Delhi High Court
Commissioner Of Service Tax vs Japan Airlines International Co. Ltd. on 20 July, 2015
Author: Rajiv Shakdher
Bench: S. Ravindra Bhat, Sanjiv Khanna, Rajiv Shakdher
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment Reserved on: 13.02.2015
% Judgment delivered on: 20.07.2015
+ CEAC 61/2014
COMMISSIONER OF SERVICE TAX ....Petitioner
Versus
JAPAN AIRLINES INTERNATIONAL CO. LTD. .....Respondent
ADVOCATES WHO APPEARED IN THIS CASE:
For the Petitioner : Ms. Sonia Sharma, Sr. Standing Counsel with Mr. Vijay
Chandra Jha, Advocate
For the Respondent : Mr. J.K. Mittal and Mr. Rajveer Singh, Advocates
CORAM :-
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE RAJIV SHAKDHER
RAJIV SHAKDHER, J
1. A Division Bench of this court vide order dated 15.12.2014 referred the
two questions of law for consideration by a larger bench in order to, broadly,
resolve the apparent conflict between the views taken by two separate Division
Benches of this court in Commissioner of Service Tax Vs. L.R. Sharma, 2014
(4) AD (Delhi) 733 (hereinafter referred to as LR Sharma-I) and
Commissioner of Central Excise, Delhi-1 Vs. Kundalia Industries, 2012 (279)
E.L.T. 351 (Del).
1.1 Accordingly, a larger bench was constituted. The questions of law,
referred to us for consideration, are extracted hereinbelow for the sake of
convenience :-
CEAC 61/2014 Page 1 of 25
"..(1). Whether the Custom, Excise and Service Tax Appellate
Tribunal (CESTAT) in an appeal under Sub-Section (2) and
(2A) of Section 86 of the Finance Act, 1994 read with
applicable provisions of the Central Excise Act, 1944, can
examine and go into the question of application of mind on
merits by the Committee of Chief Commissioners or
Commissioners?
(2). In case the aforesaid question is answered in
affirmative, i.e., against the Revenue and in favour of the
assessee, then, whether the decision of the Committee of the
Chief Commissioners or Commissioners should be treated as
null and void if they have appended signatures to the
elaborated notes and objections prepared by the subordinate
officers, before the file is put to the Chief Commissioners or
Commissioners for examination?.."
2. The reference made to the larger bench arises in the background of the
following broad facts :-
2.1 The Revenue, being aggrieved by the order dated 18.09.2013, passed by
the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred
to as the Tribunal), preferred an appeal to this court under Section 35 G of the
Central Excise Act, 1944 (in short the C.E. Act).
2.2 The grievance of the Revenue emanated from the fact that the Tribunal
had rejected its appeal, albeit erroneously, on the ground of maintainability,
and not, on merits.
2.3 The Tribunal, evidently, took the view that the decision taken to institute
the appeal before it, by the Committee of commissioners, was taken, without
due application of mind. While coming to this conclusion, the Tribunal noted
that the "...twin requirements of the decision making process, namely the due
CEAC 61/2014 Page 2 of 25
consideration of material pertaining to the adjudication / the appellate order
and the appropriateness / desirability of preferring an appeal were not met..."
2.4 The Tribunal thus, came around to the view that the decision arrived at to
review, and thereupon, prefer an appeal did not measure up to the standards
spelt out in its earlier judgments.
2.5 We may only note that in paragraph 3 of the order dated 18.09.2013,
there is a reference by the Tribunal to a judgment of its own Division Bench in
CST Delhi Vs. L.R. Sharma and Co., reported in 2013 -TIOL -944-CESTAT-
DEL (final order No.56165/2013 dated 26.04.2013), which in turn, relied upon
the judgment of the Division Bench of this court in Kundalia Industries' case.
2.6 Thus, the grievance of the Revenue in so far as the order of the Tribunal is
concerned, is limited to the aforesaid aspect.
2.7 However, the appeal before the Tribunal was preferred by the Revenue
against the adjudication order i.e. order-in- original dated 31.12.2012. These
proceedings arose in the background of the following facts; a brief narration of
these facts is necessary to understand the context, in which, the Revenue took
the decision to file an appeal before the Tribunal.
2.8 The respondent / assessee, was issued a demand-cum-show cause notice
dated 16.04.2010, pursuant to a service tax audit conducted between
08.09.2009 to 10.09.2009, in which, allegations levelled were of the following
nature : (i). that it had not complied with the provisions of Rule 6(3) of
CENVAT Credit Rules, 2004 (in short the CENVAT Rules) during the period
2008-2009; (ii). that it had wrongly availed CENVAT Credit on services which
were not used for providing taxable output services; (iii). there was non-
payment of service tax on excess baggage; and (iv). lastly, it had failed to
CEAC 61/2014 Page 3 of 25
provide information and data with respect to value of air tickets purchased prior
to 01.05.2006 which, in fact, were used on or after 01.05.2006.
