Dr. Sanjiv Agarwal
Power of Adjudication is contained in Section 83A of Finance Act, 1994. Adjudication proceedings in any assessment or penal proceedings is a very important aspect of tax administration. It provides an opportunity to the assessee to be heard and show cause before any action is taken in proceedings relating to him. Issue of show cause notice is a pre-condition to a proper adjudication which is an intimation to assessee of the proposed action by the department. The adjudicating officer adjudicates the show cause notice by considering the reply to show cause notice and other available or produced evidences by the notice. A SCN should follow certain principles to be legally sustainable.
What is Adjudication
Adjudication has not been defined in the Finance Act, 1994 but according to www. wikipedia. org, “Adjudication is the legal process by which an arbiter or judge reviews evidence and argumentation including legal reasoning set forth by opposing parties or litigants to come to a decision which determines rights and obligation between the parties involved.
Adjudication is the process of deciding an issue relating to tax matters through departmental authorities empowered to determine issues relating to classification, valuation, refund claim, tax or duty payable etc. The department raises demands by way of Show Cause Notices (SCNs) to the assessees when irregularities are observed or suspected.
Adjudication pre-supposes issuance of a show cause notice (SCN) – an intimation to show cause, explain or defend the proposed action as mentioned in the SCN. Infact, SCN is the first limb of principle of natural justice i.e., no one should be condemned unheard. SCN should be clear, precise and unambiguous.
Three types of dispute are resolved through adjudication:
To adjudicate means to decide, determine or to settle. Literally, it means the act of adjudicating, the process of trying and determining a case judicially. The application of the law to the facts and an authoritative declaration of the result.
‘An adjudication in favour of natural rights’. A solemn or deliberate determination by the judicial power: the act of giving judgment.
Black’s Law Dictionary defines the term ‘adjudicate’ so as to mean ‘to settle in the exercise of judicial authority; to determine finally’.
In Global Marine Agencies v. CC (Prev.) Jaipur (2012) 286 ELT 730 (Cestat, New Delhi), it was held that a statutory authority while exercising powers conferred under law must not be permitted to achieve a goal indirectly which he cannot achieve directly. Furthermore, power is to be exercised on sound legal principles and reasonably no power be exercised under whim or caprice. A reasonable exercise of power by a statutory authority should satisfy the test of reasonability which would embrace within its fold taking of action by initiation of a proceeding within a reasonable time.
In Union of India v. Madras Steel Re-rollers Association (2013) 38 STT 346 (SC), it was held that assessing/adjudicating authorities, appellate and revisional authorities are creatures of Act and are quasi-judicial authorities. The adjudication authorities must pass their order by exercising independent mind and without impartiality. While doing so, they are required to consider various evidences made available to them. Circulars issued by the Department are in nature of guidance to such authorities and contents of such Circulars can also be considered as evidence available before them.
De Novo Adjudication
The term ‘do novo’ has not been defined in any of the statutes. As per Black’s Law Dictionary, the term ‘de novo trial’ means as follows:—
“Generally, a new hearing or a hearing for the second time, contemplating an entire trial in same manner in which matter was originally heard and a review of previous hearing. Trying matter a new the same as if had not been heard before and as if no decision had been previously rendered”.
Some of the illustrative grounds on which a matter may be remanded for de novo adjudication may be as follows:—
(i) Non-speaking order
(ii) Non-acceptance of evidence
(iii) Non-consideration of the submissions
(iv) Non-application of mind by the adjudication authority
(v) Submission of additional evidences to higher appellate forum which were not considered by lower authorities
(vi) Non-furnishing of the relied upon document in the SCN
(vii) Denial of natural justice such as appropriate notice/reasonable opportunity/sufficient time not given to assessee
(viii) Non-consideration of evidence by the adjudicating authority
De novo adjudication is ordered with the objective of preventing miscarriage of justice, ensuring that people get fair and reasonable trials. When the matter is remanded back by the Tribunal to the lower authorities, the order of the Commissioner or any other adjudicating authority or Commissioner (Appeals) no longer sustains. The matter is required to be adjudicated afresh and both parties can make additional submissions. Moreover, even if the Court or Tribunal does not give any direction to the re-adjudicating authority regarding any aspect of the case, the re-adjudicating authority is still bound to go into each and every aspect before deciding upon the case.