Customs, Excise and Gold Tribunal - Delhi
India Automotive Ltd. vs Collector Of Central Excise on 29 April, 1986
Equivalent citations: 1987(13)ECC77, 1986(8)ECR424(TRI.-DELHI), 1986(26)ELT99(TRI-DEL)
ORDER S. Venkatesan, President 1. What is directly at issue in this case is a stay application involving an amount of Rs. 22,123.59. However, there has incidentally been raised an interesting and important question regarding the effect of Section 35E(f) of the Central Excises and Salt Act. 2. In this case, the Deputy Collector of Central Excise, Jamshedpur" and adjudicated a case relating to the classification of five items of "bolts and nuts" manufactured by the applicants, and also related charges alleging violation of various provisions of the Central Excise Rules. In his order dated 31.3.84, the Deputy Collector held that four of the items were correctly classifiable under Item 68 C.E.T. as claimed by the applicants, and the remaining item, namely, "stand stud", under T.I.52, as contended by the Department. However, he held the demand for duty in respect even of this item to be time-barred. He also absolved the applicants of the allegations levelled against them in the show-cause not ice. 3. The Collector of Central Excise, Patna, thereafter passed an order dated 30.3.85 in exercise of his powers under Section 35E(2), Central Excises and Salt Act. By this order he directed the Deputy Collector to file an appeal (sic) under Section 35E(4), Central Excises and Salt Act, before the Collector of Central Excise (Appeals), Calcutta, against the Deputy Collector's order-in-original dated 31.3.84, seeking a decision whether it was legal and justified to classify the four items of "nuts and bolts" under T.I.68, and to modify the Deputy Collector's order so as to hold these four items to be classifiable under T.I. 52. 4. The Collector (Appeals), by his order-in-appeal dated 11.7.85 held that the other four items were classifiable under T.I. 52. He accordingly set aside the order of the Deputy Collector in respect of those four items and allowed the appeal (sic). 5. Thereafter, the present applicants filed an appeal under Section 35B, Central Excises and Salt Act, against the order of the Collector (Appeals). They have prayed that that order may be set aside and consequential relief accorded to them. They have also filed the present stay application against the demand for Rs. 22,123.59, which stands confirmed by virtue of the order of the Collector (Appeals). 6. On the stay application coming up, a preliminary question arose whether the appeal out of which the stay application arises is at all maintainable in terms of Section 35B, Central Excises and Salt Act, governing appeals to this Tribunal. It was observed from the Bench that Section 35B of the act empowers the Tribunal to hear an appeal against an order passed by the Collector (Appeals) under Section 35A. Section 35A applies to an appeal to the Collector (Appeals) by any person aggrieved by a decision or order passed under the Act by a Central Excise Officer. In this case what came up before the Collector (Appeals) was not an appeal under Section 35A. It was an "application" under Section 35E, in pursuance of a direction by the Collector of Central Excise under Sub-section (2) ibid. Sub-section (4) ibid provides that "such application shall be heard by the Collector (Appeals)... as if such application were an appeal made against the decision or- order of the adjudicating authority and the provisions of this act regarding appeals including the provisions of Sub-section (4) of Section' 35-B shall, so far as may be, apply to such application. This provision clearly implies that the Collector (Appeals) shall hear and decide such application as if it were an appeal made to him under Section 35. The provisions of Section 35A would consequently apply to the hearing and disposal of such application. However, a doubt could arise whether the, provisions of Section 35E(4), quoted above, could be held to have effect beyond the stage of disposal of the application under Section 35E(2), in other words, whether Section 35E(4) could be construed as meaning that an order passed by the collector (Appeals) on such application could be deemed to be an order under Section 35A, in the context of a further appeal to, the Tribunal under Section 35B. 7. On this aspect being put to Shri Lakshmi Kumaran, the learned advocate for the applicants, he strongly urged that an appeal under Section 35B would indeed lie in such circumstances. In support of this proposition he advanced four arguments :- (i) The provisions relating to the right of appeal should be liberally construed (vide judgment of the Allahabad High Court in the case of Mohan Lal Khemka v. C.I.T., reported in Vol. 81 ITR 89 at page 93); (ii) The machinery provisions in laws should be construed in such a manner as to make the machinery work and not make it ineffective (vide judgment of the Hon'ble Supreme Court in the case of India United Mills v. Commissioner of Export Profits Tax, reported in AIR 1955 SC 79); (iii) A legal fiction should be interpreted so that the full logical consequences thereof follow (vide judgment of the Hon'ble Supreme Court in the case of Dargah Committee, Ajmer v. State of Rajas-than, reported in AIR 1962 SC 574 at page 577); and (iv) Any ambiguity in a machinery provision should be interpreted in such a manner as to carry out the purposes of the Act. In this connection Shri Lakshmi Kumaran pointed out that the purpose of the amendments to the Central Excises and Salt Act bringing in the jurisdiction of this Tribunal was to provide a high level machinery for giving independent decisions in disputed cases. Under the scheme of the Act as amended, provision was made for a dispute to be taken to the Supreme Court through an appeal or to a High Court through a reference application, even after the Tribunal had given its decision. If, however, it was held that there was no appeal against an order passed by a Collector (Appeals) under Section 35E, this would mean that only in those cases the order of the Collector (Appeals) would be a final order, in contrast to all other categories of orders under Chapter VIA. This would be an anomalous interpretation, which should be avoided. 