Rajasthan High Court - Jaipur
M/S Rathi Special Steels Ltd vs U O I And Ors on 28 September, 2018
Bench: Mohammad Rafiq, Goverdhan Bardhar
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
D.B. Civil Writ Petition No.13413/2016
M/s. Rathi Special Steels Ltd., SP-29,F-20 to 24 Industrial Area,
Khushkhera Bhiwadi, District Alwar (Raj.) through its authorized
signatory, Shri Sarjit Singh Yadav S/o Late Doulat Ram, aged
about 51 years, presently working as Authorised Signatory
(Manager), R/o B-30, Ashiyana Bagicha, Bhiwadi, District-Alwar
(Raj.)
----Petitioner
Versus
1. Union of India Through Revenue Secretary, North Block,
Near India Gate, New Delhi
2. The Commissioner of Central Excise and Service Tax,
Central Excise Commissionerate, Alwar, New Central
Revenue Building, Alwar (Raj.)
3. Senior Audit Officer/CEAP-3, Office of the Director CRA-II,
Mahalekhakar Bhawan, Janpath, Jaipur (Raj.)
4. Superintendent, Central Excise and Service Tax Range-IV,
Bhiwadi, Alwar (Raj.)
5. Registrar, CESTAT, R.K. Puram, New Delhi
6. Chief Commissioner, Central Exicise, NCRB Building,
Jaipur (Raj.)
----Respondents
For Petitioner(s) : Shri Sameer Jain with Shri Arjun
Singh & Shri Daksh Pareek
For Respondent(s) : Shri R.D. Rastogi, Addl. Solicitor
General assisted by Shri C.S. Sinha,
Shri Vedant Agarwal for UOI &
Shri Kinshuk Jain
HON'BLE MR. JUSTICE MOHAMMAD RAFIQ
HON'BLE MR. JUSTICE GOVERDHAN BARDHAR
REPORTABLE Judgment
28/09/2018
(PER HON'BLE MOHAMMAD RAFIQ, J.)
This writ petition seeks to challenge the audit objection
dated 8.11.2013, show cause notice dated 1.5.2015 and the
order-in-original dated 21.6.2016. Further prayer in the writ
(2 of 7) [CW-13413/2016]
petition is that the direction be issued to the Customs, Excise and
Service Tax Appellate Tribunal (for short-`the Tribunal') to waive
the requirement of 7.5% pre-deposit under Section 35F as
amended because the lis in the present case commenced prior to
the aforesaid amendment. The constitutional validity of Section
35F has also been challenged on the ground that it is ultra vires to
the Constitution of India as it imposes a mandatory condition of
pre-deposit 7.5%, whereas in the earlier unamended provision,
the Tribunal had a discretion to waive the pre-deposit.
Shri R.D. Rastogi, learned Additional Advocate General, at
the outset, has submitted that the constitutional validity of Section
35F has already been upheld by the High Court of Jharkhand at
Ranchi in Sri Satya Nand Jha vs. UOI in IA No.1608/2016 with
WP(T) No.4858 of 2015 by judgement dated 5.7.2016. In SLP(C)
No.31643/2016 filed against the aforesaid judgement, having
been decided vide order dated 7.11.2016, the Supreme Court has
upheld the same.
Shri Sameer Jain, learned counsel for the petitioner
submitted that as per the show cause notice dated 1.5.2015, the order in original was passed by the respondents relying on the norms fixed by the Steel Authority of India. Aside of the fact that the aforesaid norms cannot be applied to the petitioner, copy of such norms and other material, which the respondents relied, were not supplied to the petitioners despite demand. Reference is made to the number of applications, which the petitioner submitted and also the application, he made under Right to Information Act demanding copies thereof. It is argued that only part of some of those documents have been supplied to the petitioner and that too subsequent to passing of the order-in-
(3 of 7) [CW-13413/2016] original. Therefore, the order in original has apparently been passed in breach of the principles of natural justice. In such like situation, alternate remedy of appeal may not be an impediment for this Court to entertain the writ petition and annul the order impugned.
On the question of pre-deposit, learned counsel submitted that while in the unamended provision, the Tribunal had the discretion to waive the requirement of pre-deposit, but in the amended provision now it has been made mandatory that every appeal shall be accompanied by pre-deposit of 7.5%. Learned counsel relying on the judgement of Hoosein Kasam Dada (India) Ltd. vs. State of Madhya Pradesh & Ors.-1953 AIR SC 221 has argued that the lis in the present case should be taken to begin when the audit objection was raised on 8.11.2013 and the law of that time should be applicable to the appeal that may now be required to be filed against the order in original. Learned counsel in support of his arguments has relied on the judgement of the Madras High Court in Arafaath Travels Pvt. Ltd. vs. CESTAT, Chennai-2016 (333) E.L.T. 278 (Mad.) and also Kerala High Court at Ernakulam in Jeevan Telecasting Corporation Ltd. vs. C.C.E.C. & S.T. Cochin-2015 (38) S.T.R. 1126 (Ker.). It is also submitted that this Court also in Rajasthan Tourism Development Corporation Ltd. vs. UOI & Ors., D.B. Civil Writ Petition No.9557/2015 vide order dated 18.05.2016 has taken similar view.
Shri R.D. Rastogi, learned Additional Solicitor General has argued that the audit objection does not give rise to commencement of a lis. Audit objection merely provides basis to the competent authority to take a view on that basis, whether or not to proceed further. In this case, the opinion was formed by the (4 of 7) [CW-13413/2016] competent authority on examination of audit objection and other materials and thereafter show cause notice as issued on 1.5.2015, which is when the lis may be taken to have commenced. It is argued that the amended Section 35F came into force on 6.8.2014. Since the show cause notice was issued much thereafter, the amended provision would apply to the petitioner even with respect to filing of the appeal.
