TIOL-DDT 110 · the untouched capture
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<html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body bgcolor="#FFFFFF"> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#0000FF" size="3">TIOL-DDT 110</font><br> 09 05 2005<br> Monday</b></font></p> <p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b>Can Chief Commissioner adjudicate and if so who is the appellate authority?</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Section 129 A (1) of the Customs Act, the Appellate Tribunal (CESTAT) can entertain appeals arising out of the orders of<br> <br> 1 Commissioner of Customs as an adjudicating authority<br> 2 Commissioner (Appeals)<br> 3 Certain orders passed by the Board prior to 1982<br> <br> The provision for appeal to the Tribunal in Central Excise cases is identical.<br> <br> Now what will happen if an adjudication order is passed by the Chief Commissioner as an adjudicating authority? Normally in Customs or Central Excise, the Chief Commissioner is not expected to or required to pass an adjudication order. The instructions on adjudication powers of officers do not mention Chief Commissioner as an adjudicating authority. But perhaps by the provision that a senior officer can exercise the powers of a junior officer, the Chief Commissioner can exercise the adjudication powers of all officers ranging from Assistant Commissioner to Commissioner. This may be perfectly logical but will create impossible ridiculous situations when these orders are to be appealed against. As per Section 129 A of the Customs Act and Section 35 B of Central Excise Act, the Tribunal cannot entertain an appeal from the Chief Commissioner. So the Chief Commissioner’s order becomes un-appealable. Quite an <b>appealing</b> proposition for the government!. <br> <br> But you may say, the Chief Commissioner is only acting as a Commissioner and so his order is to be treated as an order by the Commissioner and so the appeal will lie to the Tribunal. But then what happens if the Chief Commissioner passes an order as the Assistant Commissioner? Here the appeal will lie to the Commissioner (Appeals) who is a subordinate of the Chief Commissioner and whose annual confidential reports are written by the Chief Commissioner. Can the Commissioner (Appeals) sit in judgement over an order passed by his own Chief Commissioner and will any Commissioner (Appeals) have the guts to quash the orders of his Chief Commissioner?<br> <br> We have come across an order recently passed by a Chief Commissioner which is in appeal before the Tribunal. The Tribunal had originally remanded the case to the Commissioner and on remand, instead of the Commissioner, the Chief Commissioner adjudicated the case and the case is back with the Tribunal on appeal from the Chief Commissioner’s order. Incidentally the Tribunal set aside part of the order passed by the Chief Commissioner.<br> <br> The Northern Bench of the Tribunal had in </font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=52&filename=legal/cestat/2002/2002-TIOL-183-CESTAT-DEL.htm">2002-TIOL-183-CESTAT-DEL</a></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> held that there is no provision under the Customs Act or Central Excise Act for the Tribunal to entertain an appeal against an order passed by the Chief Commissioner. But now the Chennai bench of the Tribunal has admitted and decided an appeal against order of the Chief Commissioner.<br> <br> Board should immediately issue clarifications directing the Chief Commissioner not to pass adjudication orders as the only remedy available to the assessee in such cases would be a writ in the High Court.<br> <br> See details of the case in our Breaking News today.<br> <br> <font color="#336633"><b>Central Excise Tariff Act – correction spree</b></font><br> <br> As per Section 5 of Central Excise Tariff Act, now the government can, by notification, amend the schedules to the Tariff Act. Now you have to keep track of not only amendments to exemption notifications but also amendments to the chapter notes and the headings themselves. Hitherto amending the tariff was an annual affair done only through the Finance Bill so that you could update your tariff once in a year.<br> <br> In exercise of this power, the government has come up with a notification making several amendments in several chapters. These are basically corrections. It is good to have this power with the government instead of going to parliament for every small correction. But it will be better if the government does not use this power frequently as that will cause confusion. It will be also convenient if the government has a separate series of numbers for these amending notifications to the tariff - <b><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=29&filename=notification/excise/2005/etariff05_019.htm">Notification No. 19/2005-CE, dated 5-05-2005.</a></b><br> <br> <font color="#006633"><b>Interesting snippets from CAG’s report No. 11 of 2005 to Parliament – Central Excise </b></font><br> <br> <b>1 Budget estimates</b> – Finance Minister misleading parliament? The CAG says that year after year the collections fell short of budget estimates. But the government continued to make optimistic projections. Who is to blame? The FM?