Custom, Excise & Service Tax Tribunal
Cst, Delhi vs M/S L.R. Sharma & Co on 26 April, 2013
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
West Block No.2, R. K. Puram, New Delhi.
Court No. 1
Date of hearing: 15.04.2013
Date of decision: 26.04.2013
Honble Sh. Justice G. Raghuram, President
Honble Sh. Sahab Singh, Technical Member
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982.
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
ST CoD Application No. 2955 of 2012, ST Stay No. 2954 of 2012 in
Service Tax Appeal No. 2258 of 2012 & ST/C.O. No. 4476/2012 with ST/COD No. 4477 of 2012
(Arising out order-in-original No.73-74/GB/2012 dated 26.04.2012 passed by the Commissioner, Service Tax, New Delhi).
CST, Delhi Appellants
Vs.
M/s L.R. Sharma & Co. Respondent
Appearance: Shri Amresh Jain, DR for the appellants.
Shri J.K. Mittal, Advocate for the Respondent Coram: Honble Mr. Justice G. Raghuram, President Honble Mr. Sahab Singh, Technical Member Final Order No. 56165/ 2013 dt. 26.04.2013 Per: Justice G. Raghuram:
Revenue has preferred the substantive appeal (Service Tax Appeal No. 2258 of 2012), aggrieved by the adjudication order No. 73-74/GB /2012 passed by the Commissioner, Service Tax Delhi, whereby the proceedings against the assessee for non remittance of service tax for the period 2004-05 to 2008-09 were dropped. The appeal is preferred pursuant to a decision of the review committee (comprising the Chief Commissioners, Central Excise, New Delhi and Chandigarh), communicated to the Commissioner, Service Tax Delhi vide a covering letter dated 30.07.2012. As the appeal was filed with a delay, CoD application No. 2955 of 2012 is also preferred seeking condonation of the delay of three days in preferring the appeal.
2. Responding to the application for condonation of delay, the respondent/ assessee filed a memorandum of Cross-Objection contending:-
(a) That the decision set out in review Order No. 24/2012 (authorising filing of an appeal by Revenue) is invalid since the order was signed by the two Chief Commissioners comprising the Committee, on different dates;
(b) That the formation of an opinion as to the error of the adjudication order and the desirability of preferring an appeal there from was not arrived at in a joint meeting of the Commissioners but was separately arrived at and recorded by the two Chief Commissioners on separate dates; and
(c) The two Commissioners mechanically signed the notes put up by sub-ordinates, without due and independent application of mind by the authorised Chief Commissioners themselves; and these infirmities bidate the substantive and procedural discipline mandated by Section 86(2) of the Finance Act, 1994 (the Act).
3. Section 86(2) of the Act is as the relevant provision which confers discretion on the committee of Chief Commissioners. Section 86 enacts the facility of an appellate remedy to this Tribunal. Section 86(1A)(ii) enacts that every committee constituted by the Board (CBEC) shall consist of two Chief Commissioners of Central Excise or two Commissioners of Central Excise, as the case may be. Sub-section (2) of Section 86 is alleged to have been violated. This provision reads:
(2) The Committee of Chief Commissioners of Central Excise may, if it objects to any order passed by the Commissioner of Central Excise under section 73 or section 83A direct the Commissioner of Central Excise to appeal to the Appellate Tribunal against the order.
4. It may be noticed that Section 35B(1B)(2) of the Central Excise Act, 1944 and Section 129A (1B) (2) of the Customs Act, 1962 incorporate substantially similar provisions with regard to conferment of discretion on a committee of specified officers, to consider the desirability of preferring an appeal to the Tribunal.
5. The gravaman of the assessees objections to the authorisation by the Committee, may be noticed:-
(a) There was no meeting between the concerned Chief Commissioners of Central Excise on the issue;
(b) The review order was prepared by sub ordinates officers (Supdt.), to which the concern Chief Commissioners merely appended their signatures on different date (14.07.2012 and 23.07.2012), without expressing any opinion;
(c ) Review Order No. 24/2012 was issued on the basis of the Chief Commissioners of Central Excise Delhi Zone and Chandigarh Zone merely appending their signatures on 14.07.2010 and 23.07.2012 respectively; on note sheet prepared by subordinate officers; and
(d) The Chief Commissioners thus abdicated the statutory responsibility, to review an adjudication order for preferring an appeal, to subordinate officers.
