Recently, i.e. on 05.08.2014, there was an article in Taxindiaonline.com about the adjudication process in the Central Excise Department. (http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=21173)
TIOL-DDT 2410
05.08.2014
Tuesday
05.08.2014
Tuesday
Policeman,
Prosecutor and Judge - all rolled into one
“THE story of a huge litigation
generally starts with a Show Cause Notice in Customs/Excise/Service Tax.
Usually the Show Cause Notice is the result of an audit or investigation by the
preventive unit. The Audit objection or the preventive intelligence is often
approved by the Commissioner and the Commissioner himself issues the Show Cause
Notice under his signature. And then he sits in judgement over the initial findings
approved by him and the notice issued by him - as the adjudicator. So,
un-understandably by any normal citizen, the Commissioner is the policeman,
prosecutor and the judge”.
(Pl visit www.taxindiaoline.com for full text of the article)
_______________________________________________________________
It is highly
improper to compare the functions and powers of a Revenue officer with that of
a Police Officer and a Judicial Officer.
A Police Officer, based on the First Information Report (FIR)
registered, investigates the case with[1]
or without[2]
the permission of the Magistrate following the procedure laid down in Chapter
XII of the Criminal Procedure Core, 1973 and submits his Final Report under the
provisions of Section 173 of CrPC. Further,
it is for the judicial officer to examine the evidences threadbare and to
satisfy himself that the case is proved beyond reasonable doubt, before passing
the appropriate Adjudication Order based on the merits of the case and
provisions of law.
While any
investigation by a Police Officer begins invariably with the registration of a
First Information Report (FIR), a copy of which is duly submitted the
Jurisdictional Magistrate[3],
there is no concept of FIR in the cases registered under the Customs Act or
Central Excise Act. While the Police
Officer is not empowered under the CrPC to summon any person (u/s 160), or to
search any premises (u/s 165) without registration of an FIR, a Revenue Officer
starts his investigation, summons a person[4]
or searches a premises[5]
merely on the reasonable belief that there is an offence under the relevant act
or there are certain goods which are liable to confiscation. While the Police Officer is barred[6]
from obtaining the signature of the witness on the statement recorded by him,
the Revenue Officer not only makes the witness sign the statement, but it
becomes a piece of evidence under any judicial or quasi judicial process[7].
The functions of adjudication envisaged by the Customs act and the Central Excise Act are quasi judicial in nature. Adjudication Orders are generally passed and issued by the officers of appropriate level in the departments under CBEC under the provisions of Customs Act or the Central Excise Act, depending upon the issue in hand. These Acts are Special Acts framed for the levy and collection of duty. Primarily the adjudication powers vested with the departmental officers are meant to ensure that there is no loss of revenue by way of an alleged contravention of the provisions of the aforesaid act/s by any person/s and to discourage any such offences by imposing sufficient amount of penalties to have a deterrent effect, as provided for in the statute. The investigation under Revenue Acts is more of a fact finding exercise for the purpose of adjudicating the case in hand, unlike an investigation of a criminal case by a Police Officer. Nevertheless, whenever a criminality in the offence is observed by the Adjudicating Authority during the process of his adjudication, a private complaint u/s 200 of CrPC is promptly filed before a competent Court. The prosecution proceedings are totally independent of Adjudication proceedings.
Show Cause Notice
The term
‘SHOW-CAUSE-NOTICE’ probably frightens a common man and is generally the
beginning of “huge litigation”. But
in fact, the issuance of SCN is nothing but a gesture of following the
principles of natural justice on the part of the Adjudicating Authority. By issuing an SCN, the assessee or the person
whose goods are proposed to be confiscated or against whom imposition of a
penalty is proposed is given an opportunity to submit his version and
evidences, if any, to bolster his arguments.
‘The principles of natural justice which have got to be observed by all
judicial and quasi judicial bodies are that a party should not be condemned
unheard, that he should know what the charge against him is, that he should be
heard in his defence, that he should be given an opportunity to lead evidence,
and he should also be given an opportunity to examine the materials which are
before the adjudicating authority for his defence [8].
