By TIOL News Service

MUMBAI, NOV 26, 2018: THE CESTAT while allowing the appeal filed by the assessee held -

CX - Valuation - Section 4 of the CEA, 1944 - Period involved is 1-9-2000 to 6-9-2000 - SCN issued on 30-9-2005 - Issue is whether duty payable on SKO(PDS) should be on the retail sale price fixed by the government/OCC under Administered Price Mechanism (APM) or on the value recovered from oil marketing companies during the disputed period and Whether the demand is hit by limitation.

Held: Larger Bench in the case of ONGC - 2015-TIOL-1960-CESTAT-MUM-LB has held that the assessee has to discharge the excise duty on the transaction value which is collected from oil marketing company (OMC) by issuing commercial invoice, therefore, in view of the said decision, the issue is no longer res integra - As regards limitation, since the issue involved is of interpretation and the matter had to be referred to the Larger Bench, extended period is inapplicable - so also, appellant is a PSU of the Government of India and it cannot be said that there is any malafide intention on their part to evade payment of duty - moreover, central excise records were being audited by the Audit party and CERA, therefore, there cannot be any suppression on the part of the appellant - issue was also very much in the knowledge of the government as various correspondences were made between Ministry of Finance and Ministry of Petroleum and Board had also issued Circulars 30.06.2000 and 18.09.2000 in the matter - as the issue was very much in the public domain and amongst department, extended period is not invocable for recovery of differential duty - impugned order is set aside as the demand is not sustainable on limitation - Appeal is allowed: CESTAT [para 5]

We reported this order dated 31 st October 2017 as - 2017-TIOL-4271-CESTAT-MUM .

The Revenue has filed an appeal before the Bombay High Court and urges the following question of law:-

"Whether on the facts and circumstances of the case and in law, the Tribunal was correct in setting aside the demand of limitation after having held in favour of the Revenue on merits?"

The Division Bench raised a question regarding maintainability of the appeal in view of s.35G(1) of the CEA, 1944.

The respondent assessee submitted that since they have accepted the order of the Tribunal in respect of valuation, there is no challenge in respect of valuation before the Supreme Court. Even the counsel for Revenue submitted that since the issue of valuation is concluded and the only issue being urged in the appeal being of ‘limitation', the appeal is entertainable.

In support, the decisions in Facor Steel Ltd. - 2008-TIOL-826-HC-MUM-CX and Mahindra Ugine Steel Co. Ltd - 2007-TIOL-847-HC-MUM-CX were adverted to.

However, the High Court brought to the notice of the parties its decision in APM Terminals India Pvt. Ltd. - 2018-TIOL-1891-HC-MUM-ST where it had examined the ambit of Section 35G(1) of the Act for the purposes of entertaining the appeals from the order of the Tribunal.

It was held therein that -

"10. …, whatever the nature of question proposed by the appellant, it is for the Court to formulate the substantial question of law in the context of the order being impugned. Therefore, if the order of the Tribunal is an order relating to a question having relation to the rate of duty or value of goods for the purposes of assessment, the jurisdiction of this Court is barred by virtue of Section 35G of the Act…"

The High Court noted that the decisions in Facor Steel Ltd. (supra) and Mahindra Ugine Steel Co. Ltd. (supra) were not pointed out to the Bench when the issue of maintainability of the appeal was decided in the case of APM Terminals Pvt. Ltd. (supra).

It was also pointed out to the Bench by the parties that in Century Enka - 2018-TIOL-2056-HC-MUM-CX the High Court had admitted an assessee's appeal challenging ONLY imposition of penalty u/s 11AC of the Act even though the order impugned before it also dealt with an issue of valuation, for the reason that the appellant made a statement that the valuation of the goods which was determined by the Tribunal stands accepted by the assessee and they did not seek to challenge it.

Inasmuch as on the same basis, the present appeal ought to be considered for admission on the issue of limitation which alone has been urged after accepting the valuation.

The High Court observed that the said decision in Century Enka (supra) would have no application to the facts of the present case since the challenge therein was in respect of penalty imposed; that issue of penalty is an exercise done subsequent to assessment of goods for duty; that the issue of - assessment of goods to duty on either of rate or valuation issue being time barred, would also be an assessment to duty and, therefore, be barred in terms of s.35G of CEA, 1944.

Nonetheless, the High Court observed that it was an agreed position between the parties that the apparent conflict of views of the Court in APM Terminals India Pvt. Ltd. (supra) and Facor Steel Ltd. (supra) are not reconciliable and, therefore, the difference could only be resolved by a larger bench of the High Court so as to lay down the law for the State.

Noting that such an exercise alone would ensure certainty of law inso far as the litigants in the State are concerned moreso since the issue raised has a wider impact as it may also affect appeals filed under the Finance Act, 1994 and the Customs Act, the Division Bench of the High Court directed the Registry to place the papers and proceedings of the present appeal before the Hon'ble Chief Justice to obtain suitable directions to place the following questions of law before the larger bench to decide:-

(i) Whether on the facts and circumstances of the case and in law, the issue of a demand being time barred when it is made on the basis of valuation and / or rate of duty, is an issue relating to the assessment of goods and, therefore, an appeal under Section 35G of the Act, is not maintainable before this Court ?

(ii) Whether an appeal under Section 35G(1) of the Act would be maintainable before this Court when there is no dispute with regard to the rate of duty and / or valuation as arrived at by the Tribunal (both parties accept the decision of the Tribunal on that issue) and challenge the impugned order only to the extent of the demand being barred by limitation ?

(See 2018-TIOL-2465-HC-MUM-CX)