IN CROSS OBJECTIONS AGAINST APPEAL, ASSESSEE CAN CHALLENGE PART OF ORDER WHICH WAS UNFAVOURABLE TO HIM, THOUGH HE MAY NOT HAVE PREFERRED APPEAL AGAINST IT

[Mr. M. GOVINDARAJAN]

Chapter VI A of Central Excise Act deals with appeals. Sec. 35 of the Act deals with the appeals to Commissioner (Appeals). Sec. 35(1) provides that any person aggrieved by any decision or order passed under this Act by a Central Excise Officer lower in rank than a Commissioner of Central Excise may appeal to Commissioner of Central Excise (Appeals) within 60 days from the date of communication to him of such decision or order. Sec.35A deals with the procedure in appeal by Commissioner (Appeals). Sec.35B of the Act deals with the appeals to the Appellate Tribunal.

Sec. 35B(1) provides that any person aggrieved by any of the following orders may file appeal to the Appellate Tribunal against such order:

A decision or order passed by the Commissioner of Central Excise as an adjudicating authority;

An order passed by the Commissioner (Appeals) under Sec. 35A;

An order passed by Central Board of Excise & Customs or the Appellate Commissioner of Central Excise under Sec. 35 as it stood immediately before that day;

An order passed by the Central Board of Excise & Customs or the Commissioner of Central Excise either before or after the appointed day, under Sec. 35A as it stood before the appointed day.

Sec. 35B(4) provides that on receipt of notice, that appeal has been referred under Section 35B, the party against whom appeal has been preferred, may, notwithstanding that he may not have appealed against such order or any part thereof, file, within 45 days on receipt of the notice, a memorandum of cross objection verified in the prescribed manner against any part of the order appealed against and such memorandum shall be disposed of by the Tribunal as if it were an appeal presented within the time specified in sub section (3)..

Sec.35E deals with the powers of Committee of Chief Commissioners of Central Excise or Commissioner of Central Excise to pass certain order. Sec.35E(4) provides that where in pursuance of order sub section (1) or sub section (2) of Section 35E the adjudicating authority, or an authorized officer makes an application to the Appellate Tribunal or Commissioner (Appeals) within the period of three months from the date of communication of the order under sub section (1) or sub section (2) to the adjudicating authority such application shall be heard by the Appellate Tribunal or Commissioner (Appeals) as the case may be, as if such application where an appeal made against the decision or order of the adjudicating authority and the provisions of this Act regarding appeal including the provisions of sub section (4) of Section 35B, shall so far as may be, apply to such application.

In 'Ispat Traders V. CC, Jamnagar' - 2009 (235) ELT 111 it was held that when the order is partly favorable to the assessee and partly favorable to the Department, both may come in appeal within the specified time; that if one of them does not file appeal within the specified time and the other chooses to file an appeal, then the other party also gets an opportunity to re-open the issue decided against them by filing cross objection within 45 days on receipt of notice about filing of the appeal.

In 'Commissioner of Central Excise, Allahabad V. Bajaj Hindustan Sugar and Industries Limited' - 2009 -TMI - 77653 - (CESTAT, NEW DELHI) the factory of the assessee was visited by the Departmental officers and in course of stock checking shortage of brown sugar was detected vis-à-vis records maintained by the assessee. The Asst. Commissioner vide order-in-original confirmed the duty demanded along with interest on it and besides this imposed penalty of Rs.5000/- on the assessee under Rule 25(1) of Central Excise Rules, 2002. In course of adjudication proceedings before the Assistant Commissioner, the assessee had challenged the shortage but their plea was not accepted. The assessee did not file appeal against this order. But the Department filed an appeal before Commissioner (Appeals) for enhancement of penalty on the ground that as per the provisions of Rule 25(1) the minimum penalty which can be imposed is Rs.10,000/- and penalty below Rs.10,000/- cannot be imposed. The assessee filed a memorandum of cross objection as per Sec. 35B(4). The Commissioner (Appeals) dismissed the appeal filed by the Department and also dismissed the cross objections filed by the assessee.