6. We have carefully perused the original record relating to the grant of authorisation signed by the Chief Commissioners of Central Excise. The following is chronology of events relevant by the record:
(a) The Chief Commissioner, Delhi Zone addressed a letter dated 25.06.2012 to the adjudicating authority to forward the file pertaining to the adjudication order, expeditiously;
(b) On 27.06.2012 the office of the adjudication authority forwarded the file as directed;
(c) An office note was drawn up by the office of Chief Commissioner of Central Excise, Delhi Zone (DZ) setting out the brief facts of the case; a summary of the adjudication order; an analysis of the same indicating that the adjudication authority erred in dropping proceedings; and proposing that the Committee of Chief Commissioners review the adjudication order, for preferring an appeal;
(d) The draft note was signed by the Superintendent, Sh. Arvind Kumar on 29.06.2012; by the Deputy Commissioner concerned on 11.07.2012; and by the Chief Commissioner (DZ) on 14.07.2012;
(e) Simultaneously that the note, a draft order of review was drawn up;
(f) After the signature of the CCE (DZ) was appended on the note on 14.07.2012, the relevant papers including the draft review order drawn up by the office of CCE (DZ) were forwarded to the CCE, Chandigarh Zone;
(g) The office of CCE (CZ) put up another note setting out the brief facts of the case; a summary of the adjudication order and its analysis. This note indicated that the CCE (DZ) had proposed review of the adjudication order, had signed the proposed review order and forwarded the same for concurrence of the CCE (CZ);
(h) This office note of the CCE (CZ) appears to have been drawn up by the Superintendent (Rev.) on 23.07.2012 and countersigned by the ADC (CCV) on the same date. CCE (CZ) also signed the note on 23.07.2012;
(i) On receipt of the relevant papers by the office of CCE (DZ) from the office of CCE (CZ) including the formal order of review, now signed by both the Commissioners (the Delhi Chief Commissioner on 14.07.2012 and Chandigarh Chief Commissioner on 23.07.2012), a note was put up on 30.07.2012 for forwarding the review decision to the adjudicating authority with directions to file an appeal to this Tribunal alongwith an application for condonation of delay, since the last date for preferring an appeal is 31.07.2012.
7. The file pertaining to the review order also discloses that the ld. Counsel for the assessee had sought information under the RTI Act, 2005 regarding some aspects relating to passing of the review order. These were responded by the office of CCE (DZ) on 20.09.2012. Of relevance is paragraph (d) of this letter wherein it is stated that the review order was passed by circulation of papers and was signed on 14.07.2012 by the CCE (DZ) and 23.07.2012 by the CCE (CZ) and was sent to the adjudicating authority on 30.07.2012. In paragraph (e), the assessees Counsel was informed that as the review order was passed in circulation no meeting was required to be held and therefore there are no minutes of a joint meeting.
8. Analysis: Provisions of the Section 86 of the Act, setting out the right to prefer an appeal to this Tribunal and matters connected therewith reveal that an assessee aggrieved by an adjudication order passed under Section 73 or 83A, or an appellate order passed by the Commissioner (Appeals) under Section 85 may prefer an appeal, within the time stipulated. Sub-section (1A) authorises the Board to constitute committees and clause (ii) thereof enjoins the committee shall comprise two Chief Commissioners or the two Commissioners of Central Excise, as the case may be. Sub section (2) confers a discretion on the Committee, if it objects to any adjudication order (passed under Section 73 or Section 83A), to direct the adjudication authority to appeal to this Tribunal against the adjudication order. Other provisions of sub section (2) set out the procedure to be followed where there is a difference of opinion among the Chief Commissioners constituting the committee, not relevant for purposes of the present adjudication. Sub section (3) enacts an extended period of limitation of four months (from the date on which the order to be appealed against is received by the committee of Chief Commissioners), for preferring an appeal to the Tribunal. Apparently an extended period of limitation is provided since the decision to appeal must be formed by a Committee and the process would consume some time.
