Customs, Excise and Gold Tribunal - Mumbai
Baron International Ltd. vs Commr. Of Cus. & C. Ex., Vadodara on 7 February, 2002
Equivalent citations: 2002(143)ELT112(TRI-MUMBAI)
ORDER J.H. Joglekar, Member (T)
1. M/s. J.R. Electronics (JRE) was a Proprietorship unit of Mr. Z.H. Rizvi. The unit manufactured CTVs. and Audio products bearing 'AKAI' brand. These were sold in their entirety to M/s. Baron International Ltd. (BIL) in terms of an Agreement. M/s. BIL held the right to use the 'Akai'; brand name. The prices negotiated between the manufacturer and its sole buyer was declared as the price for levy of duty. The CTVs. and Audio systems were supplied by JRE to BIL from December, 1994 onwards. On 1-4-1996 the proprietary concern ceased to exist and a Private Limited Company in the name and style of M/s. J.R. Consumer Electronics Pvt. Ltd. (JRCEPL) was formed. The Company had two Directors - one was Mr. Rizvi and the second was Mr. Jaydeep Anand. The assets and liabilities of the proprietary unit were taken over by the private limited company. The manufacture and supply of CTVs. and audio products were continued as earlier.
2. There was a substantial difference between the manufacturer's price and the market price of the CTVs and audio systems. This lead to investigations. The investigations showed that the manufacturer was getting as cost and profit the sum of Rs. 250/- per set. The key components were supplied by M/s. BIL. Those components which were purchased by M/s. JRE was also heavily undervalued. Statements of concerned persons were recorded. The Agreements were studied and which showed that M/s. BIL exercised absolute control over M/s. JRE. Similar findings were made even when M/s. JRE was converted into M/s. JRCEPL. The prima facie conclusion drawn was that the proprietary concern and the private limited company were dummies of M/s. BIL and therefore the prices at which M/s. BIL were selling the final goods should be the base for assessment in the hands of the manufacturer. In this belief the show cause notice was issued to M/s. BIL, Mr. J.R. Mulchandani, Chief Executive, Mr. Kabir Mulchandani, M.D. and S.C. Gupta and Jaydeep Anand, Directors of M/s. BIL; Mr. Rizvi and M/s. JRE were also made noticees. The Notice directed that replies be filed to Commissioner of Central Excise, North U.P., Meerut. The Notice was dated 12-6-97.
3. Throe more show cause notices were subsequently issued.
4. The noticees filed appropriate replies before the Commissioner of Central Excise, Meerut. Later on adjudication of the cases were transferred to Commissioner of Central Excise, Vadodara. On hearing the noticees afresh the Commissioner of Central Excise, Vadodara has passed combined orders dated 27-1-1999.
5. The Commissioner concentrated on the allegation that JRE & JRCEPL were dummy units of BIL. He examined each allegations made in the Show Cause Notice to sustain the charge. As regards JRCEPL he held that it could not be termed as a dummy unit. Part of the demand as it pertained to the period after JRCEPL was formed, on this ground was dropped. Even then he confirmed duty of Rs. 5,48,92,612/- as differential duty on goods which were supplied by the JRE to BIL. On the observation that the assessments were provisional he chose not to impose penalty and to levy interest. He passed this Order on 27-1-99.
6. The Central Board of Excise reviewed this Order in terms of Section 35E(1) of the Central Excise Act, 1944 and directed the Commissioner of Central Excise, Meerut-II to make an application before the CEGAT for determining all the points enumerated therein. This order resulted in filing of Appeal Nos. E/387/2000-Mum. to E/393/2000-Mum.
7. M/s. BIL have filed Appeal No. E/1845-V/99-Mum. challenging the Order of the Commissioner of Central Excise, wherein they were directed to pay duty.
8. Vide interim Order No. C-I/3453/W2B/2000, dated 4-10-2000 on an application for waiver of pre-deposit of duty filed by BIL, the Tribunal directed that the appeals be placed for final disposal.