2.9 The said show cause notice was adjudicated upon by Commissioner of
Service Tax, Delhi vide order dated 28.12.2012. A copy of which was
despatched, it appears, to the respondent /assessee on 31.12.2012.
3. The adjudication order dated 31/28.12.2012 was reviewed, according to
the Revenue, by the Committee of Chief Commissioners, as mandated under
the provisions of Section 86(2) of the Finance Act, 1994 (in short the Finance
Act). Post, the review, a decision was taken to file an appeal before the
Tribunal.
4. Broadly, the grounds articulated by the Revenue, in the review notes, to
establish reasons as to why an appeal was required to be instituted, were as
follows:-
(i). First, the adjudicating authority had imposed a nominal penalty of
Rs.5,000/- evenwhile returning a finding in its favour, to the effect, that the
respondent / assessee had wrongfully availed of CENVAT credit amounting to
Rs.1,09,70,221/- qua input services which were not taxable.
(i)(a). According to the Revenue, a minimum penalty of Rs.1,09,70,221/-
was leviable on the respondent / assessee on this score alone. It is the
revenue's case that the adjudicating authority having held that the extended
period was applicable in this case as provided in the proviso to Section 73(1)
of the Finance Act, it ought to have proceeded to impose penalty in terms of
Section 78 of the said Act.
(ii). Second, that the demand raised (which included cess imposed) qua excess
baggage though confirmed, was held to have been paid, without ascertaining,
CEAC 61/2014 Page 4 of 25
as to whether the amount, towards this demand, was actually deposited by the
respondent / assessee. According to the Revenue, the respondent / assessee
was liable to penalty on this account, as well.
4. In this context and, at this stage, it would be relevant to note, the manner,
in which, the decision taken, to file the appeal before the Tribunal evolved.
4.1 In the first instance, the Inspector (Review) in the concerned department
of the Revenue prepared a note on 11.03.2013, which was, put up before the
Superintendent (Review) on the same date. The said note articulated, in detail,
the grounds for challenging the order of the adjudicating authority. The
Superintendent (Review), appears to have seen and appended his signatures to
the said note, as indicated above on 11.03.2013, itself.
4.2 The said note was put up before the Deputy Chief Commissioner in the
Chief Commissioner's unit. The note placed before the Deputy Chief
Commissioner clearly spelt out, amongst other aspects, the issue pertaining to
the purported failure of the adjudicating officer to impose a minimum penalty
of Rs.1,09,70,221/- in respect of wrongful credit of CENVAT by the
respondent / assesse.
4.3 This note was put up before the Additional Deputy Commissioner on
11.04.2013 who, independently, came to a similar view, which is, that the
adjudication order had to be reviewed for reasons stated therein.
4.4 Based on the notes prepared by the subordinate officers, which was also
countersigned by AC (Review), on 22.04.2013, Mr. P.S. Pruthi, the Chief
Commissioner, Central Excise (Chandigarh Zone), who was one of the
members of the Committee of Commissioners, appended its signatures, on the
note sheet, on 26.04.2013.
CEAC 61/2014 Page 5 of 25
4.5 Apart from the above, there is on record, a Review Order no.24/2013
dated 26.04.2013. This is a typed note, which bears, the signatures of both Mr.
B.K. Bansal, Chief commissioner of Central Excise (Delhi Zone) and Mr. P.S.
Pruthi, Chief Commissioner of Central Excise (Chandigarh Zone). A copy of
this note has been placed on record both by the Revenue as well as by the
respondent/assesse.
5. Therefore, when the appeal was moved before the Tribunal, a preliminary
objection was taken by the respondent / assessee that it was not maintainable,
as there was no application of mind by the Committee of Chief Commissioners
(which comprised of Mr. B.K. Bansal and Mr. P.S. Pruthi) in considering the
draft review order, which recommended, institution of the appeal against the
adjudication order.
6. As noted above, the Tribunal accepted the objections raised by the
respondent / assessee even while recording that an elaborate note culminating
in a recommendation for review, was prepared by subordinate officers, which
was placed before the aforenamed Chief Commissioners, who were charged
with the responsibility, to take a decision, as to whether an appeal ought to be
preferred against the subject adjudication order.
7. It is in this background that we are called upon to answer the questions of
law referred to us for consideration.
8. To assist us in the matter, the Revenue was represented by Ms. Sonia
Sharma, Advocate, while the respondent/assesse was represented by Mr. J.K.
Mittal, Advocate.
8.1 It was the submission of Ms. Sharma that the reference had to be answered
in favour of the Revenue in as much as the Tribunal failed to appreciate that the
CEAC 61/2014 Page 6 of 25
Committee of Commissioners, while taking a decision in the matter of filing
the appeal before it had the benefit of the material placed before them, which
included, the observations of all subordinate officers at various levels, who had
diligently applied their mind to the errors which had crept in the adjudication
order.
