Department not provided details of computation of demand of duty: CESTAT directs re-adjudication

Haryana Steet Glass Limited Vs C.C.E. & S.T. (CESTAT Ahmedabad)

Introduction: The CESTAT Ahmedabad recently delivered a crucial decision in the case of Haryana Steet Glass Limited against the Central Excise and Service Tax Department. The order, dated 03.11.2023, grants relief to the appellant, directing re-adjudication on the computation of an approximately 6.7 Crore excise duty demand. The basis for this decision is the absence of proper document analysis regarding the clearance of sheet glass to the Domestic Tariff Area (DTA).

Detailed Analysis: The case involves Haryana Steet Glass Limited, a 100% Export Oriented Unit (EOU), engaged in the manufacture of sheet glass. The timeline extends from the trial production initiation in 1996 to the grant of an EPCG (Export Promotion Capital Goods) license in 1997. Despite receiving permission for clearance of finished goods to DTA, a subsequent demand for 6,76,07,490/- was raised by the Customs Authorities.

The appellant challenged this demand in the High Court of Gujarat (SCA No. 5478 of 1998). The High Court observed that the conversion from EOU to EPCG had a substantial impact on the duty demanded. Consequently, the demand letters were quashed on grounds of procedural lapses.

The Department, dissatisfied, appealed to the Supreme Court, leading to the issuance of a show cause notice in 2009. Despite repeated requests, the appellant contends that the Department failed to provide the basis for quantification of the demand. The impugned order-in-original confirmed the demand without supporting documents.

The appellant’s counsel, Shri Paritosh Gupta, asserts that the lack of detailed quantification makes the demand unsustainable. The appellant emphasizes having paid appropriate duty on DTA clearances and argues for the quantification of capital goods duty considering the EOU to EPCG conversion.

In response, Shri R. Nathan, Assistant Commissioner (AR), reiterates the findings of the impugned order. However, the CESTAT Ahmedabad, upon careful consideration, notes that the show cause notice did not rely on any document for quantifying the demand. The listed particulars lacked supporting evidence, raising questions about the correctness and legitimacy of the duty.

As a result, the CESTAT sets aside the impugned order, allowing the appeal and remanding the matter to the adjudicating authority. The directive is clear: the adjudicating authority must reconsider the case, providing necessary documents to ascertain the correct quantification of duty.

Conclusion: The decision by CESTAT Ahmedabad in the case of Haryana Steet Glass Limited v. C.C.E. & S.T. is a significant development. The order, pronounced on 03.11.2023, provides relief to the appellant by directing re-adjudication on the excise duty demand of approximately 6.7 Crores. The crux of the matter lies in the absence of proper documentation supporting the demand, prompting the CESTAT to set aside the impugned order. This decision underscores the importance of detailed document analysis in adjudicating excise duty demands and ensures a fair hearing for the appellant in the renewed adjudication process.

FULL TEXT OF THE CESTAT AHMEDABAD ORDER

The brief facts of the case are that the appellant (being 100% EOU) engaged in the manufacture of sheet glass. On 24.10.1996 the appellant have started a trial production subsequently, they requested to the department to convert the 100% EOU to EPCG. The trial production was extended up till 30.06.1997. From July 1997, the production discontinued. During the period 1996-1997, the appellant vide various letters addressed to the Development Commissioner, the appellant requested clearance to finished goods/ rejects to DTA, the request was accepted and permission was granted for clearance of the said goods to DTA. Various goods were, therefore cleared to DTA under permission of the Development Commissioner on payment of appropriate duty. Vide letter dated 14.10.1997, the Customs Authorities directed the appellant for payment of duty, thereafter on 03.11.1997, a license was granted to the appellant under the EPCG Scheme by the department. Thereafter, vide letter dated 14.12.1998 department directed the appellant to deposit a sum of Rs. 6,76,07,490/-. The appellant challenging the said demand letter dated 14.12.1998 filed an SCA No. 5478 of 1998 before the High Court of Gujarat. The Writ Petition of the appellant was admitted by the Hon’ble High Court of Gujarat and interim relief was granted in favour of the appellant. In the said order, it was observed that permission for converting the EOU to EPCG was granted which would have a substantial impact on the duty demanded by the department. A deboning letter was also issued by the appropriate authority. The SCA No. 5478 of 1998 was allowed vide order dated 11.07.2018 whereby the demand letters issued by the department were quashed and set aside on the ground that such demand letters could not have been issued without issuance of show cause notice and adjudication thereon. The department being aggrieved by the said order of the Hon’ble High Court challenged the same before the Hon’ble Supreme Court by way of SLP No. CC/4808 of 2009. The Hon’ble Supreme Court while disposing the SLP, ordered for permission to the department to issue show cause notice. Also by recording that appellant would not raised the issue of limitation in the adjudication proceedings. Thereafter department issued the show cause notice dated 04.05.2009. The appellant in its interim reply requested the department for providing the basis of quantification of demand thereafter the appellant have repeatedly request for same details of quantification stating that without the said detail, it would not be possible for the appellant to defend its case and attend the hearing in the absence of such details. The adjudicating authority has passed the order-in-original whereby the demand proposed in the show cause notice was confirmed. Being aggrieved by the said impugned order-in-original, the appellant filed the present appeal.

2. Shri Paritosh Gupta, learned counsel appearing on behalf of the appellant, at the outset, submits that till date the department has not provided the basis of quantification of the demand proposed in the show cause notice. He referred to the chart given in the impugned order, whereby he submits that very broad description against each amount was given from which it cannot be known the basis calculation of such demand. He further submits that the appellant have paid the appropriate duty on the clearance of goods in DTA and the duty of capital goods needs to be quantifying considering the conversion from EOU to EPCG. However, no any detail was provided either in the show cause notice or even thereafter despite repeated request made by the appellant. In this position, the demand confirmed by the adjudicating authority is not sustainable. The appellant, post hearing, filed written submission dated 22.10.2023 which is taken on record.

3. Shri R. Nathan, learned Assistant Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.

4. On careful consideration of the submission made by both the sides and perusal of record, we find that at present the limited issue raised by the appellant is that the department has not provided the details of computation of the demand of duty, therefore, the appellant is unable to make their defense submission. To appreciate the appellant’s claim, where it is right or otherwise, we find that show cause notice dated 04.05.2009 has not relied upon any document from which the demand can be quantified. Moreover, in the show cause notice the details of the demand is given as under:

On perusal of the above detail it is found that the individual duty demand from serial No. 1 to 16 is not supported by the documents it is necessary to arrive at the conclusion that whether the quantification of demand is correct and whether such duty is payable by the appellant.

5. In the above fact, we are of the view that the matter needs to be reconsidered by the adjudicating authority by providing the necessary documents whereby the correct quantification of duty, if any can be ascertained. Accordingly, we set aside the impugned order and allow the appeal by way of remand to the adjudicating authority for passing a fresh order.

(Pronounced in the open court on 03.11.2023)