8. Shri Jain, appearing for the respondent Collector, agreed with the submissions of Shri Lakshmi Kumaran to the effect that an appeal to the Tribunal would lie under Section 35B in such a case. 9. Without prejudice to our decision on this preliminary question, we heard both sides on the stay application itself. We shall revert to this aspect later. 10. We have carefully considered the submissions of Shri Lakshmi Kumaran, with which Shri Jain is in agreement. There is no doubt that, in terms of Section 35E(4), an "application" under that Section is to be disposed of as if it were an appeal under Section 35, on which an order is to be passed under Section 35A. The only question is whether the "legal fiction" (as termed by Shri Lakshmi Kumaran) or the deeming provision as it could be called, under Section 35E(4) extends only to the stage of disposal of the application by the Collector (Appeals), orwhether the further provisions which normally apply to an order passed under Section 35A by the Collector (Appeals), including a further appeal to this Tribunal, would also be applicable. 11. On a purely literal construction of Section 35ECO, it is possible to argue that the analogy stops with the disposal of the application by the Collector (Appeals). However, on a full consideration of the scheme of Chapter VIA as well as of the arguments advanced by Shri Lakshmi Kumaran and of judicial decisions which have come to our knowledge, we find that there is substantial force in the view advanced both by Shri Lakshmi Kumaran and Shri Jain. 12. As has been pointed out by Shri Lakshmi Kumaran, the effect of holding that an appeal does not lie to the Tribunal in such a case would be that the order of the Collector (Appeals) would be the final order in such a case. This would be in contrast to the scheme of the provisions of Chapter VIA, as amended, which provides a chain of appeals going up to the Appellate Tribunal in all other cases; a further appeal to the Supreme Court in matters relating to valuation or rate of duty; and a reference application in other matters. This would also be in contrast to the position prior to Amendment. Previously, an order-in-original could be revised suo motu by the Collector of Central Excise in terms of Section 35A(2). However, such a revisional order was not final but was subject to a further revision by the Central Government under Section 36(1) as it then stood. The effect of rejecting Shri Lakshmi Kumaran's contention would, therefore, be to take away a remedy which existed prior to the introduction of the provisions relating to the Appellate Tribunal; and also, as already stated to treat one classes of cases, where the order of the Collector (Appeals) becomes the final order under the Act, differently from all other classes of cases falling within Chapter VIA. It would certainly appear anomalous that, in the process of setting up a new appellate authority, which could visibly be seen to be separate from the executive authority, and generally introducing more effective appellate remedies, an existing remedy in one particular category of cases should be taken away altogether. 13. A further apparent anomaly would be that an assessee who has failed before the original authority as well as the Collector (Appeals), would still, under the new scheme, have available the remedy of a second appeal to the Tribunal. As against this, in a situation where the original authority decided in favour of the assessee, but the Collector (Appeals) decided in favour of the Department - that is, where there are conflicting decisions by two authorities - there would be no provision for any further appeal. It is difficult to conceive that this could be the intention of the Legislature. 14. There is one other principle which would lend strong support to the proposition advanced by S/Shri Lakshmi Kumaran and Jain. Section 35E(4) provides that the provisions of this Act regarding appeals shall, so far as may be, apply to such application. It does not specifically refer to the continuation of the proceeding in the form of a further appeal or appeals. There are, however, weighty rulings to the effect that an original decision, an appeal against that decision, and even a second appeal, are all connected by an intrinsic unity and are to be regarded as one legal proceeding. This has been clearly set out in the judgment of the Hon'ble Supreme Court in the case of Garikapati Veeraya v. N. Subbiah Choudhry, reported in AIR 1957 SC 540, as seen from the extract below:- "(23) From the decisions cited above the following principles clearly emerge : (i) That the legal pursuit of a remedy, suit, appeal and second appeal are really but steps in a series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceeding. (ii) The