Telangana High Court
H.C.Choksi vs $ Collector-Customs on 16 November, 2022
Author: T.Vinod Kumar
Bench: T.Vinod Kumar
*THE HON'BLE SRI JUSTICE L. NARASIMHA REDDY
AND
*THE HON'BLE SRI JUSTICE CHALLA KODANDA RAM
+REFERENCE CASE Nos.2 and 3 of 1997
and
+WRIT PETITION No.27775 of 1996
% 08-10-2014
REFERENCE CASE Nos.2 and 3 of 1997
# H.C.Choksi .. Applicant in
R.C.No.2/1997
# C.R.Salian .. Applicant in
R.C.No.3/1997
Vs.
$ Collector-Customs, Hyderabad .. Respondent
<GIST:
>HEAD NOTE:
! Counsel for applicants : Sri P. Venugopal
^ Counsel for respondent : Sri Gopala Krishna Gokhale
? CASES REFERRED :
1) (S) AIR 1957 SC 49
2) 232 ITR 170
3) 271 ITR 362
4) 79 STC 163
THE HON'BLE SRI JUSTICE L. NARASIMHA REDDY
AND
THE HON'BLE SRI JUSTICE CHALLA KODANDA RAM
REFERENCE CASE Nos.2 and 3 of 1997
and
WRIT PETITION No.27775 of 1996
COMMON JUDGMENT: (Per LNR,,J)
These two references are presented by the
applicants, under Section 130(3) of the Customs Act (for
short 'the Act') r/w Rule 29 of the Customs, Excise and
Gold (Control) Appellate Tribunal (Procedure) Rules, 1982
(for short 'the Rules"), as provisions stood in 1993. The
applicants seek a direction to the appellate Tribunal to
frame a question, namely:
"Whether in the facts and circumstances of the case
the Tribunal was justified in dismissing the appeals
filed by the applicants as not being maintainable,
despite the Company filing the appeal?"
for being referred to this Court for its opinion.
Briefly stated, the facts are that the applicants were
working as Commercial Officer and Senior Materials
Manager, respectively, by M/s. Sarabhai Electronics
Limited, ORG Systems Division, Wadi Wadi, Baroda (for
short 'the Company'), in the year 1991. As a part of its
activity, the Company used to import computers and allied
items from various countries. One such import was of
'Winchester Disc Drives' from M/s. Control Data
Corporation of U.S.A. (CDC). The import was not directly
to the Company, but it was through the Computer
Maintenance Corporation (CMC), a Government of India
Agency, and with the permission of Directorate General of
Technical Development (DGTD). After the goods were
received at the destination, certain defects are said to
have been noticed in them. In the meanwhile, M/s. CDC
was taken over by another company, by name, M/s.
Seagate Technologies at Singapore. After obtaining the
necessary clearances from the CMC, the defective
imported goods are said to have been sent for repair to
M/s. Seagate Technologies at Singapore, from Bombay,
the 'exist point'. On the instructions issued by the
Company, the repaired goods were redelivered at
Hyderabad, the 'entry point'.
In the process of examining the goods for customs
clearance, the Assistant Collector of Customs, Air Cargo
Complex, Begumpet, Hyderabad, noticed some
discrepancies between the particulars mentioned at the
exist point, on the one hand, and those mentioned at the
entry point, on the other hand. After hearing the Company
on the doubts expressed by him, the Assistant Collector of
Customs passed an order, dated 16.10.1992, directing
confiscation of the goods. However, the facility of
redemption of the goods on payment of fine of
Rs.3,00,000/- was provided. The value of the goods was
mentioned as Rs.7,10,479/-. In addition to that, the
Assistant Collector of Customs levied penalty of
Rs.1,50,000/- each on the applicants, under Section 112
of the Act, alleging that they abetted the Company, in
violating the provisions of the Act and the Rules made
thereunder.
The Company, which suffered the order, preferred
an appeal before the Collector of Customs, Hyderabad,
under Section 129 (A) (1) of the Act and it was
dismissed. However, the Collector of Customs directed
the original authority to conduct a de novo enquiry, as to
the value of the goods and to re-determine the fine
amount, in lieu of the confiscation, depending on the
outcome of the de novo exercise.
Before the Collector of Customs, the Company
pleaded the case of its employees, the applicants herein,
also. However, the Collector of Customs refused to
entertain that plea, observing that it is for the applicants to
work out their remedies.
On coming to know that the appeal preferred by the
Company before the appellate authority was dismissed,
the applicants filed appeals before the Customs, Excise &
Gold (Control) Tribunal, New Delhi (for short 'the
Tribunal'), assailing the order passed by the original
authority, levying penalty on them. The appeals were
dismissed on 16.11.1993, as not maintainable.
Thereupon, the applicants filed reference petitions before
the Tribunal, with a prayer to refer the question, namely,
"in the facts and circumstances, whether the Tribunal was
right in dismissing the appeals filed by the applicants as
not maintainable", to the High Court. The Tribunal
rejected the reference petitions through a detailed
common order, dated 26.06.1996. Hence, these two
references.
Independently, the applicants challenged the order,
dated 16.11.1993, by filing the writ petition.
