2025 (8) TMI 1654 - HC - Central Excise

Appeal dismissed; excise levy and personal penalties upheld; appellants must exhaust statutory appellate remedy and pay 7.5% pre-deposit.

Dhanbad Fuels Pvt. Ltd., Maan Steel And Power Ltd. And Maan Concast Pvt. Ltd. Versus The Commissioner CGST And Cx Bolpur Commissionerate And Ors.

HC dismissed the appeal, upholding central excise levy and penalties and directing the appellants to exhaust the statutory appellate remedy before the ... Levy of central excise duty and penalty on the assessee, its directors and others - jurisdiction of Audit Commissioner to exercise jurisdiction and pass the order of adjudication when the Audit Commissioner places reliance on a notification issued by the Board being Notification No. 14/2017-C.E.(N.T.) dated 9th June, 2017 - Audit Commissionerate did not grant a personal hearing and declined to accept the request for adjournment - alleged ground of undeclared transactions when the appellants/assessees were able to provide reconciliation data to cover the transaction nearly to Rs.6 crores, which aspect was never considered by the adjudicating authority - cross-examination made by the appellants, specifically in their reply requesting for cross-examination of the transporters by specifying their names was rejected erroneously. Whether the request for adjournment was unjustly denied and that the reasons assigned by the adjudicating authority for refusing adjournment is justified? - HELD THAT:- The reconciliation data which is said to have been submitted by the assessees whether it was considered or not considered also would require examination of facts. Equally so, the issue as to whether the denial of cross-examination was just and proper would also require examination of facts - The appellants should exhaust the statutory appellate remedy available before the learned tribunal. As mentioned above, the assessment is a high-pitched assessment and the burden on the Directors of the Company on whom personal penalty has been imposed at very high rate will undoubtedly be a difficult proposition as 7.5% of the disputed demand is required to be paid when an appeal is filed before the tribunal. Nonetheless, the said statutory provision mandating pre-deposit as a condition precedent for preferring an appeal before the learned tribunal having been upheld by the Constitutional Courts, the appellants have no other option except to comply with this statutory condition. The appellants should exercise the statutory remedy of appeal available before the learned tribunal. Appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Audit Commissioner had jurisdiction to adjudicate relying on Board Notification No. 14/2017-C.E.(N.T.) and references to Service Tax Rules (Rule 3) as recited in the adjudication order. 2. Whether reassignment of proceedings from the Executive Commissioner (who issued the show-cause notice) to the Audit Commissionerate mid-proceedings, without granting a personal hearing or accepting requests for adjournment, violated principles of natural justice. 3. Whether the adjudicating authority ignored reconciliation data submitted by the assessee and thereby rendered a 'high-pitched' demand without adequate consideration of mitigating/exculpatory material. 4. Whether refusal to permit cross-examination of specified transporters (whose statements were relied upon) on the ground that directors'/officers' statements had been recorded was illegal and vitiated the adjudication. 5. Whether the appellants should be relegated to the statutory appellate remedy (including the pre-deposit condition) rather than having the High Court decide the merits in writ proceedings. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Jurisdiction of Audit Commissioner relying on Board Notification and Service Tax Rule reference Legal framework: Adjudicatory jurisdiction is governed by statutory provisions and the scope of assignments effected by the Board; validity of adjudication depends on proper delegation/assignment and correct application of relevant rules/notifications. Precedent Treatment: No specific prior case law was applied or overruled in the judgment; the Court noted that jurisdictional questions often require factual determination. Interpretation and reasoning: The Court held that the contention as to jurisdiction and mis-quotation or mis-application of rules/notifications raises primarily factual and mixed questions (e.g., effect of the notification and justification for assignment to the Audit Commissionerate). Such questions cannot be appropriately resolved in writ proceedings without examining the factual matrix and documentary record. Ratio vs. Obiter: The observation that jurisdictional objections require factual examination is ratio to the decision to dismiss the writs and direct appellate remedy; detailed adjudication on jurisdiction was not undertaken (obiter in terms of any view on the merits of the notification's applicability). Conclusion: The Court declined to decide the jurisdictional issue in writ jurisdiction and directed appellants to pursue the statutory appeal where factual and legal aspects of the notification and assignment can be examined. Issue 2 - Reassignment mid-proceedings and alleged breach of natural justice (denial of personal hearing/adjournment) Legal framework: Principles of natural justice require opportunity to be heard, fair procedure for personal hearing and reasonable consideration of