What constitutes remanding the matter for fresh adjudication and what not constitutes remand by Commissioner (Appeal) in Excise, Customs and Service Tax
It is quite often in litigation matters, the higher appellate forums to the lower adjudicating authorities order for remanding the matter for fresh consideration. The aim of the article is not whether the Commissioner (Appeals) has the power under Central Excise or Service Tax to remand the matter for de nova proceedings. The aim of the article is to understand under what situations it can be called remand for de nova adjudication and when it cannot be called remand. Sometimes the higher appellate forums while disposing the matter in favor of Appellant issues directions to be followed by lower adjudicating authorities/administrative authorities.
Remand for De nova proceedings: In this case higher appellate forums pass the order to original adjudicating authorities to consider the matter as a fresh by giving the opportunity of being heard. In de novo adjudication of case, all issues must be left open to be considered afresh by the adjudicating authority. As per Black’s Law Dictionary ‘Remand’ means sending something back for further action. Example: Appellate Court can reverse the opinion of trial court’s opinion and remanded the case for new trail.
It is essential to examine on what grounds higher appellate courts order for De nova proceedings for fresh adjudication or I can say on these grounds we can pray the higher forums to remand the matter for de novo adjudication. Remember these are not exhaustive, the list is illustrative only.
1. The adjudicating authority has not considered any evidence or refused to take any evidence.
2. Lower authority has not considered written submission from the appellants
3. The appellants were not furnished beforehand, the copies of the relied upon documents to SCN.
4. Order of lower authority is not reasoned one.
5. Additional evidence produced by the Appellant to higher appellate forums.
6. The adjudicating authority has not applied its mind specifically to the merits of each issue before arriving at his decision.
7. Order passed without giving the reasonable opportunity of being heard.
In Central Excise, Commissioner (Appeals) is not empowered to remand the matter back for fresh adjudication to the original adjudicating authority by virtue of amendment to Section 35 A(3) of Central Excise Act, 1944. It is settled position of the in Law in Excise Act. The legislature intentionally divested the power of Commissioner (Appeals) because the Commissioner (Appeals) is empowered:
1. To make further enquiry independently
2. To call for summons under Section 14 of Central Excise Act, 1944
3. To ask for any documents
4. To ask for any evidence
5. To take additional evidence which was not produced with lower authority
6. To exercise any jurisdiction under Chapter IVA
7. To allow during the PH the additional grounds which were not there in the Appeal Memo or were not taken before the original authority.
Commissioner (Appeals) can exercise all the above powers by virtue of Section 12E of Central Excise Act, 1944. Because of Commissioner (Appeals) having all the above powers he can enquire the facts of case on his own and decide the case on merits. That is why the government divested him from exercising the power of remand to lower authority and there is no necessity for him to remand the matter. Now the Commissioner (Appeals) is empowered to adjudicate the case on his own, can I call Commissioner (Appeals) is an Adjudicating authority?
The definition of ‘adjudicating authority’ in Central Excise Act, 1944 specifically excludes Commissioner (Appeals). That means as per the definition of Act Commissioner (Appeals) is not adjudicating authority but is it so? In this regard I wish to state a case Mil India Ltd Vs CCE, Noida 2007 (210) E.L.T 188 (S.C) it was held that “In fact, the power of remand by the Commissioner (A) has been taken away by amending Section 35A with effect from 11-5-2001 under the Finance Bill, 2001. Under the Notes to clause 122 of the said Bill it is stated that clause 122 seeks to amend Section 35A so as to withdraw the powers of the Commissioner (A) to remand matters back to the adjudicating authority for fresh consideration. Therefore, the Commissioner (A) continues to exercise the powers of the adjudicating authority in the matters of assessment. Under Section 35B any person aggrieved by the order of the Commissioner as an adjudicating authority is entitled to move the Tribunal in appeal. Section 35B indicates that the decision of order passed by the Commissioner (A) shall be treated as an order of an adjudicating authority.”
From the above judgment I am inclined to conclude Commissioner (Appeals) is adjudicating authority for a limited purpose for appealing to CESTAT. As we are all accounting people I can say by considering the ‘substance over the form’ the Commissioner (Appeals) is an adjudicating and fact finding authority.
As per the above judgment and Finance Bill 2001 the Commissioner (Appeals) is debarred from remand the matter from fresh adjudication but not for directions or to give orders to lower authority to protect interest of revenue or department.
In service tax, my discussion is confined towards whether the order is the remanding order for de nova proceedings or order is disposed by giving the directions to the lower authority.
It is well settled Law in Central Excise that sales realization by an assessee should be treated as cum-duty price and assessable value should be worked out after excluding the elements towards duty etc. In Service Tax Law, the similar provision is enshrined under Section 67(2). In event of non collection of Service Tax, consideration shall be treated as cum tax basis and service tax shall be calculated accordingly.