Sri P. Venugopal, learned counsel for the applicants,
submits that the levy of penalty against the applicants by
the original authority, through order, dated 16.10.1992,
was totally unjustified, particularly when no such penalty
was imposed on the Company. He submits that the
employer of the applicants i.e., the Company availed the
remedy of appeal not only canvassing the correctness of
the confiscation of the goods, but also the levy of the
penalty on the applicants, and that since the appellate
authority refused to entertain the 2nd part of the claim, the
applicants have straight away approached the Tribunal.
He further submits that the Tribunal ought to have
entertained the appeals on merits, particularly when the
order before it was already dealt with by the appellate
authority, may be at the instance of the Company. He
further submits that the applicants raised a pure question
of law and the Tribunal ought to have referred the same to
the High Court. It is also urged that in the event of this
Court finding that there exists a case for reference, the
procedure contemplated under Section 130(1) of the Act,
namely, to require the Tribunal to refer the question to it,
may be dispensed with, since the Parliament itself has
dropped the procedure, leading to superfluous exercise,
resulting in pendency of the matters for decades together.
Sri Gopala Krishna Gokhale, learned counsel for the
respondent, on the other hand, submits that the applicants
failed to avail the remedy of appeal before the Collector of
Customs, and that the further appeals preferred by them
before the Tribunal were rightly rejected, as not
maintainable. He submits that in the reference petitions
filed by the applicants, the Tribunal has undertaken
extensive discussion, with reference to the decided
cases, and has taken a correct view of the matter. He
further submits that there are no merits in the references
sought by the applicants and the same deserve to be
rejected. He further submits that the writ petition is not
maintainable.
Two decades have elapsed, since the Assistant
Collector of Customs passed the order, not only
confiscating the goods of the Company, but also levying
penalty upon the applicants, and still, the matter did not
assume finality. Before this Court itself, the references
were pending for the past 17 years. The controversy is in
a very narrow compass.
The applicants are neither importers nor exporters.
They are just the employees of the Company, which
imported certain electronic goods. No irregularity as such
was found, when the goods were imported from a
company in U.S.A. The whole controversy has arisen,
when the goods received, after they were sent for repair or
remodeling. The Assistant Collector of Customs noticed
some inconsistency in the particulars of the goods
furnished at the exist point, on the one hand, and those
found at the entry point, on the other hand. It was found
that the goods, which were returned after repair,
resembled brand new products. Taking the view that the
goods, that were received by the Company, were new
items and were not covered by valid documents, the
Assistant Collector of Customs confiscated them. A
facility of redemption of the goods was created, on
payment of fine of Rs.3,00,000/-. The nature of relief, that
was granted by the Collector of Customs in the appeal
preferred by the Company, has been indicated in the
previous paragraphs.
The basis for levying the penalty on the applicants
was that they did not furnish the correct value of the
goods in the respective invoices. Out of the two
applicants, only one of them was issued a show-cause
notice and ultimately penalty was levied on both of them.
Being the employees of the Company, the
applicants naturally relied upon their employer, to pursue
the remedies. From a reading of the order passed by the
Collector of Customs, it is evident that extensive
arguments were submitted on behalf of the applicants
also. However, the Collector of Customs refused to
entertain the same, on the ground that the applicants were
not before him.
The consultants, whom the applicants approached,
seem to have taken the view that since the order in
original, passed by the Assistant Collector of Customs has
been the subject matter of adjudication by the Collector of
Customs i.e., the appellate authority, there is no point in
repeating the exercise before that authority and,
accordingly, advised them to approach the Tribunal,
straight away. The Tribunal refused to entertain the
appeals, as not maintainable. Thereupon, the applicants
sought for references and even that were negatived.
Two aspects become relevant here. The first is
about the view taken by the Tribunal, as to the
maintainability of the appeal, and the second is about the
merits of the references. Though it is essential to maintain
a clear distinction between these two aspects, the
discussion would be such that there is bound to be
overlapping, in the process of answering the questions
sought to be referred. The discussion necessarily must
be undertaken, though not in absolute terms, about the
view expressed by the Tribunal, about the maintainability
of the appeals.
Had it been the case where the order passed by the
original authority i.e., the Assistant Collector of Customs
was not the subject matter of the appeal before the
Collector of Customs, by the time, it landed before the
Tribunal; refusal to entertain an appeal, could have
certainly been treated as legal. However, since the order
in original, dated 16.10.1992, has been the subject matter
of the appeal before the Collector of Customs; insisting
that the applicants ought to have availed that remedy,
would amount to being too hyper technical, particularly
when both the remedies up to that stage are quasi judicial
in nature.
The adjudication is a comprehensive process, more
so where a hierarchy of remedies is provided. Under the
Act, independent examination of the matter takes place for
the first time before an appellate authority. The order of
assessment is indeed, a pure administrative exercise.
The appellate authority would address all the questions in
detail, record the findings of fact, express a view on the
questions of law, and adjudicate the matter as it finds
appropriate. The appeals therefrom are to the Tribunal
and hardly there exist any restrictions, on its power even
to deal with questions of fact.