right of appeal is not a mere matter of procedure but is a substantive right. (iii) The institution of the suit carries with it the implication that all rights of appeal then in force are preserved to the parties thereto till the rest of the career of the suit. (iv) The right of appeal is a vested right and such a right to enter the superior Court accrues to the litigant and exists as on and from the date the lis commences and although it may be actually exercised when the adverse judgment is pronounced such right is to be governed by the law prevailing at the date of the institution of the suit or proceeding and not by the law that prevails at the date of its decision or at the date of the filing of the appeal. (v) This vested right of appeal can be taken away only by a subsequent enactment, if it so provides expressly or by necessary intendment and not otherwise" (Emphasis added). This has been reaffirmed by the Hon'ble Supreme Court in the case of Dayawati and Anr. v. Inderjit and Ors., reported in AIR 1966 SC 1423, as seen from the following extract :- "(11) Section 6 of the Relief of indebtedness Act is clearly retrospective. Indeed, the heading of the section clearly shows that it lays down the retrospective effect. This being so, the core of the problem really is whether the suit could be said to be pending on June 8, 1956 when only an appeal from the judgment in the suit was pending. This requires the consideration whether the word 'suit' includes an appeal from the judgment in the suit. An appeal has been said to be 'the right of entering a superior Court, and invoking its aid and interposition to redress the error of the Court below.' (per Lord Westbury in Attorney-General v. Sillem, (1864) 11 ER 1200 at p. 1209). The only difference, between a suit and' an appeal is this that an appeal "only reviews and corrects the proceedings in a cause already constituted but does not create the cause." As it is intended to interfere in the cause by its means, it is a part of it, and in connection with some matters and some statutes it is said that an appeal is a continuation of a suit." (Emphasis added.) It would, therefore, follow that the deeming provision contained in Section 35E(4) would apply not only to the disposal of the application to the Collector (Appeals) but to all the logical sequels to that application, since these are all to be regarded as a single proceeding with an intrinsic unity. 15. The above conclusion would also be reinforced by the wording of Section 35E(4), which has been quoted in para 6 above. According to that section "the provisions of this Act regarding appeals ... shall, so far as may be, apply to such applications". It will be seen that what are made applicable are "the provisions of this Act" and not of any particular section. Therefore, all the provisions of the Act relating to appeals, which would include all the provisions contained in Chapter VIA, would apply to an application under Section 35E. Had the intention been to restrict the scope of the analogy or the deeming provision, it could have been expected that Section 35E(4) would have referred only to certain specific provisions of the Act, such as Section 35A and 35B. 16. We also find that in a slightly' different context, a similar view has been taken by the Tribunal that an appeal lies to it, although not provided in so many words. This relates to cases under the Produce Cess Act, 1966. In its decision in the' case of Upper Ganges Sugar Mills Ltd., reported in 1985 (19) ELT 155, the Tribunal had occasion to consider Section 15(2) of the Produce Cess Act, which reads as under- "The provisions of the Central Excises and Salt Act, 1944 (1 of 1944) and the rules made thereunder, including those relating to refunds and exemptions from duty, shall so far as may be, apply in relation to the levy and collection of duties of excise on any produce specified in the Second Schedule as they apply in relation to the levy and collection of duty payable to the Central Government under that Act." It was held that in the light of this provision the Tribunal was competent to hear appeals against orders passed under the Produce Cess Act by the Appellate Collector or Collector (Appeals). 17. Thus, in the light of the various considerations we have set out above, we are of the view that the effect of Section 35E(4) is to make applicable to orders passed under that Section not only the provisions relating to disposal of appeals to the Collector (Appeals) but also the connected provisions relating to further appeals. In other words, an appeal would lie to the Appellate Tribunal under Section 35B against an order passed by the Collector (Appeals) under Section 35E(4). In this view the present appeal is maintainable and so is the stay application which is the subject of our consideration. 18. We now come to the merits of the stay application. Shri Lakshmi Kumaran argued that the applicants had a strong case on merits. He submitted that in regard to the one item where the Deputy Collector had held against the applicants, he had nevertheless held the demand to be totally time-barred. According to him, the other four items were on exactly the same footing and the demand in respect of those also was totally time-barred. 19. As regards the financial position of the applicants, Shri Lakshmi Kumaran referred to their Audit Report for the year ending 31.3.85. This showed a gross profit of about Rs. 14 lakhs and a net profit of Rs. 1.25 lakhs. After adjustments against the accumulated loss brought forward, etc., there was a loss of about Rs. 75,000/-. He submitted that the applicants were not in a position to deposit the amount demanded. 