adjournment requests; administrative reassignment of proceedings must not operate to deprive parties of hearing rights. Precedent Treatment: The judgment did not cite or overrule prior authorities but applied the general principle that procedural fairness and factual inquiry are central to claims of natural justice violation. Interpretation and reasoning: The Court held that whether reassignment and subsequent conduct (refusal of personal hearing/adjournment) amounted to gross violation of natural justice is a fact-dependent question. Determination requires scrutiny of the record, correspondence, requests for legible copies, and reasons given by the adjudicating authority for refusal-matters unsuitable for resolution on the limited record in writ proceedings. Ratio vs. Obiter: The directive to remit the grievance to the statutory appellate forum is ratio; any non-adjudication on whether natural justice was breached is obiter as the Court refrained from deciding the substantive contention. Conclusion: The Court did not find it appropriate to set aside the adjudication on this ground at the writ stage and required the appellants to raise the issue before the tribunal on appeal. Issue 3 - Alleged non-consideration of reconciliation data and high-pitched assessment Legal framework: Assessment authorities are obliged to consider material and explanations placed before them; allegations of excessive or high-pitched demand implicate adequacy of consideration and correctness of quantification of tax liability. Precedent Treatment: The judgment acknowledged established standards that factual disputes about assessment quantum are normally addressed in appeal; no precedent was overruled or followed beyond this procedural norm. Interpretation and reasoning: The Court observed that whether reconciliation data (purportedly reconciling nearly Rs.6 crores) was considered by the adjudicating authority requires examination of the record. Since the correctness of the quantum and the claimed non-consideration are factual issues, they are more appropriately contested in the statutory appeal where evidence and submissions can be fully tested. Ratio vs. Obiter: The pronouncement that assessment-quantum disputes should be ventilated before the tribunal is ratio to the order; the Court did not determine whether the demand was indeed high-pitched (obiter/non-decided). Conclusion: Appellants were directed to challenge the assessment and alleged non-consideration of reconciliation in the appeal to the tribunal. Issue 4 - Refusal of cross-examination of transporters whose statements were relied upon Legal framework: Right to cross-examine witnesses or sources relied upon in adjudicatory proceedings is a component of fair hearing where statutory procedure or principles of natural justice require it; admissibility and reliance upon statements by third parties are material to the legitimacy of reliance. Precedent Treatment: The Court treated this as a factual question of procedural fairness; no binding precedent was applied or disapproved in the judgment. Interpretation and reasoning: The Court found that whether the denial of cross-examination was just and whether reliance on transporters' statements without permitting cross-examination vitiates the adjudication are issues requiring factual scrutiny. The High Court declined to adjudicate these contested facts in writ proceedings and instead left them to the appellate tribunal for determination after fuller examination of the record. Ratio vs. Obiter: The instruction to raise and decide the cross-examination issue before the tribunal is ratio to the dismissal of the writs; the Court did not decide on the legality of the impugned refusal (obiter/non-decided). Conclusion: The appellants must pursue the contention regarding cross-examination in the statutory appeal; the High Court did not set aside the adjudication on this ground. Issue 5 - Relegation to statutory appellate remedy and the pre-deposit requirement Legal framework: Statutory scheme provides an appellate remedy to the tribunal with a condition precedent of pre-deposit (percentage of disputed demand) for entertaining appeals; constitutional courts have, in relevant precedents, upheld pre-deposit mandates as a valid procedural requirement. Precedent Treatment: The Court expressly noted that constitutional courts have upheld the statutory pre-deposit requirement; that principle was treated as settled law and applied. Interpretation and reasoning: Given the fact-intensive nature of the disputes (jurisdiction, natural justice, reconciliation, cross-examination), the Court concluded that the appropriate course is to require exhaustion of the statutory appeal remedy. The Court recognized that the pre-deposit condition imposes significant burden (including on directors saddled with personal penalty) but held that the appellants have 'no other option' given the settled position upholding pre-deposit obligations. Ratio vs. Obiter: The mandate that appellants exhaust the statutory appellate remedy and comply with the pre-deposit requirement is ratio and determinative of the dismissal of the writs. Observations about hardship caused by pre-deposit are obiter commentary but factual in context. Conclusion: The appeals dismissed; appellants directed to file appeal before the tribunal within 90 days from receipt of the order and to comply with the pre-deposit condition for the appeal to be entertained and adjudicated on merits.