If the proceedings are in relation to an individual or
an agency, they are expected to pursue the remedies, at
every stage of the hierarchy as provided for in law. Even
where there are more parties to the same proceedings,
they too are required to pursue the remedies as provided
for in law, even if their grievances vis-à-vis the orders
under appeal are specific to them. However, if the
appellate authority had an occasion to deal with the matter
in detail, when approached by one of the several parties
to the proceedings, the one, who did not avail the remedy,
may justifiably feel that the same result would ensue, if he
or she approaches that authority and can think of
pursuing the remedy before a higher forum, provided for
under the concerned statute. Requiring such party to
undergo the same ordeal, as did the other parties, may
amount to just subjecting him to the process, knowing fully
well, the result thereof. This is particularly so, when the
fora are quasi judicial in nature. The effort should be to
address the controversy than to be excessively technical.
In the instant case, there is an angle, which cannot
be overlooked. The applicants did not undertake any
business or manufacturing activities of their own.
Whatever they did was in their capacity as employees of
the Company. The penalty was not in relation to their
returns. They were certainly justified in relying upon their
employer to pursue the remedies on their behalf also and
the advise, if any, not to prefer independent appeals
cannot be said to be totally lacking merits. As a matter of
fact, their employer has also pleaded for them. By the
time the appellate authority took the view that the
employer of the applicants cannot canvass their case, the
stipulated limitation stood expired. Therefore, the only
alternative for the applicants was to approach the superior
forum, namely, the Tribunal. A peculiar part of the case is
that their employer i.e., the Company, which availed the
remedy of appeal before the Collector of Customs, did not
feel the necessity to pursue the further remedies before
the Tribunal, but the applicants, who did not prefer an
appeal before the Collector of Customs, came under the
necessity to file appeals, before the Tribunal.
Time and again, the Courts have taken the view that
the procedure is a handmaid and it cannot frustrate the
adjudication of the dispute, as such. The Parliament
created as many as four remedies, under the Act, to a
party aggrieved by an order of assessment or penalty,
namely, the appellate authority, the Tribunal, the High
Court and the Supreme Court. On account of the lapse,
which, one directly cannot attribute to the applicants, they
were denied of the adjudication, at any stage, whatever
against the original order. The primary duty of the
Tribunals and the Courts is to address the actual
controversies and they cannot be swayed away by hyper
technicalities, unless the procedural lapse was so serious
that it goes to the root of the matter. Therefore, in the
peculiar circumstances of the case, the Tribunal ought to
have entertained the appeals.
Having refused to entertain the appeals preferred by
the applicants, the Tribunal rejected the application to
refer the matter to this High Court. The Tribunal did take
note of the judgments of the Supreme Court, wherein the
principles governing the reference of the matter to the
High Court were enunciated. The judgment in Sree
Meenakshi Mills Limited, Madurai Vs. Commissioner
[1]
of Income Tax, Madras is almost a treatise on the
subject. What has been summed up by the Supreme
Court was extracted by the Tribunal in para 24 of its
order. Speaking for the Bench, Justice Venkatrarama
Ayyar discussed the subject at length, with reference to
the precedents, Indian as well as foreign and the enlisted
circumstances, under which, the references can be
ordered, and when not.
Broadly stated, the references were held to be
mandatory, when what is sought to be referred to, is a
question of law. So is the case, when reference is
sought, of a mixed question of fact and law. An element
of subjectivity was added only, where the proposed
reference is about the question of fact. In para 10 of the
judgment, an illustration of cases involving questions of
fact and law was furnished. Support was derived from
cases decided by the House of Lords and other British
Courts, as to the maintainability of an appeal before a
forum, to settle the question of law. The case on hand fits
into the same. In that view of the matter, the Tribunal
ought to have acceded to the request of the applicants.
The next question is about the course to be adopted
under the law, as it stood, when the Tribunal refused to
refer the matter to the High Court. The law was that if an
aggrieved party approaches the Court by filing an
application for reference, on being unsuccessful before
the Tribunal, the High Court must require the Tribunal, to
refer the questions to it, if it was satisfied that the question
ought to have been referred. Sub-Section 3 of Section
130 of the Act reads:
"Where the High Court is satisfied that a substantial
question of law is involved in any case, it shall
formulate that question."
If this course is adopted, the High Court must require the
Tribunal to refer the question, which it has dealt with, to
itself and then proceed to decide the matter. The
Parliament realized the futility of such exercise and has
done away with this procedure by amending the Act.
Similar provisions, that were existing in the Income Tax
Act and the Central Excise Act, were also deleted. The
law, as it stands now, is substantially different. The
Tribunal, which was known as CEGAT, has been
replaced with a different adjudicatory body. The present
law does not provide for reference being made to the High
Court, on being required. If for any reason, such
reference is made, either it would be a futile exercise,
since the High Court has already addressed the issue,
or/and the matter would be pending before this Court for
another decade, if past experience is any indication.
Logical extension of a pedantic approach would be that:
(a) The Tribunal, which is now functioning under
the Act, must be required to refer the question
framed by the applicants herein to the High Court,
(b) If such question is referred, the corresponding
case before the High Court must await its turn for
disposal for years together, and
(c) What would be decided at that stage would be
as to whether the appeals before the Tribunal at
the instance of the applicants were maintainable.
In other words, the appealability of the order passed in the
year 1992 would arise for consideration before this Court
somewhere after the year 2020.
