Commissioner Of Central Tax, Mumbai South vs Standard Chartered Bank

This appeal along with the stay application has been filed by the revenue against the order in appeal No CKJ/GST/A-I/Mum/277/2019-20 dated 06.01.2020 of the Commissioner GST and CX (Appeals-I) Mumbai. By the impugned order Commissioner (Appeal) has held as follows:

In view of the above refund claims cannot be regarded as time barred. O-I-O No CGST/Refunds/GM/11/2019-20 dated 30.09.2019 passed by Assistant Commissioner Division II, CGST & CX Mumbai South is set aside. The matter is remanded back to the sanctioning authority for considering the matter afresh on merits after giving the appellants an opportunity of personal hearing."

Revenue has challenged the impugned order stating as follows:

"3.1 In the present case, Commissioner (Appeals-I) has remanded the matter to the adjudicating authority to examine the case on merits. Commissioner (Appeals) does not have power to remand the case but is required to decide the matter himself. Section 85 (5) of the Finance Act, 1994, with respect to disposal of appeals by Commissioner (Appeals) reads as below:

(5) Subject to the provisions of this chapter, in hearing the appeals and making orders under this section, 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 Central Excise Act, 1944 (1 of 1944).

From the reading of the above, it is clear that the powers of Commissioner (Appeals) for disposal of appeals with respect to service tax is same as in Central Excise.

Section 35 A (3) reads as follows:

Section 35A. Procedure in Appeal - The Commissioner (Appeals) shall, after making such further inquiry as may be necessary, pass such order, as he thinks just and proper, confirming, modifying or annulling the decision or order appealed against:

From the above, it is clear that Commissioner (Appeals) power to dispose off the appeal does not include power to remand the case.

4.2 The Hon'ble High Court of Punjab & Haryana in case of Commissioner of Customs Amritsar v/s Enkay (India) Rubber Co Pvt Ltd.- 2008 (224) ELT 393 (P & H) held as under;

"5. After hearing learned Counsel for the parties, we find that there is merit in the contention raised on behalf of the Revenue. Once the power of remand has been expressly taken away by the Finance Act, 2001, which came into operation w.e.f. 11-5-2001, the Commissioner (Appeals) is divested of power to remand the case back to the Adjudicating Authority. It cannot be argued that the power of remand should still be read into the provision which survive after deleting the words 'or may refer the case back to the adjudicating authority with such directions as he may think fit for fresh adjudication or decision'. There is expression of necessary intendment in deletion of the aforementioned expression by the Legislature. In that regard we place reliance on the judgments of Hon'ble the Supreme Court in the cases of Hitendra Vishnu Thakur v. State of Maharashtra, (1994) 4 SCC 602; Maharaja Chintamani Saran Nath Shahdeo v. State of Bihar, (1999) 8 SCC 16; and Garikepadi Veeraya v. Subbiah Choudhry, AIR 1957 SC 540."

Similar view has been adopted in the following cases:-

(i) The Hon'ble Supreme Court in case of MIL India Ltd.- 2007 (210) ELT 188 (SC), and

(ii) CCE Jallandhar v/s B C Kataria [2008 (221) ELT 508 (P & H)] Accordingly, the Commissioner (Appeals) should have decided the case himself instead of remanding it back for decision on merits."

Today the matter has been listed for consideration of the stay application. Stay application is dismissed. As the appeal has been preferred by the revenue raising a question in very narrow compass, appeal of Revenue is taken up for final disposal.

4.1 We have heard Shri Anand Kumar, Additional Commissioner, Authorized Representative for the revenue and Shri Gopal Mundra, Advocate for the respondents.

4.2 Learned Authorised Representative submits that the only ground raised in appeal filed by Revenue is that Commissioner (Appeals) does not have power to remand the matter back. Hence the order of Commissioner (Appeal) remanding the matter for decision on merits is bad in law, and needs to be set aside.

4.3 Learned Counsel for appellant submits that he has no grievances if the matter is again heard by the Commissioner (Appeals)/ Original Authority, without disturbing the finding recorded by the Commissioner (Appeals) in impugned order on limitation.

5.1 We have considered the impugned order along with the submissions made in appeal and during the argument by both sides.