8.2 Ms. Sharma submitted that the Tribunal's observations to the effect that
there was an absence of due consideration of the material, and the failure, to
disclose as to whether or not it was appropriate / desirable to prefer an appeal,
was erroneous, in as much as, every such aspect was reflected in the notes of
the subordinate officers, which was placed before the Committee of
Commissioners. The fact that the Committee of Commissioners appended their
signatures to the note was, according to her, sufficient compliance of the
provisions of Section 86(2) of the Finance Act. The learned counsel submitted
that such an exercise implicitly recognized due application of mind by the
Committee of Commissioners.
8.3 It was her contention that requiring Committee of Commissioners to
replicate the reasons already on record, with which they concurred, in case,
would make the procedure unnecessarily cumbersome and impracticable.
8.4 The reason advanced by the learned counsel, in support of the aforesaid
contention, was that, in so far as the merits of the case were concerned, the
Tribunal, in any event, would examine the same at the stage when the appeal is
listed for hearing before it.
8.5 In support of her submissions, Ms. Sharma relied upon the following
judgments :-
CEAC 61/2014 Page 7 of 25
Collector of Central Excise, Calcutta Vs. Berger Paints India
Ltd., (1990) 2 SCC 349; Commissioner of Central Excise Vs.
Ufan Chemicals, 2012 Law Suit (All) 2539; Commissioner of
Service Tax Vs. LR Sharma, 2014 (4) AD (Del) 733; LR
Sharma Vs. Commissioner of Service Tax, SLP 14544/2014 and
14545/2014; LR Sharma Vs. Commissioner of Service Tax,
Review Petition No.2521 and 2522/2014 and LR Sharma Vs.
UOI, 2011 (22) STR 269
9. On the other hand, Mr. Mittal argued that the reference had to be
answered against the Revenue. It was the submission of the learned counsel
that, as rightly found by the Tribunal, the two Chief Commissioners, who
formed the Committee (which had taken a decision to institute the appeal
before the Tribunal), had never met.
9.1 The learned counsel submitted that there were in fact three separate
review orders passed in the matter. According to the learned counsel, the first
review order culminated with the signatures of the Chief Commissioner of
Central Excise (Delhi Zone), who appended his signature on the note sheet on
15.04.2013. Similarly, the second review order, the learned counsel stated,
culminated with the signatures of Mr. P.S. Pruthi, Chief Commissioner, Central
Excise (Chandigarh Zone); who appended his signatures on 26.04.2013. The
learned counsel contended that thereafter, a third review order was prepared.
In so far as this review order was concerned, while it carried the signatures of
both Mr. B.K. Bansal and Mr. P.S. Pruthi, the date on which the order was
signed was not mentioned.
9.2 The learned counsel submitted that, in an RTI enquiry, the
respondent/assessee had received a response dated 25.07.2013 which, revealed
that not only the two Chief Commissioners had not met but that the review
order no.24/2013, was signed by Mr. B.K. Bansal, Chief Commissioner,
CEAC 61/2014 Page 8 of 25
Central Excise, on 15.04.2013 and, by Mr. P.S. Pruthi, Chief Commissioner,
Central Excise (Chandigarh Zone), on 26.04.2013.
9.3 The learned counsel thus submitted that the facts clearly demonstrated that
each Chief Commissioner had taken a decision independently of the other, and
that, there was no inter-se consultation between the members of the Committee.
9.4 It was submitted that the function discharged by the Committee of
Commissioners being a quasi-judicial function, it had to necessarily meet,
consult and give reasons, as to why a decision had been taken to institute an
appeal before the Tribunal against the subject adjudication order. In other
words, the contention of the learned counsel was, that a mere exercise of
signing the note sheet; albeit separately or even collectively, would not ensure
due compliance with the obligations placed cast on the Committee of
Commissioners, as mandated under the provisions of Section 86(2) of the
Finance Act.
9.5 To support his contention that the duty discharged by the Committee of
Commissioners was a quasi-judicial function, the learned counsel relied upon
the Revenue's own instructions contained in circular dated 23.11.2012, issued
by the Central Board of Excise and Customs (in short the Board). It was thus,
contended by the learned counsel that, the circular, in any event, would be
binding on the Revenue.
9.6 In context of the submissions made hereinabove, the learned counsel
relied upon the following judgments :-
CCE, Delhi-1 Vs. Kundalia Industries, 2012 (279) ELT 351
(Delhi); CCE, Delhi-III Vs. B.E. Office Automation Products
Pvt. Ltd., 2010 (249) ELT 24 (P&H); CCE, Noida Vs. V.S. Exim
Pvt. Ltd., 2012 (283) ELT 206 (Tri.-Delhi); CCE, Noida Vs.
CEAC 61/2014 Page 9 of 25
Super Cassettes Industries Ltd., 2013 (294) ELT 587 (Tri.-Del);
UOI Vs. Arviva Industries (I) Ltd., 2007 (209) ELT 5 (SC); and
Indian Oil Corporation Ltd. Vs. CCE, Baroda 2006 (202) ELT 37
(SC).
10. Before we proceed further, it may be relevant to extract the provisions of
Section 86 (2) of the Finance Act, under which, the Committee of
Commissioners, is said to have exercised its power to institute the appeal in the
Tribunal.