It does not need any specific effort to point out the
weakness in the system or the futility of the remedies, if
the course referred to above is adopted. Every reputed
jurist subscribed to the view that:
(a) Law is not static nor it is in a straight jacket, and
(b) Courts are not helpless before the rigid and
futile frame of procedure.
In the ultimate analysis, the procedure is only a tool, to
enable the parties as well as the adjudicating agencies to
address the real controversy, than to go around it in futile
exercise. More and more, the procedure is permitted to
dominate the proceedings beyond the point, there is every
likelihood of the very substantive law being rendered futile
and citizens being left remedyless. Whatever be the
necessity and admissibility to stick to the procedure, the
peculiar facts of this case warrant a course of action,
which need not be taken a general rule or precedent.
Further, this is not a maiden effort in this case alone.
I n Commissioner of Income Tax vs. Maharishi Ved
[2]
Vigyan Vishwa Vidya Peetham , the Delhi High Court;
i n Commissioner of Income Tax v. Munak Engineers
[3]
(P.) Ltd., the Punjab and Haryana High Court and in
[4]
State of Orissa v. Mahabir Prasad Agrawalla the
Orissa High Court, have taken the view that answering the
questions straightaway, instead of requiring the Tribunals
to frame the questions and send to the High Court once
again, cannot be said to be contrary to the letter and spirit
of law. Obviously, realising the futility of such exercises,
the Parliament itself amended the law providing for
appeals to the High Court, straightaway on questions of
law. Even otherwise, the relief of requiring the Tribunal to
entertain the appeal preferred by the applicants herein,
can be granted.
The writ petition challenging the order, dated
16.10.1992, cannot be entertained, since that order was
the subject matter of appeal and reference.
Hence, the Reference Cases are allowed, holding
that the appeals preferred by the applicants against the
original order, dated 16.10.1992, passed by the Assistant
Collector of Customs as confirmed in appeal are
maintainable. The order, dated 16.11.1993, passed by
the Tribunal is set aside. The Tribunal, which is now
functioning in the place of the CEGAT, shall take up the
appeals and dispose of the same on merits, as early as
possible. There shall be no order as to costs.
The Writ Petition is dismissed.
The miscellaneous petitions filed in the reference
cases and the writ petition shall stand disposed of.
_____________________
L. NARASIMHA REDDY, J
8th October, 2014
Note: LR copy be marked.
(b/o)
cbs
HON'BLE SRI JUSTICE L. NARASIMHA REDDY
AND
HON'BLE SRI JUSTICE CHALLA KODANDA RAM
R.C.Nos.2 and 3 of 1997 and W.P.No.27775 of 1996
COMMON ORDER:(per Hon'ble Sri Justice Challa Kodanda Ram)
1) I had the benefit of reading the common Order written by my learned brother and as I am unable to agree with the reasoning and the result, this separate Common Order if being made.
2) There are two Reference Cases and one Writ Petition. 1st and 2nd petitioners in the Writ Petition are the applicants in the R.C.No.3 of 1997 and R.C.No.2 of 1997 respectively. Both the Reference Cases and the Writ Petition had arisen on account of the Order-in-Original, dated 16.10.1992 passed by the Collector of Customs & Central Excise, Hyderabad (in short "Collector (Customs))" under Sections 111 and 112 of the Customs Act, 1962 (in short "the Act"). It would be appropriate if the cases are being disposed of by a common order, though dealing separately, as the statutory provisions applicable are entirely different. Reference Case Nos.2 and 3 of 1997:
3) The applicant in R.C.No.3 of 1997 is the Commercial Officer of M/s O.R.G. Systems (A Division of M/s Sarabhai Electronics Ltd., Baroda) (hereinafter referred to as "the Company"). The applicant in R.C.No.2 of 1997 was the Senior Materials Manager (hereinafter referred to collectively as "applicants 1 and 2").
4) A show cause notice dt.07.03.1992 came to be issued to the Company, alleging misdeclaration of the goods as "repaired and returned items" whereas the goods imported appear to be Branch New Items and thus violated the provisions of Section 11 of the Act and liable to be confiscated under Section 111 (m) of the Act, apart from penal action under Section 112(a) of the Act. The Applicant No.1, who was the Commercial Officer at relevant point of time alleged to have subscribed the importers declaration and also the declaration under Section 10 of the Customs Valuation Rules, 1988 by indicating the goods as "Received after Repair", thus abetted the offence of evading of the customs duty. Both the Company and the Applicant No.1 was granted 30 days time for submitting their objections/representations to the Additional Collector of Customs. The show cause notice came to be replied by the Company as well as the Applicant No.1 vide their letters dated 22.05.1992. It may be noted that a perusal of the show cause notice does not disclose any notice having been issued to the Applicant No.2 (Sr. Materials Manager). Both the Company as well as the Applicant No.1 sought in their representation opportunity of personal hearing before deciding the case.
