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Limitation for adjudication recalled

JUNE 14, 2011
By G Jayaprakash
LIMITATION play havoc with the rights of the party to litigation and often, otherwise eligible claims / rights will not be
fructified because of limitation, in general as per provisions of Limitation Act, or as per specific provisions of relied Acts /
Rules.
In all the Centrally administered Indirect tax Statutes, as on date, a demand of tax not paid, short paid or erroneously
refunded can be demanded only within one year, unless otherwise the demand arose for different reasons of fraud etc.
enumerated in the statutes, that too only up to a maximum of 5 years. Hence relevant date adore an admirable position
in taxation disputes.
Prior to the introduction of Finance Act, 2001 there were no provisions for limitation for settling the dispute by issuing
Orders-in-Original by specifying a period within which adjudication is to be completed from the date of the Show Cause
Notice.
Finance Act, 2001 vide section 123 brought in a new provision in Central Excise Act,1944, which prescribed a time limit
for adjudicating cases as per section 11A of Central Excise Act, 1944. [Similar provision under section 28 inserted vide
section 103 of Finance Act, 2001 in Customs Act, 1962.] There is no similar provision in Finance Act, 1994 [Service
Tax]. Such a provision for limitation provided is with a rider of where it is possible to do so. Hence the adjudicating
authorities had breathing time. Finance Bill 2011 vide clause 60(11) brought in a new provision, which is a reproduction
of section 11A (2A) of Central Excise Act, 1944 [Under Customs Act, 1962-vide section 41 (9) of Finance Bill, 2011]
without the where it is possible to do so Phrase.
However, subsequent amendments brought out to Finance Bill, 2011 recalled the deletion of the phrase where it is
possible to do so and inserted it in the substituted section 11A of Central Excise Act, 1944. With the insertion of where
it is possible to do so' into the new provision the statuesque continue.
It appears interesting to understand the implications of these new provisions, if, retained in Finance Act, 2011.
Adjudicating authorities are bound to adjudicate the cases before the expiry of one year from the date of issue of Show
Cause Notice attracting provisions of Sub-section (4) of Section 11A and within six months from the date of issue of
Show Cause Notice in cases attracting provisions of Sub-section (1) of Section 11A of Central Excise Act, 1944. Whether
it would have been valid only prospectively or applicable to pending Show Cause Notices too?
Interpretations by interested parties conveniently hide the intention of statute to suit their requirement. In this case
Revenue may claim prospectively and parties for retrospectively. The applicability of the amendment brought out by
2008 Finance Act, to Section 78 of Finance Act 1994 to the effect to restrict the application of Section 76, if penalty is
imposed under Section 78 is still being fought at different levels without accepting the principle that a beneficial
provision will be applicable for imposing penalties. The Krishna Poduval's case of the Kerala High Court is being relied to
impose penalty simultaneously under Section(s) 76 and 78 for SCNs issued prior to 10.05.2008.
It also appears, the new pre-amended provision would have rendered the practice of transferring cases to call book
based on the four criteria prescribed by CBEC redundant. The adjudicating authorities might have been forced to confirm
demands based on C & AG objections, even though the objections are contested by the department. This is because of
the mandatory requirement to issue SCN whenever an objection is received from C & AG.
The adjudication is a process that requires application of mind by the adjudicating authority and he / she should not be
forced to act as robots with application software loaded and forced to decide cases. It appears, the substituted provisions
of section 11A restrict the adjudicators to decide cases, without any discretionary power. If it is to curb its misuse,
students of Law may recollect in the legal history textbook - the case of a small Court judge Kannappan' of erstwhile
Madras Presidency'. The allegation against him was that he decided a case by accepting a bribe of Rs.5. The mass
protest to replace him ultimately entrusted the power to decide cases to the East India Company and the rest is history
of how East India Company acquired judicial powers and became the political masters of this great country.
Higher Courts occasionally set aside certain decisions citing inordinate delay in deciding the cases. One such case is
Hindustan Lever Limited v Union Of India .The Hon'ble Court held that In the absence of period of limitation,
proceedings have to culminate with in reasonable time- If not done so they stand vitiated and liable to be quashed. The
Court also refused to remand the case for redetermination after compliance of natural justice citing undue delay in
decision.
The term Where it is possible to do so is a question of fact and reasonability test appears to be applicable in this case.
The recent deletion and re-introduction of the phrase may rekindle the thought of consultants/ Advocates, and this may
be yet another argument in future and innovative phrases may be required to demolish the argument of limitation to
save Revenue. Further C&AG may also renew the report about slow pace in adjudication once again. [Read TIOL Report
dated 12.6.2006].
In the light of the existing instructions to decide cases within the time frame i.e. within six months/ one year, (Refer
RFD), necessity of a further provision, with a rider, in the Act requires a relook by the appropriate authorities since the
re-introduction of the rider appears to have no positive effect on Revenue but may cause damage, if properly agitated.

17/02/2016 12:14 PM

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(The author works with the Department and the views expressed are personal)

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17/02/2016 12:14 PM