"..86. (1). Any assesse aggrieved by an order passed by a
Commissioner of Central Excise under section 73 or section
83A or an order passed by a Commissioner of Central Excise
(Appeals) under section 85, may appeal to the Appellate
Tribunal against such order "within three months of receipt of
the order"
(1A)(i). The Board may, by notification in the Official
gazette, constitute such Committees as may be necessary for the
purposes of this Chapter.
(ii). Every Committee constituted under clause (i) shall consist
of two Chief Commissioners of Central Excise or two
Commissioners of Central Excise, as the case may be.
(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.
Provided that where the Committee of Chief Commissioners of
Central Excise differs in its opinion against the order of the
Commissioner of Central Excise, it shall state the point or points
on which it differs and make a reference to the Board which
shall, after considering the facts of the order, if is of the opinion
that the order passed by the Commissioner of Central Excise is
not legal or proper, direct the Commissioner of Central excise to
appeal to the Appellate Tribunal against the Order.
CEAC 61/2014 Page 10 of 25
(2A). The Committee of Commissioners may, if he objects to
any order passed by the Commissioner of Central Excise
(Appeals) under section 85, direct any Central Excise Officer to
appeal on his behalf to the Appellate Tribunal against the order.
Provided that where the Committee of Commissioners differs in
its opinion against the order of the Commissioner of Central
Excise (Appeals), it shall state the point or points on which it
differs and make a reference to the jurisdictional Chief
Commissioner who shall, after considering the facts of the order,
if is of the opinion that the order passed by the Commissioner of
Central Excise (Appeals) is not legal or proper, direct any
Central Excise Officer to appeal to the Appellate Tribunal
against the order.
Explanation - For the purposes of this sub-section,
"jurisdictional Chief Commissioner" means the Chief
Commissioner having jurisdiction over the concerned
adjudicating authority in the matter..."
10.1 A bare perusal of the aforesaid section would show that while sub-
section (1) of Section 86 gives the assesse the right to appeal against any order
passed by the Commissioner of Central Excise under Section 73 or Section 83
or even qua an order passed by the Commissioner, Central Excise (Appeals)
under Section 85 of the Finance Act, in so far as the Revenue is concerned, the
decision with regard to whether or not an appeal has to be filed can be taken,
only by a Committee of Commissioners of Central Excise provided it has an
objection to an order passed by Commissioner of Central Excise under Section
73 or Section 83A of the Finance Act. If, the Committee of Commissioners,
comes to such a conclusion then, it is mandated to direct the Commissioner of
Central Excise to prefer an appeal to the Tribunal.
10.2 Under sub-section (1A)(i), the Board is empowered by a notification
published in the Official Gazette to constitute the Committee of
Commissioners. Sub-clause (ii) of sub-section (1A) of Section 86 provides that
CEAC 61/2014 Page 11 of 25
the Committee so constituted shall either comprise of two Chief
Commissioners of Central Excise or two Commissioners of Central Excise, as
the case may be.
10.3 Where, however, the Committee of Commissioners differs in its opinion
qua the order of the Commissioner of the Central Excise, it is required to state
the point or points of difference and place the same by way of a reference
before the Board which, after considering the facts of the order, can direct, the
Commissioner of Central Excise to prefer an appeal to the Tribunal if, it is of
the opinion that the order of Commissioner of Central Excise, is not legal or
proper.
10.4 Under sub-section (2A) of Section 86, an identical methodology is
provided where the Committee of Commissioners objects to any order passed
by the Commissioner of Central Excise (Appeals), under Section 85 of the
Finance Act.
10.5 Beyond this, the Section does not state as to the manner in which
Committee of Commissioners have to arrive at a decision as to whether an
appeal should be preferred against the order of Commissioner of Central
Excise. As is abundantly clear, the provision for constitution of Committee of
Commissioners appears to have been incorporated in the Finance Act to
exclude the possibility of institution of frivolous and / or futile appeals.
Frivolous and / or futile appeals could be of various kinds including against
those orders of the Commissioner of Central Excise, which concern, issues that
stand already covered against the Revenue by virtue of decisions rendered by
superior courts or involve aspects which, cannot even make out a statable case
before the Tribunal.
CEAC 61/2014 Page 12 of 25
10.6 Barring such cases the Revenue, ordinarily, should have the liberty to
assail an adjudication order which, in its wisdom, is against its interest. We
may, however, add a note of caution, which is that, our observation as to what
could be a frivolous and/ or futile appeal is not exhaustive.
10.7 The submission made before us by Mr. Mittal that the Committee of
Commissioners should not only meet and consult but should also give reasons
for the decision arrived at by them, independently of what is already placed on
record before them, loses a sight of the fact as to how the Revenue functions
when it is tasked with administrative duties.