9. On a true and fair construction of Section 86(2) of the Act, considered in the context in which the provision occurs, the inference is compelling that the decision to appeal is mandated to be preceded by due application of mind by a Committee comprising two Chief Commissioners, to avoid filing of unnecessary or frivolous appeals, in the interest of efficient revenue administration and of provisions of the Act. In the circumstances, due application of mind by each of the Chief Commissioners comprising the committee is a sine qua non for constituting a valid decision of the committee. The provision does not in terms require the Chief Commissioners comprising the committee to sit en banc. What all is required and mandatorily so is that the Chief Commissioners should both apply their respective minds independently to the relevant parameters of the decision namely:
(a) That the adjudication order was in error; and
(b) That it is a fit case for preferring an appeal to the Tribunal.
On a normative analysis of Section 86(2) of the Act, we find no warrant to conclude that a joint meeting of Chief Commissioners at which the decision ought to be taken, is mandated.
10. Revenue (the appellant) has contended that in the absence of a statutory prescription requiring a joint sitting of the Chief Commissioners comprising the committee, a decision taken by each of the Commissioners by independent application of mind though on different dates, would not transgress provisions of Section 86(2), unless it is apparent from the relevant record that there was no application of mind by one or both the Commissioners comprising the committee.
11. We now consider the precedents cited at the bar in support of the respective contentions, on behalf of the assessee and Revenue.
- In Commissioner of C. Ex. Delhi-III vs. Grand Prints Pvt. Ltd. reported in 2009 (240) ELT 631 (Tri. Del.), a matter arising under Section 35B(2) of the Central Excise Act, 1944, relevant facts were that consequent on a decision by the committee in August 2006 appeals were filed on 20.09.2006 but without the decision of the committee appended to the appeals. To cure the technical defect, applications were filed alongwith a copy of the note sheets pertaining to the committees decision in August 2006 and a further decision of the committee reiterating its earlier decision regarding formation of an opinion and authorisation to file such appeals. This Tribunal referred to the decision of the Karnataka High Court in Commissioner vs. ITC Ltd. -2008 (221) ELT 331 (Kar.) wherein the High Court ruled that there is no statutory requirement as to a meeting of The Commissioners comprising the committee and that a decision could be taken by circulation, since it is essentially an administrative decision. It requires to be noticed that in Grand Prints Pvt. Ltd. also a note sheet was prepared by the Superintendent on 23.08.2006 for consideration by the committee of Commissioners which was endorsed by the Commissioner, Delhi on 31.08.2006 and the Commissioner, Rohtak on 11.09.2006. The Commissioner, Delhi had endorsed we may file appeal. This Tribunal followed the decision of the Karnataka High Court in ITC Ltd. and rejected the contention of the assessee, that the decision must be signed at a joint meeting of the Commissioners comprising the committee.
- In Commissioner of Central Excise, Delhi-I vs. Kundalia Industries reported in 2012 (279) ELT 351 (Del.), the Delhi High Court was required to consider provisions of Section 35B (2) of the Central Excise Act, 1944. This Tribunal had dismissed Revenues appeal on the ground that no opinion was formed in accordance with Section 35B. The record disclosed that after receipt of a copy of the order passed by the Commissioner (Appeals) the matter was examined at the level of Superintendent (Rev.) and the Assistant Commissioner (Rev.) who had opined that the order of the appellate Commissioner dated 15.10.2007 was incorrect and requires to be reviewed for preferring an appeal to the CESTAT. The committee of two Commissioners simply appended their signatures to the office note on 07.01.2008 and 08.01.2008. Para 5 of the judgment records an inference by the Court that there was no meeting of the two officers to consider the case and that the record does not disclose application of mind by the officers to issue nor recording of any opinion; and that there was thus no due application of mind. The High Court ruled that there should be a meaningful consideration which should be reflected on the note sheet and as no such satisfaction or opinion is discernable, there was no proper decision taken, under section 35B. The decision of the Tribunal was affirmed and appeal by Revenue rejected.
- In Commissioner of C. Ex. Jaipur-II vs. Shree Rajasthan Synthetics Ltd. 2012 (25) STR 166 (Tri. Del.) ld. a learned single Member of this Tribunal held that no decision could be taken by circulation of papers to the two Commissioners comprising the committee. In para 2 of the order, the ld. single Member rejected the Division Bench decision in Grand Prints Pvt. Ltd., observing that there is no express provision permitting a decision by circulation and that when two minds do not meet together on a particular day, no Committee is said to have been existing at a particular moment. Therefore, the Review Order is non est in the eyes of law. Revenues appeal was dismissed as non-maintainable.