Thereafter, the Order-in-Original dated 16.10.1992 came to be passed by the Collector (Customs) confirming the allegations in the show cause notice and the Company was found to have violated the provisions of the Act. The confiscation of 45 numbers of Winchester Disc Drivers was ordered by giving an option to redeem the same on payment of fine of Rs.3,00,000/-in lieu of confiscation in addition to appropriate customs duty, a penalty of Rs.1,50,000/- was imposed on both the Applicants. As against the Order-in-Original, the Company filed an appeal before the Collector of Customs & Central Excise (Appeals), Hyderabad (in short "the Collector (Appeals), who confirmed the finding that the goods imported were brand new and they are liable to be confiscated. However, the Regional Authority was directed to refix the value taking into consideration of the submissions of the Company. When a plea was made on behalf of the Company that penalty against the Applicants may be set aside, the same was rejected by the Collector (Appeals) by its order dated 13.05.1993, on the ground that there was no appeal filed by the Applicants. The Collector (Appeals) rejecting the appeal was further appealed by the Company before the Customs, Excise and Gold (Control) Appellate Tribunal (in short "the CEGAT") under Section 129(B) of the Act.
5) The appeals came to be considered by a Special Bench consisting of three members, in its Order dated 22.11.1993 (now reported in C.R.Salian and H.C. Choksi Vs. Collector of [5] Customs, Hyderabad . In the said appeal an objection with regard to the maintainability of the appeal was raised. The Special Bench by majority of 2:1 had sustained the objection and held that the appeal as not maintainable as the Order-in-Original was not appealed against and thus had become final. Thereafter, applicants 1 and 2 filed applications before the Tribunal under Section 130 (1) of the Act praying the CEGAT to refer the question of law "Whether the Tribunal was right in dismissing the appeal filed by the applicant as not maintainable?" to the High Court for its opinion. The CEGAT, after considering the elaborate arguments and by referring to various judgments on the issue, had refused to state the questions of law said to be arising from the orders of the Tribunal. As against such orders of the CEGAT refusing to refer the questions, the applicants have filed present Reference Cases invoking the jurisdiction of the High Court under Section 130(3) of the Act with a prayer to refer the questions of law to this Court so as to consider the same under Section 130(i) of the Act.
6) In the applications for reference filed under Section 130(3) of the Act, briefly stated the following grounds in support of the applications:
1) The question which falls for consideration in the appeal, "Whether the appeal filed by the Company before the Collector (Appeals) questioning the penalty levied against the appellant itself is maintainable or not?" is the question of law?
2) Whether the Company cannot be said to be aggrieved by the Order-in-Original?
3) Whether the appeal filed by the company cannot be said to be an appeal on behalf of the applicants, who are only officers acting for and on behalf of the Company and not in their individual capacity?
4) In that view of the matter, can it not be said that the Company is the actual person aggrieved. Whether the refusal of the Tribunal is on a very narrow interpretation and too technical etc. At any rate, the question sought to be referred is a pure question of law and therefore the Tribunal erred in declining to make a reference to the Hon'ble High Court.
7) By raising the above grounds, the question of law extracted in the para No.5 is prayed to be referred.
8) At the outset, I would like to make it clear that the order of the CEGAT refusing to refer, is an elaborate order considering the good number of precedents, wherein legal precedents governing the scope of Reference Applications were considered albeit arising under the Income Tax Act. It would be useful to set out the Section 66 of the Income Tax Act, 1921 (in short "the 1922 Act") and Section 256 of the Income Tax Act, 1961 (in short "the 1961 Act"). So far as they are relevant for the purpose of this case are extracted (as existing at relevant time).
9) Section 256 of the 1961 Act, reads as under:
256(1): The assessee or the Commissioner may, within sixty days of the date upon which he is served with notice of an order passed before the 1st day of October, 1998, under section 254, by application in the prescribed form, accompanied where the application is made by the assessee by a fee of two hundred rupees, require the Appellate Tribunal to refer to the High Court any question of law arising out of such order and, subject to the other provisions contained in this section, the Appellate Tribunal shall, within one hundred and twenty days of the receipt of such application, draw up a statement of the case and refer it to the High court.
Provided that the Appellate Tribunal may, if it is satisfied that the applicant was prevented by sufficient cause from presenting the application within the period hereinbefore specified, allow it to be presented within a further period not exceeding thirty days.
(2) If, on an application made under sub-section (1), the Appellate Tribunal refuses to state the case on the ground that no question of law arises, the assessee or the Commissioner, as the case may be, may, within six months from the date on which he is served with notice of such refusal, apply to the High Court, and the High Court may, if it is not satisfied, with the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case and to refer it, and on receipt of any such requisition, the Appellate Tribunal shall state the case and refer it accordingly.
(3) Where in the exercise of its powers under sub-
section(2), the Appellate Tribunal refuses to state a case which it has been required by the assessee to state, the assessee may, within thirty days from the date on which he receives notice of such refusal, withdraw his application, and, if he does so, the fee paid shall be refunded.
10) Section 66 of 1922 Act, reads as under:
Section 66 - Statement of case by Commissioner to High Court:
(1) if, in the course of any assessment under this Act or any proceeding in connection therewith other than a proceeding under Chapter VIII, a question of law arises, the Commissioner may, either on his own motion or on reference from any Income-tax authority subordinate to him, draw up a statement of the case and refer it with his own opinion thereon to the High Court.
