TaxTMI 
TaxTMI 
2023 (6) TMI 301
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....e appellant by exercising powers under section 85(4) of the Finance Act 1994 [the Finance Act] read with the second proviso to section 35A(3) of the Central Excise Act 1944 [the Excise Act] and section 73 of the Finance Act confirmed the demand of Rs. 37,05,65,104/- proposed in the notice dated 29.12.2020 with interest and penalty. 2. The appellant is engaged in the manufacture of winding wire, plastic cable and SS wire. In addition to the manufacturing activity, the appellant is also engaged in providing turnkey project services and erection and commissioning services, mainly to electricity distribution companies. 3. It transpires from the records that earlier, pursuant to an audit of the records of the appellant, a show cause notice dated 07.09.2017 was issued to the appellant proposing a demand of Rs. 1,70,89,498/- under rule 6(3A) of the CENVAT Credit Rules, 2004 [the 2004 Credit Rules] on the ground that apart from manufacturing excisable goods (on which appropriate excise duty was paid) and provision of output services (on which appropriate service tax was paid), the appellant was also engaged in trading of goods in such turnkey projects, which would qualify as 'exe....
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....that the assessee has not computed the proper service tax payable on execution of such Turnkey Projects resulting in short payment of Service Tax amounting to Rs. 37,05,65,014/- during the period October, 2014 to June, 2017 (Annexure-A) (RUD-1) in contravention of the provisions of Section 66B, 67,68 of the Finance Act, 1994 read with rules made thereunder. xxxxxxxxxxx 20. From the above, it appears that, the assessee failed to discharge the service tax liability as discussed in the preceding paragraphs. xxxxxxx. It appears that there has been a deliberate act by the assessee to suppress their correct taxable value in order to intentionally short pay and evade the service tax payment to the Govt. exchequer and not following the provisions of the law. Had the department not initiated the inquiry/investigation against them in the instant case, the said short payment of Service Tax would have remained unnoticed and unearthed, therefore, the extended period of limitation as contained under the proviso to Section 73(1) of the Finance Act, 1994 read with Section 6 of The Taxation And Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, appears to be in....
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....t-paid or erroneously refunded, the Central Excise Officer may, within thirty months from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of- (a) fraud; or (b) collusion; or (c) willful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words "thirty months", the words "five years" had been substituted. Explanation.-Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of thirty months or....
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....ers and follow the same procedure as he exercises and follows in hearing the appeals and making orders under the Central Excise Act, 1944 (1 of 1944)." 12. It would be seen that sub-section (4) of section 85 of the Finance Act provides that the Commissioner (Appeals) shall hear and determine the appeal and pass such orders as he thinks fit and such orders may include an order enhancing the service tax, interest or penalty. Sub-section (5) of section 85 of the Finance Act provides that subject to the provisions of Chapter V of the Finance Act, in hearing the appeals and making order under section 85, the Commissioner (Appeals) shall exercise the same powers and follow the same procedure as he exercises and follows in hearing the appeals and making orders under the Excise Act. 13. Section 35 of the Excise Act deals with appeals to Commissioner (Appeals), while section 35A deals with the procedure in appeal. The relevant portion of section 35A of the Excise Act, is reproduced below: "Section 35A. Procedure in appeal.- (1) xxxxxxx (2) xxxxxxx (3) The Commissioner (Appeals) shall, after making such further inquiry as may be necessary, pass such ....
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....n appeal, the Commissioner (Appeals) has the power under sub-section (4) of section 85 of the Finance Act to pass such orders as he thinks fit and such orders may include an order enhancing the service tax, interest or penalty and though sub-section (5) of section 85 provides that the Commissioner of Central Excise (Appeals) shall exercise the same powers and follow the same procedure as he exercises and follows in hearing the appeals and making orders under the Excise Act, but the said powers are subject to the provisions of Chapter V of the Finance Act; (ii) From a combined reading of sub-sections (4) and (5) of the Finance Act, it is clear that a reasonable opportunity of showing cause has to be given by the Commissioner (Appeals) before enhancing the service tax, interest or penalty but such enhancement has to be within the bounds of the subject-matter of the notice already issued and a fresh notice cannot be issued by Commissioner (Appeals). In other words, only such powers provided under the Excise Act can be exercised by the Commissioner (Appeals) which are not in conflict with the provisions of Chapter V of the Finance Act. In support of this contention reliance ha....