10.8 Before we get to this point, we must deal with the submission of Mr.
Mittal that the instruction dated 23.11.2012, issued by the Board, is reflective
of the fact that the duty discharged by the Committee of Commissioners under
Section 86(2) of the Finance Act is a quasi-judicial function. We have read the
instructions. The instructions merely highlight the manner in which decisions
were being taken in the past by the Committee of Commissioners, it does not in
any way convey that the function discharged by the Committee of
Commissioners is imbued with attributes of a quasi-judicial process.
10.9 In our view, the duty discharged by the Committee of Commissioners
is purely administrative and, cannot be, categorized as a quasi-judicial function
since, it does not decide the lis between the parties, that is, the Revenue and the
assessee. There is neither a de novo investigation of facts nor is a hearing
required to be given by the committee. All that the Committee of
Commissioners does is to ascertain as to whether or not the adjudication order
is impregnated with aspects which go against the interest of the Revenue, and if
so, whether or not they are already covered by decisions rendered by superior
CEAC 61/2014 Page 13 of 25
courts. The decision rendered by the Committee of Commissioners, in our
view, does not have the attributes of a quasi-judicial function.
10.10 Furthermore, the instruction issued by the Revenue, is largely pivoted
on the decision of the Division Bench of this court rendered in Kundalia
Industries's case, which in any event, is the subject matter of the instant
reference. For the reasons that we would give hereafter, it would be clear that
the approach commended in Kundalia Industries case does not find favour
with us.
11. Therefore, having regard to the above, which is, that in our opinion, the
decision rendered by the Committee of Commissioners is an administrative
function, it would, to our minds, therefore, not require the members of the
Committee to meet, consult and give independent reasons, as contended before
us by Mr. Mittal.
11.1 In our view, a meeting and / or consultation is not mandatory so long as
each member of the Committee has the requisite material placed before him
prior to a decision being taken as to whether or not an appeal is to be preferred.
It may be a wholesome circumstance to have a meeting and consultation
between the members of the Committee but, the absence of the same, cannot
render a decision taken by them open to challenge as long as they concur with
each other and, there is, material placed before them for reaching such a
conclusion.
11.2 The facts of this case show that Mr. B.K. Bansal, Chief Commissioner of
Central Excise (Delhi Zone), appended his signatures to the note sheet on
15.04.2013, the material placed before him had notes of the Inspector
(Review); the Superintendent (Review); the Deputy Chief Commissioner; and
CEAC 61/2014 Page 14 of 25
the Additional Deputy Commissioner. Similarly, prior to Mr. P.S. Pruthi, Chief
Commissioner, Central Excise (Chandigarh Zone) signing the note, on
26.04.2013, he had before him a review note prepared by Superintendent
(Review), which was countersigned by AC (Review), on 22.04.2013.
11.3 This apart, on record, there is a review order bearing no.24/2013, which
bears the signatures of both, Mr. B.K. Bansal and Mr. P.S. Pruthi.
11.4 In our opinion, though, no inter se meeting, in the physical sense, was
held by the two Chief Commissioners, there is sufficient material, on record, to
establish, that there was, a convergence of views.
11.5 The question, which, thus arises, is this : would the absence of a physical
meeting and / or a face-to-face consultation, render the decision taken on
26.04.2013, by the Committee of Commissioners, illegal? In our view, the
answer has to be in the negative. As long as there is material on record, and an
indication, as in this case, in the form of signatures of the two Commissioners,
as to their decision in the matter, a physical meeting and / or consultation is not
the requirement of Section 86(2) of the Finance Act.
12. Which brings us to the other issue, as to whether the members of the
Committee ought to have given their independent reasons for reaching the
conclusion to institute the appeal. There is no gainsaying that, as in the case, of
quasi-judicial function carried out by statutory authorities, even in respect of
administrative decision, reasons ought to be given. The purpose behind
seeking reasons is not only to do away with the allegation that the conclusion
reached is arbitrary and / or unfair but, is also insisted upon, to enable the
aggrieved party, as also, a superior authority (which could be a statutory
authority or court or Tribunal) to ascertain as to what weighed with a decision
CEAC 61/2014 Page 15 of 25
making authority in reaching its conclusion. The principle has been summed
up in the case of Alexander Machinery (Dudley) Ltd. Vs. Crabtree, 1974 LCR
120 that the decision of an administrative, quasi- judicial or even a judicial
authority should not represent an "inscrutable face of a sphinx".
12.1 Therefore, while one cannot but agree with the proposition that there
should be material on record which reflects the reasons as to why the Revenue
wishes to prefer an appeal, what does not flow from that, is that, the Committee
of Commissioners should necessarily give their own reasons if they otherwise
agree with the reasons already on record. In the facts of the case, the record
itself shows, to which, we have made a reference above, as to why the Revenue
was desirous of preferring an appeal. The reasons set out were cogent and
substantial. As to whether the reasons recorded would finally persuade the
Tribunal to hold in favour of the Revenue is not what concerns the Committee
of Commissioners. This is so as it is an unilateral administrative decision of an
aggrieved party i.e., the Revenue.