It is argued that this matter was filed before the High Court and was entertained only because of challenge to the amended Section 35. Now that the vires of the aforesaid provision has been held ultra vires by the Jharkhand High Court, which judgement has been upheld even by the Supreme Court, that question is the issue has no longer res integra. The petitioner should be relegated to the attentive remedy of appeal, which is equally efficacious.
We have given our anxious consideration to the rival submissions and perused the material on record.
The Supreme Court in Hoosein Kasam Dada (India) Ltd., supra, while considering the argument that until actual assessment, there can be no 'lis' and, therefore, no right of appeal can accrue before that event, held that there are two answers to this plea. Whenever there is a proposition by one party and an opposition to that proposition by another, a 'lis' arises. It may be conceded, though not deciding it, that when the assessee files his return a 'lis' may not immediately arise, for under Section 11 (1) the authority may accept the return as correct and complete. But if the authority is not satisfied as to the correctness of the return and calls for evidence, surely a controversy arises involving a proposition by the assessee and an opposition by the State. The circumstance that the authority who raises the dispute is himself (5 of 7) [CW-13413/2016] the judge can make no difference, for the authority raises the dispute in the interest of the State and in so acting only represents the State. It will appear from the dates given above that in this case the 'lis' in the sense explained above arose before the date of amendment of the section and even if the 'lis' is to be taken as arising only on the date of assessment, there was a possibility of such a 'lis' arising as soon as proceedings started with the filing of the return or, at any rate, when the authority called for evidence and started the hearing and the right of appeal must be taken to have been in existence even at those dates.
Even in the Madras High Court judgement in Arafaath Travels Pvt. Ltd., supra where judgement of the Supreme Court in Hoosen Kasam Data (India) Ltd., supra was relied, the assessee preferred an appeal before the CESTAT under sub-section (1) of Section 86 of the Finance Act, 1994. The Tribunal, as a pre-condition to take the appeal on file, passed an order directing the assessee to deposit a sum of Rs.20,00,000 within a period of eight weeks. One of the arguments raised before the High Court on behalf of the appellant was that the amended provisions of Section 25F of the Central Excise Act, 1954 would not be applicable. It was held by the High Court that any amendment particularly in tax Statute, has to be prospective, unless and until, the same has been made retrospective by express provision in the amendment itself. A perusal of the amended section, i.e. section 35F of the Act only indicates the cut-off date i.e. 6.8.2014, on or after which pre- deposit is made mandatory to entertain the appeal. But it is silent with regard to the law applicable to the appeal filed prior to 6.8.2014. The pre-existing right of the appeal cannot be destroyed by the amendment. It is evident from the head note of the report (6 of 7) [CW-13413/2016] that an appeal in that case was filed before the Tribunal on 21.2.2014, much before the amended Section 35F came into force on 6.8.2014. Therefore, obviously, the pre-deposit on the basis of amended provision could have been insisted.
Even in the judgement of the Kerala High Court in Jeevan Telecasting Corporation Ltd., supra, relied by learned counsel for the petitioner, it was held that the institution of a suit carries with it an implication that all rights of appeal then in force are preserved to the parties thereto till the rest of the career of the suit and, further, that the right of appeal that is vested is to be governed by the law prevailing at the date of institution of the suit or proceeding, and not by the law that prevails at the date of its decision or at the date of filing of the appeal. Kerala High Court in the aforesaid judgement has relied on the division bench judgement of High Court of Telengana & Andhra Pradesh, which had taken a view that since lis in question had commenced prior to the introduction of the amendment to the Finance Act, 1994, with effect from 8th August 2014, the petitioner's right of appeal as per the erstwhile provisions of law would not be affected by the provisions introduced by the amendment of 2014. Perusal of para 4 of the judgement indicates that lis in that case had commenced in 2013 and therefore obviously the amended Section 35F would not apply on them.
Much though the learned counsel for the petitioner has argued that lis in the present case may be taken to have begin on 8.11.2013 when the objection was raised, we do not find any basis for accepting such a spacious plea because audit objection, as has rightly been argued merely affords a basis for the department to proceed further to examine whether or not there is (7 of 7) [CW-13413/2016] sufficient material and justification for initiating the recovery proceedings against the concerned party if the department is unable to meet the objection. It is the date of issuance of eventual show cause notice only that can be, Supreme Court in as per the ratio of the judgement of the Hoosein Kasam Dada, supra can be taken as the date of commencement of lis in the present case. The show cause notice having admittedly been issued to the petitioner on 1st May, 2015 much after coming into force of the amended Section 35F on 6.8.2014, the amended provision would apply.
As far as judgment of this Court in Rajasthan Tourism Development Corporation Ltd., supra, is concerned, it is a summary order where the complete facts are not mentioned and therefore it is not discernible to therefore as to when the lis commenced.
In view of the above discussion, the writ petition deserves to be dismissed not only because vires of Section 35F, has already been upheld by the Jharkhand High Court in Sri Satya Nand Jha, supra, which judgement has been upheld by the Supreme Court, but also on account of availability of alternative efficacious remedy of appeal before the CESTAT.
Accordingly, the writ petition is dismissed. However, it would be open to the petitioner even now to file appeal before the Tribunal, which shall be considered in accordance with law. It is made clear that we have not touched the merits of the case on any of the issues raised in the pleadings before this Court and all the points are left open to be argued before the Tribunal.
(GOVERDHAN BARDHAR),J (MOHAMMAD RAFIQ),J
RS/27
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