5.2 Hon'ble Gujarat High Court has in case of Associated Hotels Ltd. [2015 (37) ELT 723 (Guj)], considered the issue in respect of Section 85 (5) of the Finance Act, 1994 and has held as follows:

"Revenue has challenged the judgment of the Customs, Excise and Service Tax Appellate Tribunal dated 5-9-2013 raising following question for our consideration:

"Whether the Customs, Excise and Services Tax Appellate Tribunal (CESTAT), West Zonal Bench, Ahmedabad is correct in holding that in service tax matters the Commissioner (Appeals) has power to remand the case back to the adjudicating authority for de novo adjudication?"

Short question is whether the Commissioner (Appeals) exercising powers under Section 85 of the Finance Act, 1994 has the power to remand the proceedings back to the adjudicating authority. It would not be necessary to record the facts since this is a pure question of law, barring observing that in the impugned judgment, the Tribunal relying on the decision of the Delhi High Court reported in 2011 (24) S.T.R. 650 (Del.) held that under Section 85(4) of the Finance Act, 1994, the Commissioner (Appeals) would have power to remand a case to the adjudicating authority for fresh consideration.

Section 85 of the Finance Act, 1994 pertains to appeals to the Commissioner of Central Excise (Appeals). Sub-section (1) thereof provides that any person aggrieved by any decision or order passed by an adjudicating authority subordinate to the Commissioner of Central Excise may appeal to the Commissioner of Central Excise (Appeals). Sub-section (3) provides for the period of limitation for filing such an appeal. Sub-sections (4) and (5) which are relevant for our purpose, read as under :

"(4) The Commissioner of Central Excise (Appeals) shall hear and determine the appeal and, subject to the provisions of this Chapter pass such orders as he thinks fit and such order may include an order enhancing the service tax, interest or penalty :

Provided that an order enhancing the service tax, interest or penalty shall not be made unless the person affected thereby has been given a reasonable opportunity of showing cause against such enhancement.

(5) Subject to the provisions of this Chapter, in hearing the appeals and making orders under this section, 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 Central Excise Act, 1944 (1 of 1944)."

It can thus be seen that under sub-section (4) of Section 85 of the Finance Act, 1994, the Commissioner (Appeals) hearing the appeals can pass such orders as he thinks fit subject to the provisions of Chapter 130 in which the said section is contained and such orders may include an order enhancing the service tax, interest or penalty. Proviso to sub-section (4) provides that no order enhancing the service tax, interest or penalty shall be made without affording a reasonable opportunity to the person affected. Sub-section (5) of Section 85 provides that subject to the provisions of the said Chapter, in hearing the appeals and making orders, the Commissioner shall exercise the same power and follow the same procedure as he exercises and follows in hearing the appeals and passing orders under the Central Excise Act, 1944.

In plain terms, sub-section (4) of Section 85 of the Finance Act, 1994 is worded widely and gives ample powers to the Commissioner while hearing and disposing of the appeals to pass such orders as he thinks fit including an order enhancing tax, interest or penalty. Such powers would, therefore, inherently contain the power to remand a proceeding for proper reasons to the adjudicating authority. In absence of any specific bar in this respect, in our opinion, the appellate powers flowing from sub-section (4) of Section 85 would clothe the Commissioner (Appeals) with power to even remand the proceedings. If proper inquiry is not conducted or the proceedings is decided ex parte, it would not be necessary in every case that the Commissioner (Appeals) converts himself to the adjudicating authority and conducts the entire inquiry necessary for proper adjudication of the issues. In such a case, the Commissioner (Appeals) may as well decide to remand the proceedings, and we see no limitation on his powers to do so.

This is precisely how the situation has been viewed by various courts. Way back in the year 1961, a Division Bench of the Andhra Pradesh High Court in the case of Thimmasamudram Tobacco Co. v. Asstt. Collector, C.E. - AIR 1961 Andhra Pradesh 324, in the context of Section 35 of the Central Excise Act, 1944, as it stood at the relevant time, held that the power of remand is inherent in the appellate jurisdiction conferred on an appellate authority. Mere absence of such a specific provision in Section 35 which speaks only of appellate authority passing such order as he thinks fit confirming, altering or annulling the decision or order appealed against, does not disable the appellate authority from sending the matter to the authority that passed the order for fresh inquiry.