12.2 Therefore, having regard to the above, should the decision of the
Committee of Commissioners be overturned merely on the ground that they did
not give their own independent reasons, even if it meant replicating, what has
already been set forth by the subordinate officers, on record?
12.3 In our view, the answer has to be in the negative. This is so, as the
administrative decision of the kind involved, as indicated above, requires the
Committee of Commissioners to look at errors of fact and / or law in the order
passed by the adjudicating authority only from the point of view of the
Revenue i.e. as to whether the revenue should prefer an appeal. At this stage,
the Committee of Commissioners is, neither addressing nor adjudicating upon
the stand taken by the respondent/assessee. While, the decision of the
CEAC 61/2014 Page 16 of 25
Committee of Commissioners has consequences, in as much as, the
adjudicating authority's order is put in jeopardy by institution of the appeal, it
has no civil consequences which, if at all, arise only when, the appeal is
entertained and adjudicated upon by the Tribunal.
12.4 Therefore, having regard to the nature of the administrative functions
discharged by the Committee of Commissioners, in our view, there is no
requirement whatsoever under the provisions of Section 86(2) of the Finance
Act to give independent reasons for coming to a conclusion, which is, in
consonance, with a view already on record that an appeal should be filed.
12.5 In order to appreciate this aspect of the matter, it may be relevant to note
that even while discharging judicial functions, often, courts and/or tribunals
reject an appeal against the order-in-original or even a review without giving
reasons because it agrees with the underlying reasons. Such a decision of the
appellate / reviewing forum, if challenged before a superior forum, may get set
aside for reconsideration, not always on account of absence of reasons, but
because, the matter, perhaps, requires deeper consideration qua issues which
remained unaddressed in the underlying order.
12.6 Therefore, to conclude that every decision rendered by the Committee of
Commissioners which does not bear independent reasons would lay it open to
challenge, in our opinion, would be not only erroneous but would also render
the exercise inefficacious and impractical. In our view, the limited scrutiny
that the Tribunal may conduct when there is an objection raised as regards the
maintainability of the appeal is, to examine, as to whether, a decision has been
taken by the officers, who ought to form part of the Committee of
Commissioners. Once, the record shows that a decision has been taken to file
an appeal then, in our opinion, it is beyond the remit of the Tribunal to either
CEAC 61/2014 Page 17 of 25
examine the sufficiency of the material or the "appropriateness / desirability of
instituting the appeal"; as these are aspects with respect of which, responsibility
has been placed on the Committee of Commissioners.
12.7 The Tribunal, while acting as an appellate authority, in our view, has no
jurisdiction whatsoever to strike down a decision taken by the Committee of
Commissioners on the administrative side. As indicated above, the only aspect
that the Tribunal can examine is, as to whether or not there is on record a
decision of the Committee of Commissioners to institute an appeal. Once, such
a decision is shown to have been taken then, the Tribunal, will entertain the
appeal and adjudicate upon the same on merits; albeit in accordance with law.
12.8 The view that we have taken above is also the view that has been taken by
a Division Bench of this court in L.R. Sharma-1's case, of which, one of us (S.
Ravindra Bhat, J.), was a member. The Division Bench in that case examined
the issue threadbare and made the following observations in paragraphs 7 and
8.
"..7. The Court has considered the submissions of the parties. The
scope of enquiry of a Court into administrative acts is limited. This
is all the more so when the act in question is neutral (i.e. the filing
of an appeal), rather than an order placing a demand upon the
assessee or otherwise prejudicial to the interests of the assessee. An
order under Section 86(2) is for the filing of an appeal, which will
be considered on merits by the CESTAT. Whilst there is a
requirement for a meaningful procedure to be followed in all
administrative acts, including the present one, the Court must view
the deliberation by the concerned authority in context. In this case,
the respective Superintendents of the two Chief Commissioners
prepared detailed notes concerning the facts, law applicable and the
need for a reconsideration of the order of the Commissioner. This
is not disputed. Equally, it is not disputed that these notes were
placed before the Chief Commissioners. The fact that this was
done independently for the two Chief Commissioners, who did not
CEAC 61/2014 Page 18 of 25
sit together, is, as indicated above, not in question and does not
affect the legality of the impugned order. The Chief
Commissioners endorsed these proposals, and thus, the appeal was
filed. The fact that the Chief Commissioners did not, on the record,
record independent reasons for concurring with their respective
subordinates does not render the authorization void. There is no
such requirement in Section 86(2), and this Court does not propose
to add another layer to these administrative proceedings. Rather, it
is important to view the proceedings as a whole - detailed notes
considering the issue of appeal were prepared by those in the office
of the Chief Commissioner delegated with such tasks, and the final
decision or approval was taken by the Chief Commissioner. Short
of requiring the Chief Commissioner himself to record independent
reasons, there is no deficiency in the administrative action. Indeed,
the rationale for Section 86(2) was considered by the Supreme
Court in Collector of Central Excise v. Berger Paints, (1990) 2
SCC 439, in the following words:
"6. Having regard to the purpose of these rules as we
conceive it, namely, to ensure that there was an
application of mind to the points in respect of which the
question for filing an appeal arose and that the appeal was
duly authorised by the Collector, and was filed by the
person authorised by the Collector in order to ensure that
frivolous and unnecessary appeals are not filed, we are of
the opinion that in the present context and in view of the
terms of the rules and the purpose intended to be served,
the appeal was competent and was duly filed in
compliance with the procedure as enjoined by the rules. It
has to be borne in mind that the rules framed therein were
to carry out the purposes of the Act. By reading the rules
in the manner canvassed by Dr. Pal, counsel for the
respondent, before us which had prevailed over the
tribunal, in our opinion, would defeat the purposes of the
rules. The language of the relevant Section and the rules
as we have noticed, do not warrant such a strained
construction."