In a number of instances first appellate authority while upholding the order of lower authority on merits of demand, interest, extended period of limitation and penalty remanded the matter to the lower authority to compute the tax liability on cum-tax basis. Is the order of first appellate authority remanding the matter to lower authority for de nova adjudication? Can the lower authority or tax payer can go for appeal before the CESTAT on a ground that Commissioner (Appeals) has no power to remand the matter?
Answer for the above question certainly negative. As I already explained in the preceding paragraph when the Commissioner (Appeals) is upholding the part of order of lower authority there is no question of remanding the matter for de nova proceedings. It seems from the Finance Bill 2001 Note 122, prohibits the Commissioner (Appeals) to remand the matter for fresh adjudication not to give the directions to lower authority.
In the following instances where the Commissioner (Appeals) gave instructions to lower authority while disposing the appeals in favor of assessee, department filed an appeal before higher appellate authority on a ground that (Commissioner Appeals) has no power to remand the matter to lower authority. It will happen in situations where as a clear view was taken by the appellate authority on the merits relating to demands and only the re-quantification of demand in terms of his direction was left to be done by the lower authority.
1. The lower authority rejected the claim of refund on the ground that there is no input and output service relationship. The Assessee went to an appeal before Commissioner (Appeals). The Commissioner (Appeals) expressed clear view on the nexus, ordered the refund to the assessee on direction to the lower authority upon satisfaction of the conditions laid down in a particular circular.
Lower authority gone for an appeal before CESTAT on the ground that Commissioner (Appeals) has no power to remand the matter to the lower authority. The Tribunal held that such direction to lower authority cannot be considered order of ‘Remand’. The same view was expressed in 2012 (280) E.L.T 526.
2. In a similar case Commissioner (Appeals) while granting the refund directed the lower authority to see the correctness of amount claimed by the Assessee. Department went for an appeal on ground that Commissioner (Appeals) has no power to remand the matter. Appeal was rejected since the Commissioner (Appeals) not ordered the lower authority to go on merits as a fresh. It is not the case of remand of order for fresh adjudication. The same view 2012 (026) STR 0577 (Tri-Ban).
3. In a case where the Commissioner (Appeals) disposed the appeal in favor of Assessee and directed the lower authority to ensure the documentation of original refund claim. The department went for an appeal before CESTAT that Commissioner (Appeals) has no power to give directions while remanding the matter. The CESTAT held that this direction cannot be treated as remanding the matter to original authority for de nova adjudication. 2012 (279) E.L.T 0085 (Tri-Del).
Facts: Assessee produced the additional evidence (certificate) before the Commissioner (Appeals) which was not produced before the lower authority. Commissioner (Appeals) accepted the additional evidence and passed the order in favor of Assessee. While passing the order Commissioner (Appeal) in favor of assessee directed the lower authority to verify the certificate.
Department went for an appeal before CESTAT on a ground that Commissioner (Appeals) does not have a power to admit the additional evidence and no power to direct the lower authority for verification of Certificate. Whether the Commissioner (Appeal) is right in accepting the evidence which was not produced before the lower authority?
Further, merely because certificate was not produced before the lower authority cannot be made a ground for denial of exemption benefit, if the same is otherwise available to the assessee. He can himself examine the certificate and can extend the benefit. In the absence of any allegation that the said certificate was not correct or bogus, there is no infirmity in the said action of the Commissioner (Appeals) to examine the certificate himself.
It is very common for the Commissioner (Appeals) when accepting the additional evidence issues direction to lower authority to re quantify the demand or refund, ensuring the certificate or documentary evidence. It is usual practice of the department to go for an appeal when the Commissioner (Appeals) accepted the additional evidence and gave any direction to lower authority while disposing the appeal.
In case if the Commissioner (Appeal) passed the order by accepting the additional evidence by giving direction to lower authority, department certainly goes for an appeal on a ground that Commissioner (Appeals) has no power to remand the matter. It is very important for the assessee to contest such an appeal especially order of Commissioner (Appeal) is not a remand or Commissioner (Appeals) passed the order by accepting the additional evidence. Otherwise the relief what he got from the Commissioner (Appeals) will lapse thereby order of original authority will revive. It is very dangerous in case when the order passed by Commissioner (Appeal) by taking the additional evidence.
Therefore one must carefully read the order of Commissioner (Appeal) to decide whether order is remanded for de nova fresh adjudication or directions to lower authority by upholding the order of lower authority or disposing the appeal in favor of assessee by accepting the additional evidence along with the directions to lower authority. And such care full reading of the order will help in taking the future course of action.