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....no fetters on Commissioner (Appeals) to restrict himself only to the grounds which had been brought before him in the appeal; (ii) The decisions relied upon by learned counsel for the appellant are distinguishable and would not be applicable to the facts of the present case; (iii) Even if it is contended that the provisions of section 35A(3) of the Excise Act are not applicable to section 85 of Finance Act, the powers of Commissioner (Appeals) under section 85 of the Finance Act are very wide as he can pass such orders as he thinks fit and there is no restriction on the power of Commissioner (Appeals) to issue a fresh notice; and (iv) The appellant is not correct in stating that the service tax liability had been correctly discharged or that the extended period of limitation was not correctly invoked. 18. The contentions advanced by the learned counsel for the appellant and the learned special counsel for the department have been considered. 19. As noticed above, section 85 of the Finance Act deals with appeals to the Commissioner (Appeals) and provides that any person aggrieved by any decision of the adjudicating authority may appeal to the Commiss....
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....oviso to sub-section (3) of section 35A of the of the Excise Act to issue a fresh notice would not be available to a Commissioner (Appeals) under sub-section (4) of section 85 of the Finance Act as it would be in conflict with the provisions of section 83 and sub-section (4) of section 85 of the Finance Act. 21. The contention of learned special counsel for the department, however, is that there is no reason to restrict the power of the Commissioner (Appeals) while hearing an appeal under the Finance Act to sub-section (4) of section 85 and exclude the power of the Commissioner (Appeals) under the second proviso to sub-section (3) of section 35A of the Excise Act, as made applicable by virtue of sub-section (5) of section 85 of the Finance Act, to issue a fresh notice and in any event sub-section (4) of section 85 the Finance Act is wide enough to confer power on the Commissioner (Appeals) to issue a fresh notice demanding service tax that was short paid. 22. The second contention of the learned special counsel appearing for the department that there is enough power with the Commissioner (Appeals) under sub-section (4) of section 85 of the Finance Act to issue a notice to the....
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....he foundation for levy of tax and the adjudicating authority or the appellate authority cannot go beyond the issues raised in the show cause notice, needs to be remembered. 26. In Commissioner of Central Excise, Nagpur vs. Ballarpur Industries Ltd. (2007) 8 SCC 89, the Supreme Court observed that it is well settled that a show cause notice is the foundation in the matter of levy and recovery of duty, penalty and interest and if Rule 7 of the Valuation Rules, 1975 was not invoked in the show cause notice, it would not be open to the Commissioner to invoke the said Rule. 27. The same view was reiterated by the Supreme Court in Commissioner of Central Excise, Bangalore vs. Brindavan Beverages (P) Ltd. [Appeal (Civil) 3417-3425 of 2002 decided on 15.06.2007]. 28. In Nestor Pharmaceuticals Ltd. vs. Commissioner of Central Excise, Delhi 2000 (116) E.L.T. 477 (Tribunal), a Division Bench of the Tribunal observed that the Commissioner (Appeals) cannot go beyond the scope of the show cause notice and that no matter can be decided on a ground other than the grounds raised in the show cause notice and for this reason the impugned order was set aside. 29. In Tata Johnson Controls A....
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....ct, the Commissioner (Appeals) could enhance the service tax, interest or penalty by confining himself to the allegations made in the notice dated 07.09.2017 and this power would not include the power to issue a notice for enhancement of demand beyond the original show cause or on fresh ground. For instance, if the demand proposed in the show cause notice is for Rs. 100/- and the adjudicating authority confirms the demand for Rs. 75/- only, it will be open to the Commissioner (Appeals) to enhance the duty by another amount upto Rs. 25/-, after providing an opportunity to the appellant to show cause, even in an appeal filed by an assessee against the confirmation of demand of Rs. 75/-. 34. In this connection reliance can be placed on the decision of the Supreme Court in Commissioner of Income Tax, Calcutta vs. Rai Bahadur Hardutroy Motilal Chamarai 2002-TIOL-756-SC-IT-LB, wherein it was observed: "The principle that emerges as a result of the authorities of this Court is that the Appellate Assistant Commissioner has no jurisdiction, under section 31(3) of the Act, to assess a source of income which has not been processed by the Income-tax Officer and which is not disclos....
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.... needs to be noticed is that sub-section (5) of section 85 begins with the phrase "subject to the provisions of this Chapter' and then states that in hearing the appeals and making orders under section 85, the Commissioner (Appeals) shall exercise the same powers and follow the same procedure as he exercises and follows in hearing the appeals and making orders under the Excise Act. Thus, the exercise of the powers by the Commissioner (Appeals), while hearing an appeal under sub-section (4) of section 85 of the Finance Act, are subject to the provisions of Chapter V of the Finance Act, which contains sections 66 to 96. The power available to a Commissioner (Appeals) under sub-section (5) of section 85 would, therefore, be subject to, amongst others, the provisions of sections 83 and sub-section (4) of section 85 of the Finance Act. The phrase 'subject to the provisions of this Chapter', therefore, assumes importance. 40. P. Ramanatha Aiyar's "The Law Lexicon-Third Edition 2012" explains the meaning of the phrase 'subject to the provisions of this Act' in the following manner: "The expression 'subject to the provisions of this Act' merely m....
