CHENNAI, AUG 22, 2016: THE appellant is before the High Court against the order of Tribunal, remanding the matter to the Adjudicating Authority with certain observations. The dispute is about alleged shortage of inputs and clandestine removal of the same. The Adjudicating Authority categorically held that 36 loose slips, alone cannot be sufficient to prove clandestine removal of raw materials and therefore, restricted the demand only to the shortage noticed by the officers. Consequently, the adjudicating authority has passed an order to demand a sum of Rs.7,60,135/- from Unit I of the appellant and a further sum of Rs.1,61,490/- from Unit II. The appeal against the same was dismissed by the Commissioner (A) and while disposing the appeal, the Tribunal remanded the matter to the original authority with the directions inter alia to examine the loose slips gathered in the cause of search and evidentiary value thereof evaluated for the purpose of use in the adjudication.

It is the contention of the appellant that that the appellant cannot be put in a worse position, on their appeal, in the absence of any appeal or cross objection by the department. When the appellant has approached the appellate authority to redress his grievance, on the aspect of shortage of raw materials only, and not on the alleged clandestine removal of raw materials, which allegation has been found, as not substantiated, by the original authority, neither the first appellate nor the Tribunal has any jurisdiction or power to enhance the scope of assessment, adverse to the interest of the appellant, in the absence of any appeal or cross-objections, by the department, on the specific finding on the alleged clandestine removal.

After hearing both sides, the High Court held:

++ In the absence of any appeal filed by the department on the finding, relating to alleged clandestine removal of raw materials, the appellant cannot be put in a worse position, in their own appeal, and in such circumstances, the principle of "no reformatio in peius" would come into play, which means that a person should not be placed in a worse position, as a result of filing an appeal. It is a latinphrase, expressing the principle of procedure, according to which, using the remedy at law, should not aggravate the situation of the one who exercises it.

++ Had the assessee not filed an appeal, it would not be placed in a situation of inviting an adverse order, on the aspect of clandestine removal. A party who files an appeal, expects that the appellate authority would only address the grounds of appeal, made against the order impugned, and the appellant does not expect the appellate authority to go beyond the scope of appeal, and pass an order, adverse to his interest, in which event, it certainly creates a worse situation for the appellant/assessee, in his own appeal, than the order under challenge.

++ As rightly contended by the counsel for the appellant, instead of addressing the issue, as to whether, the appellate authority had acted beyond the scope of the appeal, and exceeded in his jurisdiction, the Tribunal passed an order, elaborating, as to how, adjudication has to be done, with reference to the aspect of clandestine removal of raw materials, which in our considered opinion, is jurisdictionally erroneous. On the facts and circumstances of the case, it is held that the directions issued by the appellate authority and that of the Tribunal, run contrary to the principle of "no reformatio in peius".

++ The substantial questions of law, in exercise of powers under Section 35-G of the Central Excise Act, has to be answered, in favour of the assessee.

(See 2016-TIOL-1791-HC-MAD-CX)