Section 33 of Central Excise Act reads as follows
Power of
adjudication.—Where under this Act or by rules made thereunder anything is
liable to confiscation or any person is liable to a penalty, such confiscation
or penalty may be adjudged—
(a)
………
(b)
………
Section 122 of Customs Act reads as follows
Adjudication of confiscations and penalties. – In every case under this Chapter in which
anything is liable to confiscation or any person is liable to a penalty, such
confiscation or penalty may be adjudged, -
(a) ……………
(b) ……………….
(c) …………….
Apparently,
an Order of Adjudication is passed by the Competent Authority whenever any
goods are liable to confiscation or a person is liable to penalty.
While Section 124 of the Customs Act makes it mandatory for an SCN to be issued to the concerned person before passing an order of confiscation or imposing penalty, the Central Excise Act is silent on this[9]. However, as a matter of practice and with a view to following the principles of natural justice, the Department has been religiously issuing SCNs prior to every Order of adjudication. Therefore, in a way, the issuance of SCN can be said to be a part and parcel of the adjudication proceedings.
Prosecution
As mentioned above, during the
adjudication proceedings, if the concerned officer is satisfied about the
criminality in the offence, a complaint is filed before a court of competent
jurisdiction and the case is followed up in the Court to bring it to a logical
conclusion. When it comes to prosecution of Revenue cases, it may be observed
that the statues have stipulated that the Court shall presume the culpable
mental state on the part of the accused person[10]. This is quite a deviation from the general
principle followed in the regular cases filed before the Courts by the Police Officers,
wherein it is the responsibility of the prosecution to prove the ‘mens-rea’ as
the same is an essential ingredient of any offence.
It may also be appreciated that the Hon’ble Supreme Court has held that even after imposition of penalty by an adjudicating authority, a person can be prosecuted and punished[11].
Conclusion
The Commissioner of Central Excise
& Customs is an officer entrusted basically with the work of collecting
Revenue for the Government as provided for under the relevant acts. Quasi-judicial powers have been given to him
in order to effectively check revenue leakage and to punish the offenders to
create a deterrent effect. If at all
this Revenue Collector has to be compared with anybody in view of the powers
conferred on him under the statutes, it is felt that best comparison would be
with a Magistrate, who adjudicates the cases based on the evidences placed
before him. The Audit wing/ Preventive wing etc. of a Commissioner are nothing
but his own hands to effectively discharge his duties. The Audit wing goes to the assessee’s
premises to verify the documents and in case of any non-payment/short payment
of duty, the matter is brought to the Commissioner of Central Excise, who
demands the duty and imposes the penalty for violation of statute, after
following due process of giving the opportunity of explanation (by way of SCN)
and of being heard (by way Personal Hearing) to the assessee. Similarly, whenever the Preventive Wing
happens to notice any revenue leakage, the same is brought to the notice of Commissioner,
who orders for confiscation of goods/ imposing penalty, as the case may be,
along with recovery of duty, after following the due process as above.
[1]
Section 155 of CrPC, Non Cognizable Offences
[2]
Section 156 of CrPC, Cognizable Offences
[3]
Section 157 of CrPC
[4]
Section 14 of Central Excise Act, Section 108 0f Customs Act
[5]
Section 12F of Central Excise Act, Section 105 of Customs Act
[6]
Section 162 of CrPC
[7]
Section 108(4) of Customs Act
[8]
Central Excise Adjudication Manual, Chapter III, Show Cause Notice.
[9]
Section 11A of Central Excise Act stipulates for Notice to Show Cause in case
of non-payment/short payment/ erroneous refund; but not for confiscation or
imposing penalty.
[10]
Section 9C of Central Excise Act, Section 138A of Customs Act.
[11] Director of Enforcement v. MCT M Corporation
(P) Ltd., 1996, RLT, p 365 (SC).