(2) Within one month of the passing of an order under section 31 or section 32, the assessee in respect of whom the order was passed may, by application accompanied by a fee of one hundred rupees or such lesser sum as may be prescribed, require the Commissioner to refer to the High Court any question of law arising out of such order and the Commissioner shall, within one month of the receipt of such application, draw up a statement of the case and refer it with his own opinion thereon to the High Court:
Provided that, if, in exercise of his power of review under section 33, the Commissioner decides the question, the assessee may withdraw his application, and if he does so, the fee paid shall be refunded.
(3) If, on any application being made under sub-
section (2), the Commissioner refuses to state the case on the ground that no question of law arises, the assessee may apply to the High Court, and the High Court, if it is not satisfied of the correctness of the Commissioner's decision, may require the Commissioner to state the case and to refer it, and, on receipt of any such requisition, the Commissioner shall state and refer the case accordingly.
11) Section 130 of the Customs Act, under which reference is sought, may also be noticed.
Section 130(1): The Commissioner of Customs or the other party may, within sixty days of the date upon which he is served with notice of an order under section 129B passed before the 1st day of July, 1999 (not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of customs or to the value of goods for purposes of assessment), by application in such form as may be specified by rules made in the behalf, accompanied, where the application is made by the other party, by a fee of two hundred rupees, require the Appellate Tribunal to refer to the High Court any question of law arising out of such order and, subject to the other provisions contained in this section, the Appellate Tribunal shall, within one hundred and twenty days of the receipt of such application, draw up a statement of the case and refer it to the High Court;
Provided that the Appellate Tribunal may, if it is satisfied that the applicant was prevented by sufficient cause from presenting the application within the period hereinbefore specified, allow it to be presented within a further period not exceeding thirty days.
(2) On receipt of notice that an application has been made under sub-section (1), the person against whom such application has been made, may, notwithstanding that he may not have filed such an application, file, within forty-five days of the receipt of the notice, a memorandum of cross- objections verified in such manner as may be specified by rules made in this behalf against any part of the order in relation to which an application for reference has been made and such memorandum shall be disposed of by the Appellate Tribunal as if it were an application presented within the time specified in sub-section (1). (3) If, on an application made under sub-section (1), the Appellate Tribunal refuses to state the case on the ground that no question of law arises, the Commissioner of Customs, or, as the case may be, the other party may, within six months from the date on which he is served with notice of such refusal, apply to the High Court and the High Court may, if it is not satisfied with the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case and to refer it, and on receipt of any such requisition, the Appellate Tribunal shall state the case and refer it accordingly.
12) A comparative reading of Section 66 of 1922 Act, Section 256 of 1961 Act and Section 130 of the Act, would leave no manner of doubt that the provisions in these enactments are analogous and are in pari materia. It is well settled by the Judgment of the Supreme Court in Commissioner of Income Tax Vs. Bansi Dhar & Sons & Commissioner of Income Tax, Bihar [6] Vs. Chathuram Bhadani etc., . Interpretation given with respect to an analogous provision, which is in pari materia in a cognate act, can be a reliable guide in interpreting the provisions.
13) While refusing to make a reference under Section 130(1) of the Act, the CEGAT in the present case after analyzing the facts in relation to, in its earlier judgment rendered by a 3 Member Bench, New Delhi on 22.11.1993, gave a categorical finding that on account of the fact applicants 1 and 2, in spite of having an opportunity to file an appeal before the Collector (Appeals), had failed to exercise their right and thus allowed the order passed by the Collector (Appeals) original authority) under Section 129A(1) of the Act, to become final and binding. After analysis of the provisions as well as the precedents governing the same, the Special Bench of the CEGAT in its order dated 22.11.1993 had held, the appeals filed by the applications against the orders of the Collector (Appeals) passed in the appeal filed by the Company is not maintainable. The collector (Appeals) had refused to entertain the arguments for and on behalf of applicants 1 and 2 as they were not parties, who had preferred appeal and specifically rejected the contention on their behalf while passing orders under Sections 111
(m) and 112 (a) of the Act. The CEGAT having analyzed and considered the nature of powers exercised by the original authority as well as the appellate authorities had come to a conclusion that the Company cannot be said to be person aggrieved or aggrieved person and the actual aggrieved persons had not chosen to exercise their right of appeal. The CEGAT also found that the appeal is a statutory remedy conferred and the procedure governing entertaining, consideration and disposal of the appeal, is strictly governed by the Act. In other words, in the opinion of the CEGAT, there is no scope to consider a plea to decide the parameters of the statues prescribing the limitation. The reasoning of the CEGAT is to the effect that without filing an appeal against the Order-in-Original by the applicants, no further appeal can be filed to the second appellate authority treating an order passed in the case of the Company by the 1st appellate authority as an order passed in their case.
14) The entire interpretation may sound to be too technical and pedantic, however, at the cost of reputation it may be worth mentioning that the order of the Special Bench was of three Members, wherein there was a difference of opinion between the Judicial Members and the Technical Member. In other words, there is a scope for an element of discussion and debate. The CEGAT rejected the application stating that there is no referable question of law and the order of the CEGAT dated 22.11.1993 reported in C.R.Salian and H.C. Choksi case (1 supra) was on appreciation of a simple question of fact.
