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Power to Remand cases curtailed in GST

MARCH 05, 2021

By R C Prasad, MBA, LLM

HAS the Appellate authority in GST got the power to remand the cases to the Adjudicating authority? This question hovers around the offices of the Appellate Authorities and there are divergent views on this issue.

Before discussing the legal provisions on this issue it would be prudent to discuss why the cases are being remanded to the original authorities. It is really embarrassing for the appellate authorities when they have to deal with such orders in original where the Adjudicating authorities have issued orders without following the principles of natural justice, or by mentioning such facts and grounds, which were never a part of the show cause notice, or without giving cogent reasons for the findings or sometimes without verifying the documents required for quantification of demands/refunds. All these facts places the Appellate Authorities in a piquant situation and the easiest way for them is to remand the cases either with general remark or with specific directions.

What the Law says:

Sub-section 11 of Section 107 of the CGST Act, 2017 reads as:

Section 107 (11)- The Appellate Authority shall, after making such further inquiry as may be necessary, pass such order, as it thinks just and proper, confirming, modifying or annulling the decision or order appealed against but shall not refer the case back to the adjudicating authority that passed the said decision or order:

It may be seen that in the CGST Act, 2017, it has been specifically mentioned that the Appellate Authority shall not refer the case back to the adjudicating authority that passed the said decision or order. The word used is 'shall' and not 'may' so that there is an element of discretion with the Appellate Authorities.

Hon'ble Supreme Court in the case of Lakshmanasami Gounder vs C.I.T. Selvamani And Ors - 1991 SCR, Supl. & 181 1992 SCC (1) 91 has deliberated in detail about the use of word 'shall' in statutes:-

It is settled law that the word 'shall' be construed in the light of the purpose the Act or Rule that seeks to serve. It is not an invariable rule that even though the word 'shall' is ordinarily mandatory but in the context or if the intention is otherwise, it may be construed to be directory. The construction ultimately depends upon the provisions itself, keeping in view the intendment of the enactment or of the context in which the word 'shall' has been used and the mischief it seeks to avoid.

Historical perspective:

Section 35A(3) of the Central Excise Act, 1944 / Section 128A(3) of the Customs Act, 1962 as it existed before 11-5-2001 provided that Commissioner (Appeals) shall, after making such further enquiry as may be necessary, pass such order, as he thinks just and proper, confirming, modifying or annulling decision or order appealed against or may refer the case back to the adjudicating authority with such direction as he may think fit for a fresh adjudication or decision as the case may be, after taking additional evidence, if necessary.

The said Section was amended w.e.f 11.05.2001 deleting the phrase as mentioned in bold above with an intention to withdraw the powers to Commissioner (Appeals) to remand the cases for fresh adjudication to the original adjudication authorities.

After the amendment in 2001, the said Sections read as follows :-

"The Commissioner (Appeals) shall, after making such further enquiry as may be necessary, pass such order, as he thinks just and proper, confirming, modifying or annulling the decision or order appealed against."

Though the phrase "or may refer the case back to the adjudicating authority with such direction as he may think fit for a fresh adjudication or decision as the case may be, after taking additional evidence, if necessary" was deleted after the amendment, the Commissioner (Appeals) continued to enjoy the freedom to refer the case back to the adjudicating authority under the silhouette of different decisions of the High Courts and Supreme Court. [Instruction dt. 18 February 2010]

On 25th July 2008, the Central Board of Excise & Customs had issued instructions from F. No. 275/34/2006-CX.8A and wherein it was specifically mentioned that:-

Para 3. The Board has noted that Commissioner (Appeals) do not resort to the mechanism of further enquiry as provided to them under the appeal procedure as above in such cases where it may be necessary before passing the order . Sub-Rule 4 of Rule 5 of Central Excise (Appeals) Rules, 2001 provides that nothing contained in said rule shall affect the power of the Commissioner (Appeals) to direct the production of any document, or the examination of any witness to enable him dispose of the appeal.

Para 4. In the light of the provisions as contained in the statute and the rules made there under, I am directed to request you to advise Commissioners (Appeals) working in your jurisdiction to resort to enquiry in such appeals as may be necessary in the facts and circumstances of the case before passing a just and fair order in accordance with the provisions of the Act.

The Board was very much clear in its instructions that the Commissioner (Appeals) should resort to inquiry in such appeals and the indirect message was not to refer back the cases to the adjudicating authorities.

What is to be seen is that before the amendment there was an 'enabling' provision for the Commissioner (Appeals) in the respective Acts to refer back the case and thereafter it was deleted, which neutralized the 'enabling' effect, but the Court interpreted it in a way that though the enabling provision has been deleted, it does not mean that it has taken the power to refer back the case and the Commissioner (Appeals) followed it at their discretions.

Now, in the CGST Act, 2017, as extracted earlier, there is a 'disabling' provision and the Act debars the Appellate Authority from referring back the case to the adjudicating authority. Although there is no ambiguity, yet the Appellate Authorities are referring back the cases in GST.

It would be pertinent to mention that the lawmakers are very much clear in their view as in the case of GST Tribunal, it has been specifically mentioned in Section 113 (1) of the CGST Act, 2017 that - (1) The Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against or may refer the case back to the Appellate Authority, or the Revisional Authority or to the original adjudicating authority, with such directions as it may think fit, for a fresh adjudication or decision after taking additional evidence, if necessary.

It is very clear that where it was felt necessary to 'enable' referring back the case, as in the case of GST Tribunal, it was enabled, and where it was felt not necessary, as in case of Appellate Authority, it was clearly 'disabled'.

Hope the lower Appellate authorities take note of the embargo in the law and do not add to the already increased load of litigation by flouting it with impunity!

[The views expressed are strictly personal.]

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