9. The Appeals were earlier heard by a Bench which could not conclude the matters on account of retirement of one of the members. The cases were therefore taken up for final disposal.
10. Shri. Lakshmikumaran, Advocate appeared along with Shri Narasimhan, Advocate for M/s. BIL. Shri M. Chandrasekharan, Sr. Advocate, appeared for the Revenue along with Smt. Savita Sharma, Advocate.
11. Shri Lakshmikumaran raised the issue of legality of the order under which the Appeals were filed by the Revenue and requested that a ruling be given by the Bench on these submissions before proceeding with the appeals inasmuch as the finding of the Tribunal on the basic issue raised by him would make an impact and a bearing on the hearing of the appeals.
12. The argument made by him was twofold. His first submission was that the directions made by the CBEC to the Commissioner of Central Excise, Meerut-II were not in terms of provisions of Section 35F(1) of the Act. Citing the language of the provision he says that the very Commissioner who had passed the order was alone competent to file the applications. The Adjudicating Officer in the present case was the Commissioner of Central Excise, Vadodara. The CBEC should have directed him to file the applications. The directions given to the Commissioner of Central Excise, Meerut-II were not in terms of the said provision. This order being defective the applications and the pursuant Revenue Appeals would become void. In support of his submissions he cited a number of Tribunal Judgments and also a Supreme Court judgment in the case of M.M. Rubber Co. reported in 1991 (55) E.L.T. 289 (S.C.). He claimed if the Tribunal rules in his favour the appeals of the Revenue would be liable for dismissal without being heard.
13. Shri Chandrasekharan referred to the Notifications which empowered the Commissioner of Central Excise Vadodara to deal with the case. He claimed that the Commissioner was authorised to "investigate and adjudicate" the case. He claimed that the post adjudication functions continued to vest with the Commissioner of Central Excise, Meerut-II and therefore he was competent to file the appeals and that the directions of the Board were competent directions. It is his claim that the wording "adjudicating authority" should not be rigidly interpreted. According to him the adjudicating authority is the Collector and therefore every Collector would qualify for the term 'adjudicating authority'. He submitted that this provision was entirely procedural. He said that Commissioners are transferred frequently. If the provision were to be interpreted rigidly it would cease to be functional. Referring to the cited judgment of the Supreme Court he claimed that it had focused more on the aspect of limitation.
14. Shri Lakshmikumaran referred to the amendment made to Section 35E whereby the Board could direct an adjudicating authority or any other Collector to file a Revision Application. He said that the amendment would make it clear that during the period prior to the amendment only the adjudicating Collector was competent to make such application.
15. Shri Lakshmikumaran then advanced the second ground. Section 35E(1) merely permitted the Board to examine the legality or propriety of an Order. He said that power of revision was different from right to appeal. A revisionary authority could not become an Appellate authority and seek reappraisal of the evidence appreciated by the adjudicating authority. In this connection he cited Supreme Court judgment in the case of Laxmidas v. Santokh Singh reported in 1995 (4) SCC 201. In the said Judgment the Supreme Court has brought out the distinction between the appeal and the revision and held that revisionary jurisdiction could not be converted into appellate jurisdiction. He therefore submits that on this ground also the order under Section 35E(1) suffers thereby rendering nugatory the Appeals filed by the Revenue. He, however, reserved his right to revert to this point if and when the appeals of the Revenue are taken up for hearing and requested for hearing on his first objection alone.
16. We therefore take up the first point raised by the Shri Lakshmikumaran.
17. Section 35E of the Act empowers the Board or a Commissioner of the Central Excise to call for and to examine an adjudication order. If it leads to the belief that the order is not legal or proper then the Board or the Commissioner as the case may be, may direct the adjudicating authority to make an application to the appropriate appellate authority; on the lines of the points made by the revisionary authority. Such applications are to be treated as appeals by the appropriate appellate authorities. The relevant provisions of said Section 35E at the material time read as under :-
"35E. (1) The Board may, of its own motion, call for and examine the record of any proceeding in which a Commissioner of Central Excise as an adjudicating authority has passed any decision or order under this Act for the purpose of satisfying itself as to the legality or propriety of any such decision or order and may, by order, direct such Commissioner to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order as may be specified by the Board in its order.