- In Commissioner of Central Excise, Noida vs. V.S. Exim Pvt. Ltd. -2012 (283) ELT 206 (Tri. Del.) a ld. Division Bench of this Tribunal following the decision of the Delhi High Court in Kundalia Industries and of the Punjab & Haryana High Court in Commissioner vs. B.E. Office Automation Products Pvt. Ltd. 2010 (249) ELT 24 (P&H) concluded that appeals were preferred in violation of Section 35B(2) of the Central Excise Act, 1944 as the committee of Commissioners fail to sit together to apply their minds to the facts of the case; the matter was dealt with like any other bureaucratic file without going through the record; and that mere signatures were appended on the note drawn up by subordinate officers.
- In CCE, Jamshedpur vs. M/s TRF Ltd. the High Court of Jharkhand pronounced judgment dated 27.07.2012 on a matter requiring analysis of Section 86(1)(1A)(i) of the Act. This decision cited by the Revenue is of no relevance to the facts of the present case. Revenue was in appeal before the High Court against the order of the Kolkata Bench of this Tribunal which rejected Revenues appeal on the ground that since there was no gazette notification with regard to appointment of the two Commissioners comprising the committee, the decision to prefer the appeal to the Tribunal, was incompetent. The High Court found that there was such a notification and remitted the matter to the Tribunal for a decision on merits. The decision of the High Court of Jharkhand in CCE, Ranchi vs. La Opala, RG Ltd. 2012 (285) ELT 501 (Jhar.) merely follows and applies the earlier judgment of that Court in TRF Ltd.
- In CCE, Kanpur vs. Ufan Chemicals - 2013 (290) ELT 217 (All.) Revenues appeals were allowed and orders of this Tribunal (dated 23.02.2010 dismissing Revenues appeal and another order dated 31.03.2010 dismissing the recall application) were set aside and the matter remitted to the Tribunal for a decision on merits. By the order dated 23.02.2010 this Tribunal had rejected Revenues appeal on the ground that the decision by the committee of Commissioners was not taken on any particular day; the order was signed by the Commissioners on different dates disclosing absence of ad dem on the same day. Seeking recall of this order Revenue filed an application which was rejected on 31.03.2010. Appeals against both these orders were preferred to the Allahabad High Court. The Allahabad High Court held, following the decision of the Supreme Court in (Collector vs. Berger Paints India Ltd. 1990 (47) ELT 210 (SC), that the object of a provision requiring an authorisation by the committee for filing an appeal is only to avoid filing of frivolous and unnecessary appeals; the method and manner, in which such authorisation is obtained, is not an issue on which the Tribunal could, in the absence of any objection, make an enquiry to arrive at a finding, whether such authorisation was in accordance with law. The High Court held that since there is no statutory prescription requiring that the Commissioners should sit on the same day at the same time and take a decision for filing of an appeal, a decision would not suffer from error, unless it is shown that was obtained without application of mind by the Commissioners, either sitting together or a different times or dates and at different places. On consideration of the authorities referred to above, in particular the decision of the Karnataka High Court in ITC Ltd. followed by this Tribunal in Grand Prints Pvt. Ltd.; and of the Allahabad High Court in Ufan Chemicals and having due regard to the purposes for which a provision is enacted authorisation by requiring committee of Commissioners / Chief Commissioners for preferring an appeal to this Tribunal as analysed by the Supreme Court in Berger Paints India Ltd., and the relevant statutory provisions, we are of the considered view that a joint meeting of the Commissioners or a simultaneous decision by the Commissioners comprising the committee at such joint meeting is not a requirement of Section 86(2) of the Act. If there is due application of mind, independently by the two Commissioners comprising the committee in respect of the relevant material and the integers of the decision making process, even if the concurrence as regards the decision to prefer an appeal is arrived at by circulation of relevant files and the satisfaction of the Commissioners is recorded on different dates and at different places, the decision would not be void, illegal or violative of the provision. The decision of the Delhi High Court in Kundalia Industries does not enunciate a ratio obligating a joint meeting or sitting of the Commissioners comprising the committee. The ratio in Kundalia Industries, in our respectful view is only that the record should disclose due application of mind by the two officers, to the issue and recording of an opinion, reflecting such application of mind.
