Custom, Excise & Service Tax Tribunal
M/S. Honda Motorcycle & Scooters India ... vs Cce, Delhi Iii on 5 November, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI PRINCIPAL BENCH, COURT NO. III Excise Appeal No. 2569/2011-EX[DB] [Arising out of Order-In-Original No. 514/BK/GGN/2010 dated 27.12.2010 passed by CCE, Delhi-III] For approval and signature: Honble Ms. Archana Wadhwa, Judicial Member Honble Mr. Manmohan 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? M/s. Honda Motorcycle & Scooters India Pvt. Ltd. Appellant Vs. CCE, Delhi III Respondent
Appearance:
Ms. Shweta Bector, DR for the Appellants Shri Hemant Bajaj, Advocate for the Respondent CORAM:
Hon'ble Ms. Archana Wadhwa, Member (Judicial) Hon'ble Mr. Manmohan Singh, Member (Technical) Date of Hearing: 07.10.2013 Date of Decision:05.11.2013 FO ORDER NO._58179/2013_ Per Archana Wadhwa:
Being aggrieved with the order passed by Commissioner (Appeals) revenue has filed the present appeal.
2. Learned advocate appearing for the Respondent has taken a strong objection to the maintainability of the appeal itself inasmuch as the provisions of Section 35 B(2) of the Central Excise Act have not been fully complied with by the committee of Chief Commissioners while passing the review orders.
3. By drawing our attention to the review order, he submits that the committee of Commissioner has simplicitor signed the proposals presented before them by the junior officer to file an appeal against the Order of Commissioner (Appeals) and have not independently applied their mind.
4. For better appreciation of the objection of the learned advocate we refer to the note sheet noting in the relevant file:
Kindly peruse the PUC.
Order-in-Appeal No. 514/BK/GGN/2010 dated 27.12.2010 passed by the Commissioner (A), Delhi-III, Gurgaon in the case of M/s. Honda Motorcycle and Scooter India Pvt. Ltd., Plot No 1&2, Sector 3, IMT Manesar, Gurgaon.
The issue involved is that on the basis of Physical Stock Taking conducted on the last day of the Financial Year 2007-08 shortage of Cenvatable inputs valued at Rs. 1,31,04,469/- was found. On being pointed out the party stated that the question of variation is very small as compared to the total material consumed and did not furnish any plausible explanation for the shortage of inputs found. Thus they were issued show cause notice asking them as to why:
(i) the Cenvat credit amounting to Rs. 18,89,664/- should not be disallowed and recovered from them under Rule 14 of the Cenvat credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944;
(ii). the interest on the amount of Cenvat credit mentioned above should not be demanded and recovered from them under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AB of the Central Excise Act, 1944;
(iii). The penalty should not be imposed upon them under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11Ac of the Central Excise Act, 1944;
The Adjudicating Authority, vide Order-in-Original No. 173/Mohd. Ali/ADC/CE/09 dated 16.12.09, confirmed the demand and ordered as under:
(i). the inadmissible Cenvat credit amounting to Rs. 18,89,664/- is disallowed and the same is ordered to be recovered from them under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944;
(ii). interest at the applicable rate on the above amount is ordered for recovery from them under Section 11AB of the Central Excise Act, 1944;
(iii). penalty of Rs. 18,89,664/- is imposed upon them under Section 11Ac of the Central Excise Act, 1944 read with Rule 15 of the Cenvat Credit Rules, 2004.
The Commissioner (A), Central Excise, Delhi-III, Gurgaon, vide the impugned Order-in-Appeal, set aside the Order of the adjudicating authority holding that similar dispute arose with M/s. Maruti Udyog Ltd. and the Hon'ble Tribunal allowed the appeal of the M/s. Maruti Udyog Ltd. 2004 (173) ELT 382 (Final Order No. 662/04/NB-(A) dated 29.6.2004) The department has filed SLP against the Final Order under reference in the Hon'ble Supreme Court of India (CA No. 7829/04) and (SLP No. 22645/2004). The copy of the proposal is placed opposite. This SLP is still pending in the Hon'ble Supreme Court of India.
In view of the above facts Order-in-Appeal No. 514/BK/GGN/2010 dated 27.12.2010 is submitted for information and orders please.
signed 19.01.2011
S. Singh Supt. Signed 19.01.2013
Assistant Commr. (Jud.)
Adc (Judicial) pl.
Note at pre-page and above pl.
In view of A above, we may appeal against the O-I-A.
Signed 11.02.11
Commissioner (accepted)
Signed 21.02.11
Commissioner (Roh)
5. It is seen from above, the Commissioner has signed the proposal placed before him by the superintendent and Assistant Commissioner (Judicial), by writing the words accepted the other Commissioner of the Committee has simpliciter signed the same on 21.02.2011 whereas the first Commissioner signed on 11.02.2011.
6. We find that an identical dispute was considered by the Hon'ble Delhi High Court in the case of Commissioner of Central Excise, Delhi V/s. Kundalia Industries 2012 (279) E.L.T. 351 (Del.) and it was observed by the Hon'ble High Court that the Tribunal dismissed the appeal of the Revenue [2008 (229) E.L.T. 622 (Tri. Del.)] on two grounds namely :-
(i) No opinion is formed by the Committee of Commissioners about the illegality of the order as required under Section 35B of the Central Excise Act.