(2) The Commissioner of Central Excise may, of his own motion, call for and examine the record of any proceeding in which an adjudicating authority sub-ordinate to him has passed any decision or order under this Act for the purpose of satisfying himself as to the legality or propriety of any such decision or order any may, by order, direct such authority to apply to the Commissioner (Appeals) for the determination of such points arising out of the decision or order as may be specified by the Commissioner of Central Excise in his order "
18. This provision came under the scrutiny of the Apex Court in the cited judgment CCE v. M.M. Rubber Co. (supra). In para 6 the Court observed as under :-
"It may be seen that the direction to file an appeal under these two subsections by the Board and the Collector, as the case may be, is to the very adjudication authority who would otherwise be bound by his own order and not expected to be aggrieved by the same. When an appeal is filed on such direction, the appellant will be the adjudicating authority himself and not the authority who gave the direction."
19. This judgment and especially these observations has been relied upon by the Tribunal in a number of cases, a few of which have been cited by the learned Counsel.
20. In the case reported in 2000 (38) RLT 480 (Malhotra Steel Products) the adjudication order was passed by an Additional Commissioner. The Commissioner had directed the Assistant Commissioner to file an Application before the Commissioner of Customs (Appeals). The Tribunal held the proceedings as defective, following the law in the earlier cited judgment of the Tribunal in the case of Dharampur Sugar Mills [1999 (108) E.L.T. 498 (T) = 1999 (30) RLT 539]. In the case of Dharampur Sugar Mills (supra) the adjudication order was passed by the Superintendent and the application was made by an Assistant Commissioner. Here also M.M. Rubber Co. judgment was relied upon. In these two cases and in the other cases referred by the learned Counsel the order passed under Section 35E(2) were assailed.
21. Section 35(H)(2) speaks of the adjudicating authority subordinate to the Commissioner. This term covers different levels of officers such as Assistant Commissioner, Joint Commissioner, Additional Commissioner, etc. Therefore the Tribunal interpreted the wording 'such authority' as an officer on the same level as the one who had passed the adjudication order. It must be noted here that the grievance made by the appellants in these cases was on the level of authorities and not on the ground that the officer who had made the application was different from the officer who had passed the adjudication order. Sub-section (1) of the said Section speaks only of one level i.e. Commissioner.
22. We have perused para 6 of the Supreme Court judgment in continuation with paras 4 and 5.
23. Section 35 and 35B which relate to appeals to the Commissioner (Appeals) and to the Appellate Tribunal respectively, specify that for an appeal to be filed the Appellant must be 'any person aggrieved'. In this situation the adjudicating authority making an application under Section 35E cannot be termed as 'a person aggrieved'. Sub-section 4 of this Section require the Appellate Authority to hear the applications as if they were appeals. The Supreme Court obviously was reconciling a situation which was apparently at odds i.e. an adjudicating officer being put in a situation of being aggrieved by his own order and appealing against it instead of being bound by it. It would appear that Shri Lakshmikumaran, learned Counsel is seeking to extract more from these paras than its contents.
24. The short point raised by the Counsel is that the very Commissioner who passed the adjudication order must be the person filing the application. We notice that the Supreme Court has used the phrase 'the very adjudicating authority'. The Counsel draws support from the wording "direct such Commissioner to apply ......." Therefore in our opinion the phrase 'such Commissioner' as an adjudicating authority, needs to be interpreted.
