The Adjudication Confusion

By Vijay Kumar

YESTERDAY, Advocate Natarajan posted a question on our Message Board,

Section 83A, under which this notification (as well as the earlier notification) has been issued, reads as below.
SECTION 83A. Power of adjudication. - Where under this Chapter or the rules made thereunder any person is liable to a penalty, such penalty may be adjudged by the Central Excise Officer conferred with such power as the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), may, by notification in the Official Gazette, specify.
So the adjudication powers are only with reference to quantum of penalty?
Can the limits be applied if ST liability has to be adjudicated?

These provisions are different in the three enactments pertaining to Customs, Excise and Service Tax.

Customs	Excise	Service Tax
SECTION 122. Adjudication of confiscations and penalties. - In every case under this Chapter in which anything is liable to confiscation or any person is liable to a penalty, such confiscation or penalty may be adjudged, - (a) without limit, by a Principal Commissioner of Customs or Commissioner of Customs or a Joint Commissioner of Customs; (b) where the value of the goods liable to confiscation does not exceed five lakh rupees, by an Assistant Commissioner of Customs or Deputy Commissioner of Customs; (c) where the value of the goods liable to confiscation does not exceed, fifty thousand rupees, by a Gazetted Officer of Customs lower in rank than an Assistant Commissioner of Customs or Deputy Commissioner of Customs.	SECTION 33. Power of adjudication. - Where under this Act or by the rules made thereunder anything is liable to confiscation or any person is liable to a penalty, such confiscation or penalty may be adjudged - (a) without limit, by a Principal Commissioner of Central Excise or Commissioner of Central Excise; (b) up to confiscation of goods not exceeding five hundred rupees in value and imposition of penalty not exceeding two hundred and fifty rupees, by an Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise: Provided that the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), may, in the case of any officer performing the duties of an Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, reduce the limits indicated in Clause (b) of this section and may confer on any officer the powers indicated in Clause (a) or (b) of this section.	Section 83A. Power of adjudication. Where under this Chapter or the rules made thereunder any person is liable to a penalty, such penalty may be adjudged by the Central Excise Officer conferred with such power as the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), may, by notification in the Official Gazette, specify.

Customs

Excise

Service Tax

SECTION 122. Adjudication of confiscations and penalties. - In every case under this Chapter in which anything is liable to confiscation or any person is liable to a penalty, such confiscation or penalty may be adjudged, -

(a) without limit, by a Principal Commissioner of Customs or Commissioner of Customs or a Joint Commissioner of Customs;

(b) where the value of the goods liable to confiscation does not exceed five lakh rupees, by an Assistant Commissioner of Customs or Deputy Commissioner of Customs;

(c) where the value of the goods liable to confiscation does not exceed, fifty thousand rupees, by a Gazetted Officer of Customs lower in rank than an Assistant Commissioner of Customs or Deputy Commissioner of Customs.

SECTION 33. Power of adjudication. - Where under this Act or by the rules made thereunder anything is liable to confiscation or any person is liable to a penalty, such confiscation or penalty may be adjudged -

(a) without limit, by a Principal Commissioner of Central Excise or Commissioner of Central Excise;

(b) up to confiscation of goods not exceeding five hundred rupees in value and imposition of penalty not exceeding two hundred and fifty rupees, by an Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise:

Provided that the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), may, in the case of any officer performing the duties of an Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, reduce the limits indicated in Clause (b) of this section and may confer on any officer the powers indicated in Clause (a) or (b) of this section.

Section 83A. Power of adjudication. Where under this Chapter or the rules made thereunder any person is liable to a penalty, such penalty may be adjudged by the Central Excise Officer conferred with such power as the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), may, by notification in the Official Gazette, specify.

Let us study the Central Excise case. Here the Section 33 power of adjudication is for confiscation and penalty and the Assistant Commissioner can impose a maximum penalty of Rs. 250/-. And the Additional/Joint Commissioner is nowhere in the picture. Anyway as per the Act, if the penalty is more than Rs. 250, the adjudication is to be done by the Commissioner!

Board had clarified this mystery nearly twenty years ago in Circular No. , Dated: Feb 27,1997 in which it was stated:

i) By virtue of Clause (a) of Section 33 of Central Excise Act 1944, Commissioners can adjudicate the cases of confiscation and penalty without limit. This power has been delegated to Deputy Commissioners by C.B.R. Notification No. 12-Cexdt. 17th May 1947, to Assistant Commissioners of Central Excise by C.B.R Notification No. 8-C.Exdt. 2nd September 1944 and to Superintendent of Central Excise by C.B.R. Notification No. 93/95 dt. 28th November 1959.
ii) So far as the confirmation of duty is concerned, it is observed that Section 11A empowers any Central Excise Officer to issue the notice and determine the duty due.

This is an archaic Section in the Central Excise Act. Can you think of confiscating something worth five hundred rupees and imposing a penalty of two hundred and fifty rupees these days?

And why different statutory positions for the three Statutes under the same Revenue Administration? Board knows! And the Act for some, Notification for some and any number of circulars for some. Can you think of a more confused administration?

Coming back to the question raised by Natarajan, I think the Mumbai Bench of the CESTAT has answered this question in 2013-TIOL-558-CESTAT-MUM, wherein it was observed,

The issue for consideration is whether the powers of adjudication under Section 83A of the Finance Act, 1994 is confined only to adjudication of penalties or does it also cover adjudication of Service Tax liability and interest liability under Section 73 and 75 of the Finance Act, 1994…….
It may be seen that the penalty imposable under Sections 76 and 78 are directly dependent upon the quantum of Service Tax defaulted or evaded. Therefore, if the penalty is imposed under these Sections, it is necessary to determine the quantum of Service Tax defaulted or evaded. Thus, determination of penalty is integrally connected with the determination of Service Tax liability. Therefore, these issues, that is, determination of service tax liability and imposition of penalty cannot be separated. In other words, the power under Section 83A for adjudging penalty includes inherently the power of determination of Service Tax liability; otherwise the entire purpose of Section 83A would be rendered futile. It is a well accepted principle of statutory interpretation that no Section of statute should be interpreted in such a way so as to make it a nullity.
Section 83A was inserted into Chapter V of the Finance Act, 1994 vide clause 88 of the Finance Bill, 2005 which was subsequently enacted. The notes on clauses of the said Finance Bill relating to section 83A reads as follows:
"(ix) sub-clause (j) seeks to insert section 83A so as to provide power of adjudication in service tax cases"
Thus the purpose and object of Section 83A is to provide powers of adjudication in service tax cases, which includes, the power of determination of service tax and interest liability thereon in addition to the power of imposition of penalty. Therefore, the said section cannot be interpreted in a narrow sense to restrict the power to imposition of penalty alone. The said section 83A does not read as "only penalty" or "solely penalty".
Section 83A envisages not only the determination of penalty but also determination of service tax liability as the former is incidental to the determination of the latter and is integrally connected with the latter.