(ii) There was no authorization by the Committee of Commissioners to file appeal on its behalf.
The Hon'ble High Court accordingly observed as under:-
2. Section 35B (2) of the Central Excise Act reads as under:-
The Committee of Commissioners of Central Excise may, if it is of opinion that an order passed by the Appellate commissioner of central Excise under Section 35, as it, stood immediately before the appointed day, or the Commissioner (Appeals) under Section 35A is not legal or proper, direct any Central Excise Officer authorized by him in this behalf (hereafter in this chapter referred to as the authorized officer) to appeal on its behalf of the appellate Tribunal against such order.
3. It is clear from the plain reading of the aforesaid provision that the Committee of Commissioners has to form an opinion before filing the appeal, that the order of Commissioner (Appeals) is not legal or proper and it has to further direct any Central Excise Officer authorized by him in this behalf, to file such an appeal, as noted above, the CESTAT find that neither of the two requirements which are mandatory stood satisfied.
4. The aforesaid order of the CESTAT is under challenge in the present appeal. In order to show that the Commissioner (Appeals) was not legal and proper, appeal should be filed. The noting in the relevant record are produced. A perusal thereof would reveal that after the receipt of the copy of order passed by the Commissioner (Appeals), the matter was examined in the Department at the level of Superintendent (Rev.) and Assistant Commissioner (Rev.) who had vide note dated 4th February, 2007 had given their reasons stating in view of the above grounds, Order-in-Appeal No. 116/C.E./DLH/2007 dated 15-10-2007 of Commissioner (Appeals) appears to be incorrect, illegal, unfair and merits to be reviewed for filing appeal before the Hon'ble CESTAT.
Submitted for consideration by the Committee of Commissioners of Central Excise, Delhi-I and II constituted vide Notification No. 25/2005-C.E. (N.T.)
5. This was the opinion of the aforesaid two officers who rightly submitted the matter for consideration by the Committee of Commissioners. However, the Commissioner of Central Excise-I and Commissioner of Central Excise-II who allegedly constitute the Committee of Commissioners, simply appended their signatures to the aforesaid note on 7th January and 8th January, 2008 respectively. This shows that there was no meeting of the aforesaid two officers to consider the case. The record also does not disclose that these two officers applied their mind to the issue and recorded any opinion, as per the requirement of Section 35B of the Central Excise Act that the order of the Commissioner (A) was not legal or proper and warranted to be challenged by filing an appeal.
6. We are of the view that there should be a meaningful consideration which should be reflected on the note sheets in order to comply with the requirement of Section 35(2) of the Act. In this case, the file does not show any such satisfaction or opinion having been recorded by the Committee of Commissioners. On this ground itself this appeals fails and is accordingly dismissed.
7. The disputed issue was also the subject matter of the Hon'ble Punjab & Haryana High Court in the case of CCE, Delhi Vs. B.E. Office Automation Products Pvt. Ltd., who held as under:-
3. In order to satisfy ourselves we have sent for the original record which has been produced before us. All that the file reveals is that a note was put up by the Assistant Commissioner suggesting that the order of Commissioner (Appeals) may please be appealed against. Thereafter the note observed that the file may be marked to the Commissioner Rohtak for decision by the Committee. There is no decision of the Committee on record except the signature of the Commissioner Delhi-III obtained on 19-12-2005 and the signatures of Commissioner Rohtak obtained on 27-12-2005. Both the commissioners have not even said that they agree with opinion of the Asstt. Commissioner rendered in the Note at X and Y. The only ground in support of the appeal taken in the grounds of appeal is that the opinion of the Committee of Commissioner of Customs was available on the file notings and the appeal was filed under the signatures of the Commissioner who was a Member of the Committee. It has been suggested that the aforesaid fact was not placed before the Tribunal and the only defect was that no formal authorization order was made.
4. A perusal of the record shows that firstly there is no opinion expressed by the Committee of Commissioner of Customs; secondly the Tribunal does not seem to be oblivious of the aforesaid fact. The observations made by the Tribunal are clear that in the absence of order of authorization no appeal was competent. According to sub section 2 of Section 129A of the Act a Committee of Commissioner of Customs may file an appeal against the order of the Commissioner (Appeals) if it is of the opinion that such an order is not legal or proper. In our view there is no evaluation/examination by the Committee of Commissioner Customs in respect of the order passed by the Commissioner (Appeals) leading to the formation of opinion by them to file an appeal before the Tribunal. Therefore, we find that the appeal has not been instituted as per the provisions of sub-section of Section 129A of the Act.