25. The phrase 'Commissioner' has been defined in Rule 2(4) of the Central Excise Rules 1944, essentially as the person who has the territorial jurisdiction as per the specifications in the said sub-rule. Section 33 of the Act indicates the powers of adjudication by a Commissioner and by other officers and vests the Board with the power to confer upon a lesser officer the power of adjudication given to a Commissioner. Central Excise Officers as defined under Section 2(b) includes all levels of officers from Chief Commissioner to Assistant Commissioners. The provisions also empower the Board to confer the jurisdiction of any level of officer upon any other level of officers even if the officers benefiting these from belongs to the State Government.
26. The various provisions show that the Board is empowered to assign the functions of a particular level of officer to another officer of the same level and also to confer greater jurisdiction on a lesser level of officer.
27. As observed above the Commissioners are known by their territorial jurisdiction. When a Commissioner proceeds on leave another Commissioner is given the additional charge. Commissioners are routinely transferred from one place to another or are promoted (some may retire and some may pass away). In such a situation the phrase 'such Commissioner' cannot be rigidly interpreted so as to mean the same person as the adjudicating authority. In this situation the said phrase would include a successor Commissioner also. The manner in which the Counsel interpreted the provisions, a successor Commissioner cannot be 'such Commissioner' in terms of the wording of the said Section and also that he can never be the 'very adjudicating authority' as mentioned by the Apex Court. It could be that an adjudication order is passed by a Collector and the application is made by another Collector when the other Collector is holding his charge in the absence of the Collector who passed the order. It can also be that the adjudication order is passed by a Collector holding additional charge and the application is made by Collector holding his charge after his resumption/leave. These situations are real and arise at all times. It cannot be anybody's case that the said section before its amendment would render null any application made by the other Commissioner in these situations. The situation as is existed in the present case is not so different from the situations described above.
28. In terms of Order made by the Board the function of adjudication in specific cases was transferred from Commissioner of Central Excise, Meerut to Commissioner of Central Excise, Vadodara. Such limited transfer did not take away the capability of the Commissioner of Central Excise, Meerut as an 'adjudicating authority'. The definition of the 'adjudicating authority' under Section 2(a) of the Act merely specifies the competence to pass an order. That competence is amplified and illustrated in Section 33 of the Act. When these two provisions are read together it would be clear that every officer of Central Excise of and above the rank of a Superintendent would be competent to pass an order and be called as an adjudicating authority. Therefore any attempt to give a restricted interpretation to the provisions of Section 35E would render the very Section non-operational. We find substance in the claim of Shri Chandrasekharan that the Section is essentially procedural and should be interpreted as such.
29. We take notice of the submissions made by Shri Lakshmikumaran here that the later amendment to the provision whereby any other Commissioner was authorised to file an application would indicate that prior to the amendment no other Commissioner was permitted to make the application except the person who was the adjudicating authority. We do not find substance in this plea. We recall the dispute on the construction of Rule 57Q of the Central Excise Rule on the applicability of Modvat credit on capital goods. There was a number of disputes on the eligibility of certain capital goods. Later by amendments Clause (d) was added to the explanation where in certain specific capital goods were enumerated. The Excise Officers were of the view that the credit would be available on such specified goods only from the date of amendment of the said Rule. The Tribunal negated the contention holding that where the goods passed the test of the stipulations of paras (a) to (c) their later specific enumeration in Clause (d) would not be a bar to their eligibility in the period prior to the amendment. CCE, Indore v. Surya Roshni Ltd. [2001 (128) E.L.T. 293 (Tri.-LB)].
30. Shri Chandrasekharan referring to the language of the Section 35E(1) submitted that what was transferred to CCE, Vadodara were the functions of investigation and adjudication. And therefore the other powers including that of filing an application under Section 35(1) remained with CCE, Meerut-II. On a plain reading of this provision we find that it did not preclude CCE, Meerut-II from filing the application.
31. In view of our discussions above, we do not find any substance in the contention that the applicant must be the same person, namely, the Commissioner who made the adjudication order. We find no infirmity in the application made by the Commissioner and we therefore find that the appeals filed by the Revenue are tenable.