De Novo Adjudication

Though there is no exact definition for the term ‘do novo’ in any of the statutes; but as per the dictionary meaning, it shall be:

”from the beginning” / “over again”

 In the colloquial understanding, it could be viewed that the authority for the adjudication, who empower to reopen the case, should see the case as new and as if the same had not been heard before and as if no decision had been previously rendered”.

In what circumstances  “De Novo” is Ordered: In the case of earlier order wherein the Higher Authorities (Tribunal) is of the opinion that:

1. Violation of Natural Justice
2. Procedural Irregularities
3. Non -examination of case as per the facts and merits
4. Non-Speaking Orders
5. Fresh evidence submitted during the hearing
6. Reconsideration as per the latest decisions.

Since the old cases, now being undertaken for adjudication (after the  change tax regime), poses certain challenges.

The suggestions for overcoming the challenges:

1: Economic Stagnation:

Adjudicating old Central Excise cases under the guise of de novo (afresh) proceedings after a long period of dormancy is a significant issue in today’s scenario since the change in procedures- due to transformation of most of the assesses into GST Regime. In other words, there is a real challenge for the disposal of De Novo Cases since there should be a proper guidance in dealing with the old for cases for adjudication.

 

2: Violation of Natural Justice due to discontinuity

When cases, some pending for over a decade, are remanded or reopened for de novo adjudication, it often leads to legal and practical problems, primarily causing violation of natural justice, legal uncertainty, and immense difficulty in substantiating claims.

 

3:           Time Stipulation for the disposal of Old Cases to avoid violation of Natural Justice

1. It suggested that an internal committee be formed to fix the time limit for the disposal of old cases when it remanded for fresh adjudication to avoid the unexplained dormancy:  In case of cases, which are not disposed-off within the stipulated time “benefits of doubts” must be passed on in favour of the assesses.
2. Collection of Evidence: Due to abnormal delay, after lapse many years, it becomes impossible for the assessee to place old records, documents, or register books needed to defend their case, violating principles of fair trial. Further due to certain internal 5S concepts, in which one of the activities, is to keep clean and high performing workplace, which led to clean-up old records. As per the requirement, there is some challenge to trace and submit the evidence.
3. Discontinuity due to shift in new system: Another challenge it is important to note that due to shift in GST system, there are total change in the allocation of manpower since in some companies, the entire statutory activities/compliance are given to taxation consultant. Further, it might have happened that personnel who were involved in the original transactions may have retired or moved out due etc., making it difficulties to submit the documentary evidence. This led to Department to decide the case not in favour of the assesee ie, due to lack of evidence which is considered as “under reporting the particualrs”.
4.  De Novo Concept:

• Since De Novo requires to take the case as ‘fresh’ it would tantamount to take for fair re-assessment, Hence, the officer-charge for disposing the case(s) should be more careful in deciding the case and do carry for justice, interpreting the case laws and verifying evidence before its disposal. This approach would certainly to prove the intention of the Govt., to dispose the case inequitable manner

5.  Procedural Discomfort

 In de novo proceedings, the adjudicating authority often relies on old statements recorded during the investigation without following the mandatory procedure under Section 9D of the Central Excise Act, 1944. This vitiates the entire proceeding.

• Non-Production of Relied Upon Documents: During a de novo hearing, if the department fails to provide the documents relied upon in the show cause notice (SCN), the case violates natural justice.

Preserving of old records, statements:  In this regard, it is settled principle that onus isremain with Assessee who is required to collect and submit the evidence, particulars etc., before the adjudicating authority to take-up for free and fair trail while disposing the case.

6. Lack of knowledge in interpreting the procedures, rules, amendments

• Since the cases are being taken after gap of 7+ years (after the introduction of GST), the officers are not enough experienced in the old cases, not potential to take the interpretation of case laws in deciding the de-novo adjudication. Hence it is the duty Department Seniors to provide proper guidance including conducting the classes, arranging class-rooms interactions, broad guidelines etc., are need of hour for arriving appropriate conclusion in disposing the old cases.  

7. Difficulties in de novo cases: Breaching Legal Ethics and Technical Challenges

• Irreconcilable Evidence: The tax laws, rules, and classifications change over time. Applying current legal interpretations to a transaction that took place over a decade creates severe discrepancies.
• Burden of Proof: While de novo implies a fresh look, in practice, the burden is placed entirely on the assessee to prove their innocence in a matter where the evidence has long been lost.
• Call Book Pretext: The department often keeps cases pending indefinitely by placing them in the “call book” on the pretext of pending court cases, which Courts have criticized to circumvent statutory limitations.

8. Impacts on Assessee & Expected Leverage

Financial Liability: Delayed orders attract interest and penalties that are completely attributable to administrative inertia, burdening the taxpayer with massive, often unpayable, demands.

The inordinate delay which caused huge hardships to the ultimate assessee’s in terms of time and money besides the energy which spent on tracing the old documents. The Authority shall consider the history of the case, instead of seeking hard copy, relying on digital records and analysing the circumstances which existed for the remand of case etc., for fair disposal. This approach would definitely instil the confidence in the assesses mind in approaching the authority with full faith and confidence.

 Conclusion:

Contrary to the general perception that “De Navo” mean fresh trail / “from the beginning” time consuming process etc., the authority should create a positive environment in approaching the old cases / old rules (though the rule was in force), relying on digital documents etc., to dispose the case in free and fair trail procedures. The authorities should provide more adequate opportunity to seek more evidence in disposing the case in a justified way, by rendering justice to remove the misconception of injustice at the end of “De Navo” adjudication.