High Court’s observation to prevail over CBIC Circular, Joint Commissioner has jurisdiction to issue SCN and Adjudicate same: CESTAT [Read Order]

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The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench ruled that the High Court’s observation to prevail over Central Board of Indirect Taxes and Customs (CBIC) Circular wherein it was held that Joint Commissioner has jurisdiction to issue Show Cause Notice and adjudicate the same.

The revenue filed the present appeal against the Order-In-Appeal passed by the Commissioner (Appeals) whereby, the Commissioner (Appeals) remanded the matter on the ground of Adjudication by the incompetent authority and on the ground of violation of the principle of natural justice. In the present appeal, the revenue only raised the issue that the direction of the Commissioner (Appeals) in as much as the demand of more than Rs.2 Crores be made answerable to the Commissioner is not legal and correct, in view of the observation made by Gujarat High Court in the order passed in the respondent, Palak Designer Diamond Jewellery’s Civil Application.

Mr. Dharmendra Kanjani, Superintendent appearing on behalf of the revenue reiterated that the High Court in the judgment dated 02.08.2019 relying upon the Supreme Court judgment in the case of Pahwa Chemicals Pvt. Ltd. Vs. Commissioner of Central Excise given the clear observation that merely relying upon the circular it cannot be said that the Joint Commissioner had no jurisdiction to issue Show Cause Notice and adjudicate the same. Since this observation attained finality, the Commissioner (Appeals) had no option except to follow this observation and decide the matter accordingly. However, the learned Commissioner (Appeals) even after taking note of this observation held that as per the board’s circular the case involving more than Rs.2 Crores should be adjudicated by the Commissioner. This finding is contrary to the observation made by the High Court therefore, the impugned order to this extent is not tenable.

On the other hand, Hardik Modh, learned counsel appearing on behalf of the respondents reiterated the finding of the order of the Commissioner (Appeals).

The two-member bench of Judicial Member Ramesh Nair and Technical Member, Raju did not agree with this finding of the Commissioner (Appeals) for the reason that in the normal course the board’s circular is binding on the departmental officer. However, in the present case itself when the High Court has given the clear observation that too relying on the Hon’ble Supreme Court judgment in the case of PAHWA CHEMICALS PVT. LTD. (supra) that merely relying upon the board circular it cannot be said that the Joint Commissioner had no jurisdiction to issue the Show Cause Notice and adjudicate the same, therefore, this observation is binding in this particular case on learned Commissioner (Appeals) as well as the lower Adjudicating Authority. It is the settled law that when both the board’s circular and the judgment of the court of law is prevailing and the judgment has a contrary view than to the board circular in such a case the court’s judgment will prevail over the board circular. Following this principle in the present case also when there is a clear observation of the High Court in the present case itself that will prevail over the board circular which was relied upon by the learned Commissioner (Appeals).

“We are of the view that the observation of Hon’ble High Court will prevail over the board circular and according to which the Joint Commissioner has jurisdiction not only to issue the Show Cause Notice but also to adjudicate the same,” the CESTAT said.

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