8. The Hon'ble Gujrat High Court also considered an identical question in the case of Commr. of C. Ec. & Cus., Surat Vs. Shree Ganesh Dyeing & PTNG. Works and held as under:-
11. Section 35B (2) of the Act is made up of two parts or two stages. The first stage is formation of an opinion by Commissioner that the order made by the appellate authority is not legal or proper, the second stage being filing of an appeal against order of appellate authority by directing any Central Excise Officer authorized by the Commissioner in this behalf to file an appeal on behalf of the Commissioner. Thus, the Commissioner is vested with a discretion, in the first instance to form an opinion as to whether appellate order is legal or proper and then exercise the discretion to decide whether an appeal should be preferred or not, having come to the conclusion that the order is not proper or legal.
12. In the circumstances, the first stage as to formation of an opinion, cannot be treated as an idle formality and the view expressed by Member (Technical) that once the grounds of appeal state that the order of appellate authority is not legal and proper, it would be sufficient compliance with the requirement of formation of an opinion, even if no separate opinion is formed. In this context, the statement of law made by the Apex Court in the case of Collector of Central Excise, Vadodara v. Rohit Pulp Paper Mills (supra) may be usefully referred to. The provisions of Section 35B(2) clearly require as a pre-requisite to the direction to any Central Excise Officer to file an appeal the formation of the opinion by the Collector that the order against which the appeal is to be filed is not legal or proper.
9. Apart from the above High Court decisions, the issue was also considered by the Tribunal in the case of CCE, Indore Vs. Siddhartha Marketing Services Ltd. 2013-TIOL-781-CESTAT-Del.
10. Learned DR appearing for the Revenue has drawn our attention to the Hon'ble Allahabad High Court decision in the case of CCE, Kanpur Vs. Ufan Chemicals 2013 (290) ELT 217 (All.) vide which High Court held that as the decision by the Committee of Commissioners was not taken on one day as the signed order were on different date, the same will not vitiate the review order. Accordingly the Tribunals order was set aside and the matter was remanded to the Tribunal for decision on merits. He submits that the Hon'ble High Court held that since there is no statutory provision requiring that the Commissioners should sit on the same day at the same time and take a decision for filing of an appeal, decision would not suffer from error, unless it is shown that the same was passed without application of mind by the Commissioners, either sitting together or on different times or dates and at different places. As such, he pleaded that the said order of Hon'ble Allahabad should be followed.
11. In his rejoinder, learned advocate appearing for the Respondent draws our attention to the Tribunal decision in the case of Narayan Builders Vs. CCE, Jaipur 2013-TIOL-816-CESTAT-Del. as also to the decision of the Tribunal in the case of Madura Coats Vs. Collector of Central Excise, Bangalore 1996 (82) E.L.T. 512 (Tribunal) as also to the Larger Bench decision of the Tribunal in the case of Collector of Central Excise, Chandigarh Vs. Kashmir Conductors 1997 (96) E.L.T. 257 (Tribunal) laying down that where there is a conflict of decisions of the various High Courts, Judicial discipline requires the Tribunal to follow decision of Jurisdiction High Court. Inasmuch as the Hon'ble Punjab & Haryana High Court, which are judicial High Courts under which the appellant falls has interpreted the law against the Revenue, the said decision are required to be followed. In any case, he submit that the Hon'ble Allahabad High Court decision is in respect of signing the review order on two different dates and does not deal with the non-application of mind. In fact, the said decision observes that if there is application of mind, signing of review order on to different dates would not be fatal. Thus, it leads to the fact that the application of mind and formation of opinion prior to signing the review order is an absolutely necessacity.
In any case, submits the learned advocate that the said decision of the Hon'ble Allahabad High Court was considered by the Tribunal in latest decision in the case of CESTAT-Delhi M/s. L R Sharma & Co reported as 2013-TIOL-944-CESTAT-Del. After considering the entire case law on the subject, Tribunal observed that 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. Such authorization is unsustainable and the appeal is accordingly dismissed.
12. Having reproduced the relevant note files, we find that there is no dispute about the fact that the commissioner merely signed the proposals placed before him by the junior officer by writing the words accepted. The issue to be decided is as to whether such signed acceptance by Commissioner constituting the Committee can be held to be in accordance with the legal provisions of Section 35B (2). We have already discussed the entire case law on the subject. Instead of referring to all the precedent decision, we may take note of recent decision of the Tribunal in the case of Commissioner of Service Tax, Delhi M/s. L R Sharma & CO and 2013-TIOL-944-CESTAT-Del. wherein the entire case law on the subject was considered. After taking note of the various decisions including the Allahabad High Court decision, the Tribunal held that passing of review order has to comply with the statutory obligation of due application of mind 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.
13. Since the Chief Commissioner have merely appended their signatures on the respective note sheets , drawn up by the respective subordinate officers and the record does not discloses due application of mind, the authorization to prefer the appeal was held to be unsustainable and accordingly the appeal was dismissed.
14. When we apply the ratio of the above decision to the facts of the case, we find that there is no application of mind by the Committee of Commissioners and they have merely appended their signatures to the note sheets prepared by the subordinate officers. In that view of the matter, the review order has to be held as not sustainable and consequently appeals have to be held as not maintainable. The Revenues appeal is accordingly dismissed on the said ground.
(Pronounced in the open court on)
(Archana Wadhwa) Member(Judicial)
(Manmohan Singh) Member(Technical)
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