8. The reason for the introduction of Section 86(2), rather than
permitting the filing of appeals by lower officers themselves, is to
ensure that frivolous and unnecessary appeals are not filed. Indeed,
CEAC 61/2014 Page 19 of 25
in this case, as in all cases, the merits of the case will be decided by
the CESTAT, and if there presents no reasonable argument from
the Revenue, the matter will be dismissed. The assessee has every
opportunity to contradict the case of the Revenue before the
CESTAT. By allowing appeals such as the present one, and
inquiring into minute details of the authorization provided under
Section 86(2), the result is the addition of another layer of litigation
in the matter on the legality of the authorization. This runs contrary
to the very purpose of Section 86(2), if the authorization under that
section - which is to remove additional litigation - is the cause of
further disputes. Therefore, given the underlying rationale behind
Section 86(2), unless the manner in which the authorization has
been granted by the Committee of Chief Commissioners is
arbitrary or based on irrelevant information, the Court ought not to
interfere with the administrative functioning of the concerned
authority, nor impose a new and onerous requirement of an
independent detailed and personal consideration by the Chief
Commissioners themselves, ignoring the context, i.e. the detailed
consideration of the issue by the subordinate officers also involved
in the process. The cases relied upon by the Respondent are of no
assistance. Neither Kundalia (supra), which concerned
authorization under Section 35 of the Central Excise Act, 1944
(requiring the Chief Commissioners to be of the opinion that the
order in question is illegal and improper, as opposed to only
objecting to the order under Section 86(2)), nor ITC Limited
(supra), deal with the standards for review under Section 86(2) or
the law as laid down in Berger (supra). In fact, recently in
Commissioner of Central Excise v. Ufan Chemicals, 2013 (290)
ELT 217 (All), the Allahabad High Court, while considering a
similar issue, observed that the precise method and manner of
obtaining authorization is not an issue, but only a limited inquiry
was permitted to determine whether such authorization was given
in accordance with law, which, as discussed, is clearly the case in
these proceedings..."
12.9 As would be evident, the court considered not only the decision of the
another Division Bench in the case of Kundalia Industries but also the
decision of the Supreme court in the case of Collector of Central Excise Vs.
Berger Paints. It would be pertinent to note that against the decision rendered
CEAC 61/2014 Page 20 of 25
by the Division Bench in LR Sharma-1, the matter was carried to the Supreme
Court, which dismissed the Special Leave Petition in limine vide order dated
07.07.2014, passed in SLP No.14544-14545/2014. As a matter of fact, a
review petition bearing no.2521-2522/2014, was also preferred, which was
dismissed, once again, in limine, on 27.11.2014.
13. As noticed above, in LR Sharma-1's case, a Division Bench of this
court had noticed, inter alia, a decision rendered by another Division Bench of
this court in Kundalia Industries's case as also the judgment of the Division
Bench of the Allahabad High Court in Ufan Chemicals. The decisions both in
Kundalia Industries as well as Ufan Chemicals pertain to Section 35B(2) of
the Central Excise Act, 1944 (in short the Central Excise Act). The two
decisions have taken, a diametrically, opposite view. While in Kundalia
Industries's case, the Revenue's appeal was rejected on the ground that the
Committee of Commissioners had only appended their signatures to a note
prepared by subordinate officers, which, articulated a need for filing an appeal
before the Tribunal, the Division Bench of the Allahabad High Court, allowed
the appeals of the Revenue despite the fact that the Committee of
Commissioners had acted on the note prepared by the subordinate officers. The
Division Bench of the Allahabad High Court in Ufan's case, applied the ratio
set forth by the Supreme court in Berger Paints while allowing the appeals of
the Revenue. Pertinently, the decision of the Supreme Court in the Berger
Paints's case was not brought to the notice of the Division Bench in Kundalia
Industries's case.
13.1 The examination of the aforementioned decisions immediately brings to
fore the fact that the two decisions were rendered under the provisions of
Section 35B(2) of the Central Excise Act. The language used in Section
CEAC 61/2014 Page 21 of 25
35B(2) of the Central Excise Act though not identical, we must confess, is
broadly, similar to the language used in Section 86(2) of the Finance Act.