In the case of Union of India v. Umesh Dhaimode - 1998 (98) E.L.T. 584 (S.C.), the Supreme Court in the context of Section 128(2) of the Customs Act, 1962 as it stood at the relevant time, held and observed as under :

"2. As the order under appeal itself notes, the aforesaid provision vested the appellate authority with powers to pass such order as it deemed fit confirming, modifying or annulling the decision appealed against. An order of remand necessarily annuls the decision which is under appeal before the appellate authority. The appellate authority is also invested with the power to pass such order as it deems fit. Both these portions of the aforesaid provision, read together, necessarily imply that the appellate authority has the power to set aside the decision which is under appeal before it and to remand the matter to the authority below for fresh decision."

The Delhi High Court in the case of Commissioner of Service Tax v. World Vision - 2011 (24) S.T.R. 650 (Del.), in the context of Section 85 of the Finance Act, 1994 itself confirmed the decision of the CESTAT holding that the Commissioner (Appeals) would have power to remand the proceedings to the adjudicating authority.

Insofar as Section 85(4) of the Finance Act, 1994 is concerned, our view is clear and we agree with the view expressed by the Tribunal in the impugned judgment.

Counsel for the Revenue, however, drew our attention to Section 35A(3) of the Central Excise Act, 1944 which came to be amended with effect from 11-5-2001. Prior to the amendment, the said provision read as under :

"The Commissioner (Appeals) may, after making such further inquiry as may be necessary, pass such order as he thinks fit confirming, modifying or annulling the decision or order appealed against, or may refer the case back to the adjudicating authority with such directions as he may think fit for a fresh adjudication or decision, as the case may be, after taking additional evidence, if necessary."

After 11-5-2001, the amended Section 35A(3) reads as under : "The Commissioner (Appeals) shall, after making such further inquiry as may be necessary, pass such order, as he thinks just and proper, confirming, modifying or annulling the decision or order appealed against."

On the basis of such changes made in sub-section (3) of Section 35A, counsel would contend that the powers of remand which were previously specifically granted to the Commissioner (Appeals) were taken away. This conscious omission by the Legislature would necessarily mean that after 11-5-2001, the Commissioner (Appeals) would not have power to remand the proceedings in terms of Section 35A(3) of the Central Excise Act, 1944. She would relate such limitation of powers to the present case by referring to sub-section (5) of Section 85 of the Finance Act, 1994 which as we have noticed, provides that the Commissioner (Appeals) while hearing the appeals under Section 85 of the Act, follows the same procedure and exercises same powers which he does while hearing the appeals under the Central Excise Act, 1944.

Even after the amendment in Section 35A(3) of the Central Excise Act, 1944, this Court in the case of Commissioner of Central Exercise, Ahmedabad-I v. Medico Labs. - 2004 (173) E.L.T. 117 (Guj.) held that the Commissioner of Central Excise would retain the powers of remand. The Court relied on a decision of the Supreme Court in the case of Umesh Dhaimode (supra).

Ms. Mandavia for the appellant however, would draw our attention to a later decision of the Supreme Court in the case of MIL India Ltd. v. Commissioner of C.Ex., Noida - 2007 (210) E.L.T. 188 (S.C.) in which in the context of the nature of order passed by the appellate Commissioner, whether it can be treated as an order of assessment, the Court observed that with effect from 11-5-2001, by amending Section 35A of the Central Excise Act, power of remand of the Commissioner (Appeals) has been taken away.

In the present case, we are not concerned with the power of remand of the Commissioner (Appeals) under Section 35A(3) of the Central Excise Act, 1944. In such a situation, the question would arise whether the decision of this Court in the case of Medico Labs (supra) would continue to hold the field even after the decision of the Supreme Court in the case of MIL India Ltd. (supra). The person aggrieved, be it Revenue or the assessee, would of course, contend that when there was conscious decision of the Legislature to amend certain power of remand which was previously specifically provided in the statute, the same would amount to taking away powers which hitherto existed. We need not, however, enter into this arena because in the present case, we are not concerned with this provision of appeal.