15) Now it is well settled by a catena of judgments that the High Court in answering a question under Section 66 of 1992 Act or Section 256 of 1961 Act, it has no appellate or revisional jurisdiction but only advisory jurisdiction. The above statement of law which was originally propounded in the case of Tata Iron & [7] Steel Co. Ltd., Vs. Chief Revenue Authority , 50 Indian Appeals 212 of the Judicial Committee was reaffirmed in The Commissioner of Income Tax Vs. Bombay Port Trust [8] Corporation Ltd., (1935 Indian Appeals 408 and 157 ELT 665 (SC)]. Further in Income Tax Commissioner of CIT Bombay vs. [9] Sindia Steamship Navigation Co., Ltd., a Constitution Bench of the Supreme Court held that reference jurisdiction was special jurisdiction which is different from appellate or revisional or supervisory jurisdiction over the Tribunal.
16) In the context of dealing with the powers of the High Court under Section 66 of 1992 Act and Section 256 of 1961 Act, a categorical argument on behalf of the parties that High Court exercised inherent powers akin to general jurisdiction under Article 227 of the Indian Constitution was specifically rejected by the Supreme Court in Commissioner of Income Tax Vs. Bansi Dhar [10] & Sons . Further in the case of C.P. Sarathy Mudaliar Vs. [11] Commissioner of Income Tax, A.P., Supreme Court while reversing the judgment of the AS.P. High Court had held as follows:
"6. We need express no opinion on the correctness or otherwise of the view expressed by the High Court in this judgment, for we are clearly of the view that the procedure followed by the High Court is erroneous. The High Court, in a reference under section 66 of the Income-tax Act, is exercising advisory jurisdiction; it is not sitting in appeal over the judgment of the Tribunal. If a question is raised by the Tribunal and referred to it, it is the function of the High Court to answer that question. The Tribunal will thereafter give effect to the opinion of the High Court. If the High Court finds that material facts are not stated in the statement of the case, or the Tribunal has not stated its conclusions on material facts, the High Court may call upon the Tribunal to submit a supplementary statement of case under section 66(4). But the High Court has no power to set aside the order of the Tribunal even if it is of the view that the Tribunal has not considered the question which, in the opinion of the High Court, should have been considered. The High Court must answer the question posed before it; thereafter, it is the duty of the Tribunal to pass such orders as are necessary to give effect to the judgment of the High Court conformably to that judgment."
17) The scope of consideration in disposing of an application filed under Section 130(2) of the Act, by the High Court is highly limited and restricted. In the words of the Supreme Court, if a question sought to be referred is a live issue and there is a scope for debate ,thereby there is a possibility of more than one view and the issue raised is not settled by any binding judicial precedent, the High court in exercise of its powers under Section 130(2) of the Act should call for reference and answer the question of law. A reference may be made to the orders in Income-Tax Officer Vs. [12] Unique Mfg., and Marketing Co., Ltd., and Commissioner [13] of Income Tax Vs. Managing Trustee, Jalakhabai . In particular, in Commissioner of Income Tax case (9 supra) at page 622 it was held that at the 256(2) stage High Court isnot called upon to decide whether the question may ultimately be decided in favour of the assessee, the High Court had only to consider whether a question of law which may be supported by reasonable arguments arises or not.
18) In the case on hand as stated supra there was a difference of opinion between two Judicial Members holding that appeal filed by the applicants was not maintainable as against the Technical Member taking a view that appeal filed by the applicants as maintainable. L in other words, there was a difference of opinion and there was a scope for debate. The issue of this nature did not fall for consideration earlier before any High Court, or before the Supreme Court. In those circumstances, the question being debatable is required for consideration.
19) In the light of the discussion above, in relation to the scope of the powers of the High Court, while considering the application seeking reference of a question of law, said to be arising from the orders of the CEGAT, I am of the opinion the question of law sought to be referred as a question of law arising from the orders of the CEGAT.
WRIT PETITION No.27775 of 1996:
20) The Writ Petition is filed questioning the Order-in-
Original dated 16.10.1992 passed by 2nd respondent-Collector of Customs, Hyderabad. Petitioner No.1 is Commercial Officer and Petitioner No.2 is Sr.Materials Manager of the 5th respondent-M/s Sarabhai Electronics Ltd. During the period 14.01.1992 to 06.02.1992, the 5th respondent-Company alleged to have imported Winchester Disk Drivers and misdeclared the same to be "repaired and returned items". As the import of Winchester Disc Drivers by misdeclaring was in violation of the Customs Act, a show cause notice dated 07.03.1992 came to be issued against the Company and also against the petitioners herein under Section 127-B of the Customs Act, 1962 (in short "the Act"). The Company filed their reply to the show cause notice denying the allegations. Petitioner No.1 also filed a letter dated 22.05.1992 submitting that the Company had filed a detailed reply and prayed for dropping of the penalty proceedings against him in his individual capacity. Record does not disclose any show cause notice having been issued to petitioner No.2. Both the petitioner No.1 and the 5th respondent-Company availed the opportunity of personal hearing through their advocate before the 2nd respondent. Respondent No.2 passed Order, dated 16.10.1992, whereunder and whereby the imputations in the show cause notice came to be confirmed against the Company, giving an option to the Company to redeem the goods by paying redemption in lieu of confiscation. Petitioners, were found to be indirectly responsible being officers of the Company and a penalty of Rs.1,50,000/- each came to be imposed on them under Section 112 (a) of the Act. The Company alone filed appeal against the Order-in-Original dated 16.10.1992 before the 2nd respondent, who confirmed the allegations of new disc drives by misdelcaration but directed fresh consideration with respect to valuation for the purpose of levy of customs duty. So far as the petitioners are concerned, plea made on their behalf in the Company's appeal that the penalty imposed on them should be set aside, was rejected. Company did not file further Appeal questioning the orders of the 2nd respondent. Both the petitioners filed appeal before the CEGAT under Section 129(b) of the Act, assailing the order of the 2nd respondent, which was rejected as not maintainable. Therefore, both the petitioners filed applications before the Tribunal under Section 130(1) of the Act, and sought reference of question of law "Whether the Tribunal was right in dismissing the appeal filed by the applicant as not maintainable?" said to be arising from the orders of the Tribunal, which came to be rejected by the Tribunal by its Order dated 29.01.1996. Thereafter, both the petitioners filed applications under Section 130(3) of the Act as reference cases i.e. R.C.Nos.3 and 2 of 1997 before the High Court. Simultaneously, both the petitioners had filed the Writ Petition assailing the orders of the 2nd respondent, in the Writ Petition.