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....sion 'subject to' and held that the expression "subject to" conveys the idea of a provision yielding place to another provision or other provisions to which it is made subject. 44. In Union of India vs. Brigadier P.S. Gill 2012 (279) E.L.T. 321 (S.C.), the precise question that arose for consideration before the Supreme Court was whether an aggrieved party can file an appeal against a final decision or order of the Tribunal under section 30 of the Armed Forces Tribunal Act without taking resort to the procedure prescribed under section 31 of the said Act because of the expression 'subject to the provisions of section 31'. The relevant provisions of section 30 and 31 of Armed Forces Tribunal Act are, therefore, reproduced below: "30. Appeal to Supreme Court. - (1) Subject to the provisions of Section 31, an appeal shall lie to the Supreme Court against the final decision or order of the Tribunal (other than an order passed under Section 19): Provided that such appeal is preferred within a period of ninety days of the said decision or order: Provided further that there shall be no appeal against an interlocutory order of the Tribunal. ....
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....(emphasis supplied) 46. Thus, subject to the provisions of Chapter V of the Finance Act, would mean that if there are any provisions concerning the exercise of powers and the procedure to be followed by the Commissioner (Appeals) in Chapter V of the Finance Act, then they will prevail over the powers and the procedure to be followed by the Commissioner (Appeals) under the Excise Act. It also means that if there is a conflict or inconsistency between the two, the provisions of Chapter V of the Finance Act shall prevail. 47. It is keeping in mind the aforesaid discussion, that the relevant provisions of the Finance Act would have to be examined. 48. Sub-section (4) of section 85 of the Finance Act comprehensively deals with the powers of the Commissioner (Appeals) in hearing appeals and making orders. The provisions of sub-section (5) of section 85 of the Finance Act are subject to the provisions of Chapter V of the Finance Act, which would include sub-section (4) of section 85. In such a situation, when comprehensive powers have been given to the Commissioner (Appeals) under sub-section (4) of section 85 of the Finance Act, the Commissioner (Appeals) would not have the powe....
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....85 of the Finance Act and section 35A (3) of the Excise Act. The issue that was raised was as to whether the Commissioner (Appeals) could, under section 85 of the Finance Act, remand the matter. It was sought to be contended that in view of the provisions of sub-section (5) of section 85 of the Finance Act, the Commissioner (Appeals) would have no power to remand since such a power of remand had been excluded from the provisions of section 35A (3) of the Excise Act, after an amendment was made on 11.05.2001. It is in this context that the Madras High Court observed that sub-section (3) of the 35A of the Excise Act cannot be superimposed into sub-section (5) of 85 of the Finance Act, as sub-section (4) of 85 Finance Act provides for the manner in which the Commissioner (Appeals) shall hear and determine the appeal and this only states that he can pass such orders as he thinks fit. The relevant portion of the judgment is reproduced below: "18. "The argument of the Learned Counsel for the petitioner is that prior to 2001, Section 35A(3) specifically provided that the Commissioner (Appeals)" may pass such order as he thinks fit confirming, modifying or annulling the decision o....
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....A(3) is an incorrect interpretation." (emphasis supplied) 51. The aforesaid two decisions in Associated Hotels and A.S. Babu Sah emphasise that sub-section (3) of section 35A of the Excise Act cannot be superimposed on sub-section (5) of section 85 of the Finance Act. If the intention of the legislature was to confer upon the Commissioner (Appeals), while hearing an appeal under sub-section (4) of section 85 of the Finance Act, all the powers of the Commissioner (Appeals) while exercising powers under 35A of the Excise Act, section 35A could have been inserted in section 83 of the Finance Act. The exclusion of section 35A of the Excise Act in section 83 of the Finance Act and making the provisions of section 85(5) of the Finance Act subject to the provision of Chapter V of the Finance Act also support the contention advanced by the learned counsel for the appellant that the Commissioner (Appeals), while hearing an appeal under sub-section (4) of section 85 of the Finance Act, would not have the power to issue a notice under section 73 (1) of the Finance Act. 52. What, therefore, transpires is that only such provisions of the Excise Act dealing with hearing appeals and maki....