board's Circular on merits. RATIONALE: The Court applied the statutory framework of Section 128A(3) of the Customs Act, which empowers the appellate authority to confirm, modify, or annul orders 'after making such further inquiry as may be necessary,' but this power is not unlimited and does not extend to reversing unchallenged favorable findings.The presence of two provisos in Section 128A(3) specifically empowering the appellate authority to enhance penalties or address short levy or erroneous refunds indicates that the legislature intended to limit the appellate authority's power to alter findings unless explicitly provided for.The Court reasoned that if the main clause of Section 128A(3) were as broad as claimed, the specific provisos would be unnecessary, demonstrating a legislative intent to restrict the appellate authority's power to alter unchallenged findings.The Tribunal's interpretation aligns with the statutory scheme and preserves the principle that appellate jurisdiction is confined to contested issues, preventing the appellate authority from worsening a party's position without a direct challenge.