Having said that, what appeals to us, is the view taken by the Supreme Court in
Berger Paint's case, which was rendered in the context of Rule 9 of the
Customs, Excise and Gold (Control) Appellate Tribunal (Procedure) Rules,
1982 (in short the 1982 Rules). For the sake of reference the said Rule is
extracted hereinbelow.
"..9. What to accompany memorandum of appeal?: (1) Every
Memorandum of appeal required to heard by a two-Member
Bench shall be filed in quadruplicate and shall be accompanied
by four copies, one of which shall be a certified copy of the
order appealed against in the case of an appeal against the
original order passed by the additional Commissioner or
Commissioner of Excise or Customs and where such an order
has been passed it appeal or revision, four copies (one of which
shall be a certified copy) of the order passed in appeal or in
revision and four copies of the order of the original authority.
Explanation: "Copy for the purpose of this Rule shall mean a
true copy certified by the appellant or appellant's representative
to be a true copy.
(2) In an appeal filed under the direction of the Collector or the
Administrator or the Central Board of Excise and Customs, one
of the copies of the order appealed against shall be an attested
copy instead of a certified ...."
13.2 It would be noticed that Rule 9(2) of the 1982 Rules is, broadly, in
consonance with the Section 86(2) of the Finance Act. In somewhat similar
circumstances, where institution of an appeal, authorised by the Collector,
based on a note placed before him, was assailed, the Supreme court repelled
the challenge based on the rationale that such authority was given to the
Collector to ensure that frivolous and unnecessary appeals were not filed. The
CEAC 61/2014 Page 22 of 25
Supreme Court ruled, that as long as there was an application of mind (by
which it did not mean separate reasons) in respect of the issue qua which the
appeal arose and due authority was given by the Collector, the appeal was
competent. On these grounds, the Supreme Court reversed the judgment and
order of the Tribunal.
14. Having regard to the judgment rendered in Berger Paints's case (which
has been followed by a Division Bench of this court in LR Sharma-1's case, as
also, by the Division Bench of the Allahabad High Court in Ufan's case), we
are bound to hold that the decision in Kundalia Industries' case is not
consistent with a view taken by the Supreme Court.
14.1 It is for this very reason that we respectfully differ from the view taken by
a Division Bench of the Punjab and Haryana High Court in : B.E. Office
Automation Products Pvt. Ltd. Accordingly, the two judgments of the
Tribunal cited by Mr. Mittal i.e in V.S. Exim Pvt. Ltd. and Super Cassettes
Industries Ltd., in our view, do not state, the correct position in law. As a
matter of fact, the decision rendered by another Division Bench of the
Allahabad High Court, in Devson Steels, accords, with a view taken by us.
15. Before we conclude, we may also refer to a decision dated 02.11.2012,
rendered by a Division Bench of this court in : WP(C) 6918/2012, titled : LR
Sharma and Co. Vs. Commissioner of Service Tax and Ors. (hereafter
referred to as LR Sharma-2).
15.1 As is obvious, this was a decision rendered in a writ petition by a Division
Bench. By this decision, which is really in the nature of an order, the assessee
had questioned the maintainability of the appeal pending before the Tribunal on
the ground that a review of the order of the Committee of Commissioners did
CEAC 61/2014 Page 23 of 25
not validly take place (by which we would understand that a meeting was not
convened) in terms of Section 86(2) of the Finance Act. The Division Bench
by a short order permitted the petitioner / assessee to raise the said objection by
way of a preliminary issue before the Tribunal.
15.2 For the reasons given above, in our view, this approach is inconsistent
with the purpose and the object for which Section 86(2) has been incorporated
in the Finance Act. As articulated hereinabove, the role of the Tribunal is,
limited to only ascertaining as to whether or not the Committee of
Commissioners (comprising of duly authorised officers) has taken a decision to
institute the appeal. Once, such satisfaction is reached in this behalf, the
Tribunal cannot render the appeal incompetent, in particular, on the ground that
no meeting took place, or that, there were no independent reasons recorded by
the Committee of Commissioners.
16. Having regard to the aforesaid discussion, our decision, with respect to
the two questions of law, referred to us, is as follows :-
(i). In so far as question no.1 is concerned, the same is answered in favour of
the Revenue. The Tribunal, as indicated above, cannot examine the issue
beyond the factum as to whether or not a decision has been taken by a
Committee of Commissioners to institute the appeal.
(ii). In view of our answer rendered qua question no.1, question no.2 does not
arise for consideration. In any event, in our discussion hereinabove, we have
clearly indicated that the act of appending of signatures by the members of the
Committee of Commissioners, would suffice, as long as, the record placed
before them, contains the necessary material and the reasons for approving the
action to institute the appeal.
CEAC 61/2014 Page 24 of 25
17. The reference is, answered, accordingly by us. The matter be placed
before the Roster Bench for decision in the appeal.
RAJIV SHAKDHER, J.
S. RAVINDRA BHAT, J.
SANJIV KHANNA, J. JULY 20, 2015 yg CEAC 61/2014 Page 25 of 25