20. Opposing the stay application, Shri Jain submitted that the findings of the Deputy Collector as regards time bar in respect of one item should be deemed to have been superseded, since his order had merged in the order of the Collector (Appeals). Moreover, the Deputy Collector had not made any observation as to whether the demand on the remaining four items was time-barred. 21. As regards the financial position, Shri Jain pointed out that the applicants had during the year ending 31.3.85 a sales turnover of over Rs. 1 crores. Their current assets, loans and advances amounted to over Rs. 42 lakhs, including cash and bank balance of Rs. 1.32 lakhs. He, therefore, submitted that the applications were well able to deposit the amount of about Rs. 22,000/-. ' 22. We find force in the submissions of Shri Jain. The claim of Shri lakshmi Kumaran that all the demands were time-barred is not obvious from the record and would require verification as to whether the facts relating to all the five items were similar as stated by him. As regards the financial position, in the light of the information before us, it is apparent that the applicants, who have a turnover of over Rs. 1 crore and cash and bank balance of over Rs. 1.32 lakhs, are well able to deposit the comparatively small amount of demand. We accordingly reject the stay application. The amount demanded should be deposited within six weeks from the date of communication of this order, failing which the appeal will be liable to be rejection in terms of Section 35F, Central Excises and Salt Act. H.R. Syiem, Member (T)
23. The Garikpati decision of the Supreme Court AIR 1957 SC 540 quoted by the learned President was a case that involved two persons : one was Garikapati the petitioner and the other, N. Subbiah Choudhry, the respondent. One of them filed a suit before the sub-court at a place called Barpetla on 22.4.1949, before the Constitution was adopted. The sub-court dismissed the suit on 14.11.50. The plaintiff appealed and the Andhra Pradesh High Court allowed the appeal, reversed the order of the sub-court and decreed the suit.
24. The application for leave to appeal to the Supreme Court was dismissed on the ground that the value of the property was Rs. 11,400.00 less than Rs. 20,000.00. The petitioner contended that the judgment being one of the reversal and the value being above Rs. 10,000.00 he was entitled as a matter of right to come to the Supreme Court on appeal and that right had been denied to him by the High Court.
25. On the date of the institution of the suit in April 1949, an appeal was maintainable to the Federal Court on a valuation of above Rs. 10,000/-. However, when the appeal went before the High Court, the Federal Court had been abolished, while an appeal to the Supreme Court had a valuation of Rs. 20,000.00. The Supreme Court by a majority of 4 judges to 1, decided that the aggrieved party had a vested right of appeal to the Federal Court and that such vested right of appeal was a matter which did not fall within article 133 and jurisdiction and powers with respect to such right of appeal was exercisable by the Federal Court immediately before the commencement of the Constitution, and consequently the right of appeal under Article 135.
26. The majority wrote in paragraph 48 thus :
"For reasons stated above we think that the suit, out of which this application arises, having been instituted before the date of the Constitution, the parties thereto had, from the date of the institution of the suit a vested right of appeal upon terms and conditions then in force and the judgment sought to be appealed from being a judgment reversal and the value of the subject matter being above Rs. 10,000/- the applicant had a vested right of appeal to the Federal Court under the provisions of the old C.P.C. read with the Government of India Act 1935 and the Federal Court (enlargement of jurisdiction) Act 1947. Such a vested right of appeal was a matter which did not fall within Article 133 and jurisdiction and powers with respect to such right of appeal was exercisable by the Federal Court immediately before the commencement of the Constitution and consequently the applicant. had a right of appeal under Article 135 and the High Court was in error in refusing leave to appeal to the petitioner. As in our opinion the petitioner was entitled under Article 135 to come up on a appeal to this court as of right and such right has been wrongly denied to him, we are prepared in the circumstances of this case to grant him special leave to appeal to this court under Article 136 of the Constitution. The petitioner will have the costs of this application from the respondents one and two."
We can see from this that the circumstances in which the Hon'ble Court spoke of the petitioner having a vested right of appeal was in the facts of the law being what they were on the day he instituted his suit in the sub-court in April, 1949. On that day he had a right of appeal to the Federal Court because the sum involved was Rs. 11,400.00. His right of appeal to the Supreme Court was denied by the High Court, because it held that after coming to the Constitution, the cause value had risen to Rs.20,000.00 and that since this suit involved only Rs. 11,400.00 the suit was not appealable to the Supreme Court.
