By TIOL News Service

MUMBAI, OCT 08, 2018: REVENUE is in appeal before the Bombay High Court and urges the following question of law -

Whether in the facts and circumstances of the case and in law was the Tribunal right in upholding that the case was revenue neutral without considering the facts of the case where there was larger question of evasion of duty through under valuation and imposition of penalty and interest thereof?

The dispute in the present case is with regard to the appropriate valuation of the IC Engines and parts thereof which are captively consumed in terms of Rule 6(b)(ii) of the erstwhile Central Excise (Valuation) Rules,1975.

The impugned order dated 13 January 2017 of the Tribunal allowed the Respondent's Appeal by inter alia holding that the entire exercise of determining the correct cost of the I.C. Engines and parts thereof for payment of duty would be academic. This is because the entire differential amount of the duty paid on I.C. Engines and parts thereof would be available as credit to the Respondent's tractor divisions at Nagpur and Rudrapur and utilized in payment of duty on tractors. The CESTAT order also records the fact that as it had decided the Appeal on Revenue neutrality, the issue of valuation was not being visited by it.

The High Court, viewed -

" 11. From reading of the impugned order of the Tribunal, we find that the question of valuation though raised in the Appeal before it, was not examined by the Tribunal. This as the Appeal was allowed on account of Revenue neutrality making the question of appropriate valuation academic in the present facts. However, the grievance of the Revenue before us is to the extent that the Tribunal has not dealt with the issue of valuation though it arose before the Tribunal. Therefore, in our view, the impugned order does relate to the valuation of goods for the purposes of assessment. This view of ours also finds support from paragraph 19 of the Hon'ble Supreme Court decision in Steel Authority of India Ltd. - 2017-TIOL-173-SC-CUS in the above case, it has been held that where an issue relating to valuation for purpose of assessment arises and the order is passed in breach of natural justice, then the Apex Court will admit the Appeal."

Counsel for the Revenue submitted that presuming the appeal is admitted and at the time of final hearing, in case the Court holds that the issue of valuation has to be gone into it, the only order would be to remand the appeal to the Tribunal to decide the issue of valuation.

To this submission, the High Court observed -

"…It is open to the Appellate Authority to decide the issue of valuation itself rather than restore it before the Tribunal. Moreover, one cannot lose sight of the fact that Section 35G of the Act under which the Appeal is filed, does not bestow jurisdiction on us, to entertain an Appeal relating to rate of duty and/or valuation for the purposes of assessment, in cases of grievance only of breach of natural justice."

Adverting to paragraph 18 of the apex court decision (supra), the High Court further observed that not dealing with and/or deciding the issue of rate of duty and/or valuation for purposes of assessment would also be an order relating to rate of duty and/or valuation of goods and, therefore, an Appeal, if any, would lie before the Apex Court.

The Counsel for the Revenue also submitted that non-admission of appeal would cause undue hardship to the general body of litigants under the Act, to move the Apex Court even when the orders have been passed by the Tribunal in breach of the natural justice and the party seeks only remand to the Tribunal for fresh consideration.

The High Court while negating this submission remarked -

"The jurisdiction of this Court in a statutory Appeal is determined by the terms of the statute. We do not exercise jurisdiction in equity. Therefore, when we exercise jurisdiction under Section 35G of the Act, we are bound by its provisions and cannot travel outside it. Therefore, when Section 35G of the Act very clearly excludes our jurisdiction in respect of the orders of the Tribunal relating to the rates of duty and the value of goods for the purposes of assessment, among other things, we cannot entertain an Appeal on the above issue on ground of perceived hardship."

Concluding that the Revenue appeal is not maintainable, the same was dismissed.

(See 2018-TIOL-2083-HC-MUM-CX)