We, however, cannot accept the argument of Ms. Mandavia that by virtue of sub-section (5) of Section 85, the same limitation on the Commissioner (Appeals) to remand a proceeding contained in Section 35A(3) of the Central Excise Act, 1944 must apply in the appeals under Section 85 of the Finance Act, 1994 also. This is so because, sub-section (5) of Section 85 though requires the Commissioner (Appeals) to follow the same procedure and exercise same powers in making orders under Section 85, as he does in the Central Excise Act, 1944 in appeals, this sub-section itself starts with the expression "subject to the provisions of this Chapter". Sub-section (4) of Section 85 itself contains the width of the power of the Commissioner (Appeals) in hearing the proceedings of appeal under Section 85. The scope of such powers flowing from sub-section 85(4) therefore cannot be curtailed by any reference to sub-section (5) of Section 85 of the Finance Act, 1994."

5.3 In case of Anand Color Lab [2014 (36) STR 915 (T-Del)], Delhi Bench of CESTAT after considering the decisions referred to in the appeal filed by the revenue has held as follows

"4. The Supreme Court in MIL India Ltd. v. CCE, Noida - (2007) 3 SCC 22 = 2007 (210) E.L.T. 188 (S.C.) considered the issue as to existence of the power of remand in the Appellate Commissioner in the context of the provisions of the Central Excise Act, 1944. The Supreme Court noticed that with effect from 11-5-2001 Section 35A of the Excise Act was amended deleting the power of the Appellate Commissioner to remand the matter. Following the observations in the judgment in MIL India Ltd. (supra), the Punjab & Haryana High Court in CCE v. B.C. Kataria, General Manager, Dhillon Kool Drinks and Beverages Ltd. - 2008 (221) E.L.T. 508 (P & H) held that the Appellate Commissioner had no power to remand the matter to the primary authority, under provisions of the Excise Act.

The language of Section 85 of the Finance Act, 1994 is however not analogous to provisions of the amended Section 35A of the Central Excise Act. Sub-section (4) of Section 85 authorises the Appellate Commissioner to hear and determine an appeal and pass such orders as "he may think fit". The scope of the power conferred on the appellate authority is to pass an order "as he thinks fit". This expression was considered by the Supreme Court in Assam Travels Shipping Service (supra). The Apex Court explained that it is wide enough remand.

The position regarding availability of the power to remand to the Appellate Commissioner under provisions of the Finance Act, 1994 was directly considered by the Gujarat High Court in CST v. Associated Hotels Ltd. - 2014-TIOL-463-HC-AHM-ST. The High Court having considered several authorities including the judgment of the Supreme Court in MIL India Ltd., provisions of Section 35A(3) of the Central Excise Act, 1944 and provisions of Section 85(4) of the Finance Act, 1994, concluded that the power of remand continues to inhere in the Commissioner (Appeals), in an appeal preferred under provisions of 1994 Act.

Revenue does not contest the impugned order on any other ground.

In the above circumstances, as the Appellate Commissioner has the power to remand the matter to the primary authority having regard to the amplitude of the appellate jurisdiction conferred on him under Section 85(4) of the Finance Act, 1994 the contention by Revenue to the contrary does not commend acceptance by this Tribunal. The appeal is without merits and is accordingly dismissed."

5.4 In the case of Honeywell Technology Solutions Lab P. Ltd. [2012 (26) STR 326 (T-Bang)], Bangalore bench of CESTAT held as follows:

"6. We have given careful consideration to the submissions. It is not in dispute that the Board's Circular dated 19-1-2010 required those who claimed refunds of the kind involved in these cases, to produce Chartered Accountant's certificate in support of such claim. Again, it is not in dispute that this circular was not in existence when the Orders-in-Original were passed. This is the circumstance in which the matters were remanded by the learned Commissioner (Appeals), oblivious of the fact that he did not have the power of remand. On a perusal of the impugned orders, we find that the substantial issue relating to nexus between input service and output service was remanded by the learned Commissioner (Appeals) to the lower authorities for fresh adjudication in the light of the Board's Circular. Obviously, the learned Commissioner (Appeals) could not have ordered such remand as held by the Tribunal in case of Orient Crafts Ltd. (supra) cited by the learned JCDR. The Hon'ble Supreme Court's decision in the case of MIL India Ltd. (supra) also supports the Revenue. Therefore, the orders of the Commissioner (Appeals) are liable to be set aside. However, the reason found by the learned Commissioner (Appeals) for remand of the cases appears to be valid. We, therefore, are inclined to remand the cases to the original authorities for the reason recorded by the learned Commissioner (Appeals). It is nobody's case that we do not have the power of remand.