The Department filed appeal before the Appellate Tribunal. The Department put forth the following contentions:

The quantity of brown sugar found short in the course of stock checking by the officers had been clandestinely removed without payment of duty; in view of this the duty demanded has been confirmed along with interest and penalty of Rs.5000/-;

The Commissioner (Appeals)'s order dismissing the Department's appeal for enhancement of penalty to Rs.10,000/- is contrary to the provisions of Rule 25(1) of Central Excise Rules, 2002 as minimum penalty prescribed under this Rule is Rs.10,000/- and penalty less than this amount cannot be imposed;

The cross objections filed by the assessee before the Tribunal in which the duty demand itself has been challenged, merits rejection, as the assessee did not file any appeal before Commissioner (Appeals) against the Asst. Commissioner's order confirming the duty demand and in course of proceedings before the Commissioner (Appeals) had only filed the cross objection wherein the issue of confirming duty demand on shortage of brown sugar had been raised but the same was rejected by the Commissioner (Appeals);

The assessee has not filed any appeal before the Appellate Tribunal against the Commissioner (Appeals)'s order rejecting their plea with regard to duty demand raised in the memorandum of cross objection filed before the Commissioner (Appeals) and that in view of this, at this stage, the assessee's plea with regard to confirmation of duty demand on shortage of brown sugar cannot be considered.

The assessee submitted the following:

So far as the issue of penalty of enhancement to a minimum of Rs.10,000/- is concerned this issue has already been decided by the Larger Bench in 'CCE, Bhopal V. Rama Wood Craft (P) Ltd.,' - 2008 -TMI - 49056 - (CESTAT, PRINCIPAL BENCH, NEW DEL) wherein the Tribunal held that what Rule 25(1) of Central Excise Rules, 2002 prescribes is an upper limit of penalty and within this upper limit, the adjudicating authority has discretion to impose any penalty; that in view of this, the Revenue's appeal for enhancement of penalty has been rightly dismissed by the Commissioner (Appeals);

The Commissioner (Appeals) has wrongly dismissed the plea of the assessee;

Though the assessee had not filed any appeal against Assistant Commissioner's order confirming the duty demand when the revenue filed a review appeal before the Commissioner (Appeals) the assessee as per the provisions of Sec. 35E(4) and 35B(4) filed a memorandum of cross objections;

In view of Sec.35B(4) and Sec. 35E(4) the Commissioner (Appeals) ought not have dismissed the memorandum of cross objection and is required to be remanded back to the Commissioner (Appeals) for de novo consideration.

The Tribunal heard both sides and held as follows:

When review appeal has been filed by the Department before the Tribunal or Commissioner (Appeals) under Section 35B(1) or Section 35B(2) read with Section 35B (4), the same is treated as appeal filed by the Department against the order passed by the adjudicating authority and in respect of this appeal, the provisions of Sec.35B(4) would be applicable;

Sec. 35B(4) provides that on receipt of notice that appeal has been preferred, the party against whom the appeal has been preferred may, notwithstanding that he may not have appealed against such order or any part thereof, file, within 45 days from the receipt of the notice, memorandum of cross objection verified in the prescribed manner against the appeal and such memorandum shall be disposed of by the appellate tribunal as if it were an appeal presented within the time specified;

Since in respect of review appeal filed by the Department before the Commissioner (Appeals) under Sec. 35E(4) read with Section 35E(2) the provisions of Sec.35B(4) are applicable, the respondent on receipt of notice about the Department's appeal should get opportunity to file a memorandum of cross objection within the time limit of 45 days prescribed under section 35B(4);

In this case the assessee filed cross objection within the stipulated period wherein besides opposing the plea of the Revenue of enhancement of penalty, they also challenged the confirmation of duty demand;

When such a cross objection has been filed, the Commissioner (Appeals) should have dealt with all the pleas raised in it as the same has to be treated as appeal;

In view of the above the Commissioner (Appeals)'s order holding that the assessee in the cross objection cannot plead the whole issue of the impugned order in original and that their plea is required to be limited only to the question of penalty, is not correct;

The Revenue's appeal for enhancement of penalty is dismissed;

The cross objection filed by the respondent is allowed and the Commissioner (Appeals) is directed to consider the respondent's plea with regard to confirmation of duty demand on alleged shortage of brown sugar on merit.