12. The contrary view recorded by ld. single Member of this Tribunal in Shree Rajasthan Synthetics to the effect that there should be joint meeting of the Members of the committee on a specific date, is unsustainable as a trans contrary to the decision of the Karnataka High Court in ITC Ltd. and the decision of the High Court of Allahabad in Ufan Chemical.
13. We therefore conclude that the authorisation by the Chief Commissioners (DZ) and (CZ) though recorded on different dates i.e. 14.07.2012 and 23.07.2012 while at New Delhi and Chandigarh respectively, if a due application of mind to the relevant material forwarded to them by circulation, is not illegal only on account of the circumstance that there was no joint meeting and simultaneous recording of satisfaction.
14. There is however another aspect. The question is whether the two Chief Commissioners applied their mind and have recorded an informed conclusion / decision for preferring an appeal. As already noticed, the Chief Commissioner, Delhi on 14.07.2012 and the Chief Commissioner, Chandigarh on 23.07.2012 merely signed the note put up by the respective subordinate officers setting out a summary of facts; a summary of the adjudication order; an analysis of the circumstances; and recommendation that this is a fit case for preferring an appeal. The respective notes were signed by the respective Chief Commissioners without anything to indicate independent consideration of the relevant issues and of agreement with the administrative analysis at lower levels, as to the appropriateness of preferring an appeal to the Tribunal. In identical circumstances, the Delhi High Court in Kundalia Industries (paragraph 5 and 6) and this Tribunal in V.S. Exim Pvt. Ltd. have held that mere appending of signatures by the Commissioners comprising the committee on note sheets drawn up by subordinate officers is no compliance of the statutory provision. Shri Amresh Jain, ld. DR would exert to point out a distinction between Section 35B(1A)(2) of the Central Excise Act, 1944 and Section 86(2) of the Act. According to the ld. DR under the Central Excise Act, the committee if of the opinion that an adjudication order or an appellate order is not legal and proper may direct preferring of an appeal to the Tribunal. Section 86(2) of the Act enjoins that the committee, if it objects to an adjudication order, may direct an appeal to be preferred to the Tribunal. In view of the difference in the language of the two distinct provision conferring discretion on the committee under the different enactments, even if Chief Commissioners (DZ & CZ) in the present case had merely appended their signatures (on 14.07.2012 and 23.07.2012) the respective office notes, there is sufficient compliance of Section 86(2), is the contention.
15. The above contention does not commend acceptance. As pointed out by this Tribunal in V.S. Exim and by the Delhi High Court in Kundalia Industries, mere appending of signature on the departmental note file in a mechanical fashion does not constitute sufficient compliance with the clearly implied statutory obligation of due application of mind by the Commissioners comprising the committee, to the relevant twin components of the decision;
(a) a rational consideration of the relevant material pertaining to the adjudication order/ appellate order against which the appeal to this Tribunal is to be preferred; and
(b) the appropriateness / desirability of preferring an appeal.
16. In the facts and circumstances of this case, since the Chief Commissioner (DZ) and Chief Commissioner (CZ) merely appended their signatures on 14.07.2012 and 23.07.2012 to the respective note sheets and memorandum of facts and analysis, drawn up by the respective subordinate officers and the record neither records nor discloses due application of mind, the authorisation to prefer the appeal is unsustainable. We note that the Board has issued a memorandum of instructions dated 23.11.2012 pointing out that the notes in the file and other relevant records should disclose meaningful consideration and application of mind by the committee.
17. As a consequence of the unsustainable authorisation, the appeal must fail and is accordingly dismissed. Since the appeal is dismissed on the ground of defective authorisation by the committee of Chief Commissioners, we dismiss the CoD application No. 2955 of 2012 as infructuous, though we are satisfied prima facie that satisfactory cause exists for condonation of the delay of three days in preferring the appeal.
(Pronounced on 26.04.2013).
(Justice G. Raghuram) President (Sahab Singh) Technical Member Pant 1