<br> <br> <b>2 Cenvat PLA ratio</b> – The percentage of Cenvat Credit to duty paid through PLA has gone up from 66% to 73%.<br> <br> <b>3 Cost of collection</b> – The cost of collection of excise duty was 0.95% in 1999-2000 which has come down to 0.83% in 2003-2004. The CAG has no adverse comments on this fall.<br> <b><br> 4 Outstanding demands</b> – 54560 cases involving a duty of 23276 Crores is pending finalization. 90% of the pendency must be due to objections raised by the Audit and certainly not more than 10% of this amount is going to be realized in the next 50 years. Writing off all these demands and withdrawal of all the cases pending in various judicial forums would de-clog the judicial system and throwing away the tons of records connected with these cases would give a face lift to Central Excise offices.<br> <br> <b>5 Fraud and penalty</b> - The CAG’s report goes on to state that in the last three years, the recovery from demands on fraud cases was only 130 Crores out of a demand of 1980 Crores. This means that 94% of those accused by the department of fraud are really innocent. On the penalty front the department’s performance is awfully bad. The fact that out of a penalty of over 800 Crores imposed by the department, they could collect only less than 2 Crores (0.2%) shows that the department is hyperactive in imposing penalties.<br> <b><br> 6 50% of the excise duty comes from five commodities</b> – Refined Diesel oil, motor spirit, Iron and steel, cigarettes and cement contribute to 50% of the total excise duty collected in the country. Just imagine a situation where the excise duty leviable on these commodities is doubled and all other commodities in the country are exempted from excise duty.<br> <br> <b>7 Audit vs Audit -</b> The CAG is not happy with the much publicized internal Audit mechanism of the department – EA 2000. The CAG says that goals and objective of the system were not achieved due to inadequate and skewed coverage of units, lack of proper selection and lapses in implementation. The CAG laments that while voluntary compliance by the assessee is in place, the necessary audit controls are absent. The CAG recommends that some of the controls in the old system should be brought back. Some more observations of the CAG on audit.<br> <br> • Data base of assessees completed only for 34% of the units. Work not begun in five commissionerates.<br> <br> • Non-mandatory units audited at the cost of mandatory ones.<br> • 82% of the multi-locational units not audited. <br> • 31.2% of the units audited, produced nil reports.<br> • 34% objections raised involving over 800 Crores pending.<br> <br> <b>Does any one audit the CAG?</b> The AG is responsible for most of the ills of the Revenue department. Most of the Show Cause Notices have their origin in an Audit objection or fear of an Audit objection. Even when the AG challenges a notification which has the sanctity of law, Show Cause Notices are issued and the Board never tells the CAG that it is better qualified to decide on notifications than the CAG. On several occasions, AG points out that the Board circulars are wrong or notifications are wrong and the department is forced to issue SCNs to the assessees as to why action cannot be taken against them for following notifications or Board circulars. AND SOMETIMES SUPPRESSION CLAUSE IS ALSO INVOKED. The good Board has instructed the field that whenever an objection is received from the AG, SCN has to be immediately issued. The CAG should undertake a study on the cost of litigation initiated as a result of Audit objections and the amounts realised in those litigations. In every case dropped, <b>the bill should be credited to the concerned AG</b>. Then the cost of collection of excise duty will further come down. The AG should also be asked to compensate the assessee for the unwanted litigation caused by its objections. <br> <br> The CAG is unduly worried about pending adjudication. But if you look deep, you will realise that the AG is responsible for all the pendency. Look at this real example. The AG raised an objection about a particular exemption which is crystal clear to everyone except the AG. The department has issued SCNs and is continuing to issue SCNs. They are not able to adjudicate the issue as they all know that the Audit objection is outright stupid. And they hope that one day wisdom will dawn on the portals of Audit Bhavan and the objection will be dropped. No such chance. AG makes it a Draft Audit Para and now nobody in the department will touch the case with a barge pole. The assessee continues to get SCNs for the last ten years. And the latest objection from the AG- SCNs are pending for the last ten years involving Crores of rupees. Why? Because of the AG!<br> <br> My personal experience with the AG’s Audit has not been exactly pleasant. The last time around when I wrote about AG’s Audit, their attitude has been, “kill the messenger”. An AG wrote to my Chief Commissioner that my article undermined the prestige of the AG and my Chief Commissioner promptly ordered a charge sheet against me. <br> <br> <font color="#FF6666"><b>Until Tomorrow with more DDT and CAG<br> <br> Have a Nice weekend.<br> <br> Mail your comments to</b></font> <b>vijaywrite@taxindiaonline.com </b></font></p> </body> </html>