27. In the matter before us, the action of the Deputy Collector originated in the show cause notice dated 5.12.1983 issued by the Superintendent of Central Excise, Jamshedpur. This was after this Appellate Tribunal had started functioning. On that day there was no right of any person, affected by an order of the Appellate Collector under section 35E of the Central Excises and Salt Act, 1944, to appeal to the Tribunal. The right of appeal, observed the Supreme Court, was a substantive right and it was only a step in a series of proceedings all connected by intrinsic unity; but it also pronounced at paragraph 23(iii):
The institution of the suit carries with it the implication that all rights of appeal then in force are preserved to the parties thereto till the rest of the career of the suit.
It also observed in the next sub-para :
The right of appeal is a vested right and such a right to enter the superior court accrues to the litigant and exists as on and from the date the list commenced and although it may be actually exercised when the adverse judgment is pronounced such right, is to be governed by the law prevailing at the date of the institution of the suit or proceeding and not by the law that prevails at the date of its decision or at the date of the filing of the appeal.
There was no right, under the Central Excises and Salt Act, 1944, in December 1983, when the show cause notice was issued and the list commenced, to appeal to the Tribunal from an order passed by the Appellate Collector under Section 35E.
28. It has been reasoned by many that the words :
such application shall be heard by the Appellate Tribunal or the Collector (Appeals) as the case may be, as if such application were an appeal made against the decision or order of the adjudicating authority and the provisions of this Act regarding appeals, including the provisions of Sub-section 4 of Section 25B shall, so far as may be, apply to such application apply to the order passed under Section 35E and that therefore it is appealable in the way that all other decisions and orders passed under the Act are appealable. These words, however, do not apply in any way to the order passed, but to the application presented under 35E(2). They require that the appellate authority shall deal with such application as they would deal with an appeal, and the procedure to deal with such appeals are laid down in Section 35A and 35C, with the added provisions that the opposite party may file the cross objection as provided in Section 35(B)(4). It would be a mistake in my opinion to read these words as sanctioning an appeal from the decision given under Section 35E. The words refer very clearly to "such -application"; the application is to be heard as an appeal, and not that the order passed under Section 35E is itself to be subjected to the appellate procedure laid down in the Act.
29. Sub-section (d) of Section 35B(1) provides for an appeal to the Tribunal against an order of the Board or the Collector passed under the repealed Section 35A. This section corresponded with the present Section 35E in one vital respect : the Board or the executive Collector initiates a move to redetermine "the legality or propriety" of a decision or order of a central excise authority subordinate to them. In the old Section 35A the two did it themselves, but in the new Section 35E they caused an application for redetermination to be filed before the appropriate appellate authority. Now Sub-section (d) of Section 35B designates a clear and defined line of appeal against a redetermination under the old Section 35A. But there is no such path of appeal against a redetermination under the present Section 35E.
30. It has been argued that, it could not be the intention of the Act to provide for no appeal from the decision by the Collector (Appeals) under Section 35E; but the fact remains that if the intention was to provide for an appeal, that intention must be written into the law and that till then, we cannot read the intention as a provision of the statute. It is when laws do not reflect the intention that they are amended and we have seen laws being amended every day. The right of appeal is too important a right to be conferred by intentions or by what one thinks the framers had in their minds. A right, to become substantive, must have the sanction of the law and until then, it lacks substance, and there is no way of improving it, even if one is certain about the intention.
31. The learned President has listed a number of anomalies that would result if there were no appeals against an order under Section 35E by the Collector (Appeals); the anomalies are all clear; but we cannot force the law to do what we think it ought to do or what we believe it was meant to do. Unless the law is equipped with the necessary wherewithal to do a thing, we cannot yoke it to an operation it was not outfitted for.
32. Section 35B fixes and exhausts the decision/orders that can be arraigned before the Tribunal. For its part, the Tribunal should not cut from, or add to, that catalogue. It may interpret the law; it may not amend it or rebuild it. An order passed by the Collector (Appeals) under Section 35F is not one of the orders that Section 35B lists, and so the Tribunal cannot admit an appeal against it.
33. I, therefore, respectfully disagree with the learned President that an appeal lies to this Tribunal from the order of the Collector (Appeals) and, therefore, for this reason, this appeal should fail. And so I reject it.