The original authorities will have to re-examine the question whether the refund-claimants have been able to establish a nexus between the input services and the output services. For the purpose, all the parties need to be given a reasonable opportunity of producing Chartered Accountant's certificates and the original authorities should examine the same in the light of the Board's Circular dated 19-1-2010. Needless to say that all the parties should be given a reasonable opportunity of being heard. We further make it clear that, if any original authority proposes to reject any part of the refund claim as time-barred, it has to consider the objections of the party concerned and take a reasoned view."

5.5 From the impugned order it is quite evident that the adjudicating authority has rejected the refund claim on ground of limitation, without consideration of the same on merits. Since Commissioner (Appeals) has in the impugned order arrived at the finding that the refund claim could not have been rejected on the ground of limitation, he had no option but to allow the opportunity to the original authority for consideration of the refund claim on merits. This finding of the Commissioner (Appeal) on the issue of limitation has not been challenged by the revenue in the appeal filed. To the specific query put by the bench in respect of challenge to this finding in appeal, learned authorized representative affirmed that this finding has not been challenged. Thus we do not find any infirmity in the reasoning recorded by the Commissioner (Appeals) for remanding the matter as per the para 7 and 8 of the impugned order reproduced below:

"7. On perusal of Para 13 and 14 of the impugned O-I-O it is seen that the refund claims were rejected on the grounds that they were held to be time barred. The sanctioning authority referred to Section 11B of CEA 1944 and held that the 'relevant date' mentioned in the section was as per clause (f) of Section 11B(2) of CEA 1944. In this regard I find that this provision does not apply to cases where duty is paid 'under protest'. This is mentioned in the second proviso to Section 11B(1) of CEA 1944. The sanctioning authority has noted that the appellant had paid duty 'under protest' as this fact is mentioned in para 4(a) of the O-I-O. In this regard I refer to Section 11B(1) of CEA 1944. Same is as follows; (emphasis supplied)

Claim for refund of duty and SECTION [11B. Interest, if any, paid on such duty] - 1) Any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person :

Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) substituted by that Act :

[Provided further that] the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under protest.

In view of the above the refund claims cannot be regarded as time barred as held by the sanctioning authority.

Another aspect of the impugned O-I-O is that the same was passed without giving the appellant an opportunity to be heard in person before deciding the case. In this regard Section 33A of CEA 1944 made applicable to service tax under Section 83 of the Finance Act 1944 mandates that personal hearing shall be granted before deciding a case. Section 33A of CEA 1944 is reproduced as under;

[SECTION 33A. Adjudication procedure. (1) The Adjudicating authority shall, in any proceeding under this Chapter or any other provision of this Act, give an opportunity of being heard to a party in a proceeding, if the party so desires.

(2) The Adjudicating authority may, if sufficient cause is shown, at any stage of proceeding referred to in sub-section (1), grant time, from time to time, to the parties or any of them and adjourn the hearing for reasons to be recorded in writing: Provided that no such adjournment shall be granted more than three times to a party during the proceeding.]

In a number of cases it has been held that taking decision without conducting personal hearing was bad in law. The procedures prescribed have to be followed, and as the same was not done, the order passed has to be regarded as bad in law, and deserves to be remanded back to the sanctioning authority for de novo adjudication...."

5.6 Even if we hold that Commissioner (Appeal) could not have remanded the matter back following the decisions of Hon'ble Apex Court and Hon'ble Punjab & Haryana High Court, referred to by revenue in the appeal filed, then also we remand the matter for decision by the adjudicating authority on merits as have been done by the Commissioner (Appeals). It is nobody's case that we do not have power to do so and is in accordance with the approach of Bangalore Bench in case of Honeywell referred above.

6.1 The end of justice will be met if the appeal filed by Revenue is allowed to the extent that the Commissioner (Appeals) could not have remanded the matter back. However, we being Appellate Authority in appeal filed by Revenue, remand the matter back to the Original Authority for consideration on merits without disturbing the finding of Commissioner (Appeals) on limitation.

6.2 Since the matter is in relation to refund, we direct the Original Authority to decide the matter within three months of receipt of this order, after hearing the respondent.

6.3 Appeal is disposed of in above terms and the stay application is dismissed.

(Pronounced in open court)