21) In the affidavit filed in support of the Writ Petition, petitioner had narrated the facts as set out above and as such I do not see any reason to repeat the same. The Writ Petition affidavit was sworn by the 2nd respondent-H.C. Chokshi, on behalf of both the petitioners.
22) Paragraph Nos.1 to 10 is only a narration of the facts and also explanation in relation to the merits of the matter with regard to the shipment trying to justify the goods imported were not new ones but the goods returned after repair. In brief, it is the contention of the writ petitioners that the Order-in-Original has been made against the Company and the liability, if any, has to be borne by the 5th respondent; the petitioners have acted bonafide and as such they did not file appeal under the impression that the Company would also attend to on their behalf; and they have not acquiesced with the Order-in-Original; and even if the petitioners had filed a separate application against the Order-in-Original the entire expenses of the appeal as well as the legal charges would have been borne by the 5th respondent-Company alone; the rejection of the plea of the 5th respondent-Company by the Collector to exonerate the petitioners on the ground that the petitioners had not filed separate appeals, is too technical and does not stand to legal scrutiny. There was also a specific plea by the 2nd petitioner that there was never any notice issued to him and as such, the very passing order against him was in violation of Section 124 of the Act, besides being violative of principles of natural justice. As the petitioners were prosecuting appeals before the Tribunal against the order of the Collector and Reference Applications were being filed, there were no latches in filing the Writ Petition. With the above contentions petitioners prayed for issuance of Writ of Certiorari and to quash the order dated 16.10.1992 passed by the 2nd respondent.
23) Record does not disclose any counter having been filed on behalf of the respondents.
24) We have heard the learned counsel for the petitioners Sri P. Venu Gopal, and Sri Gopala Krishna Gokhaly, learned counsel for the respondents 1 to 4. As the Writ Petition and R.Cs were clubbed together, they were heard together and the facts are not in dispute. As set out in para No.1 above, the Order-in-Original though made against three parties, only the Company had pursued the remedy of appeal before the forums provided under the statute. Admittedly, both the petitioners failed to avail of the statutory remedies of appeal. The plea on their behalf came to be rejected and as of date, Order-in-Original had become final. While dealing with the Reference Application Nos. 2 and 3 of 1997, after analyzing the statutory provision and the scope of reference applications, I had come t the conclusion that a question of law does arise from the order of the Tribunal and the Tribunal had erred in coming to the conclusion that there is no question of law and the question, which is sought to be referred, is a pure question of fact. Now, the question is the Writ Petition filed questioning the Order-in-Original by the petitioners who had already taken recourse to the remedies available under the Act is maintainable and required to be considered, as it would be allowing the petitioners to proceed with simultaneously seeking two parallel remedies.
25) In peculiar facts of this case, I am of the opinion that so far as the petitioner No.2 is concerned, the Writ Petition deserves to be considered and he is entitled for the relief on the simple ground that at no point of time he was issued a notice under Section 111(m), 1112(a) of the Act. Thus, there is a clear violation of mandatory and statutory provisions. The fact that he was never issued a notice, is not specifically denied in the Writ Petition and as a matter of fact while considering the appeals C/723 and C/722/93-B2 decided on 22.11.1993, the Tribunal had recorded "the facts of the case are that the department issued a show cause notice dated 07.03.1992 to M/s. ORG Systems and to C.R. Salian above named appellants and it appears no show cause notice was issued to Shri H.C.Choksi, the other appellant in this case under Sections 111(m), 112(a) for violation of Section 11 of Customs Act, 1962" (See para 2 of the Order in C.R. Salian and H.C. Choksi case (1 supra). So far as the petitioner No.1 is concerned no such ground is available to him.
26) So far as petitioner No.1 is concerned the relief under Article 226 cannot be granted as there is no plea of violation of either of statutory provision or lack of jurisdiction in the authority in passing the impugned order.
27) It may also be noted that the 1st petitioner-C.R.Salian, Commercial Officer, was the one who subscribed the importers declaration and also the declaration under Rule 10 of Customs Valuation Rules, 1988 and it was the specific allegation that Shri C.R.Salian indicated the goods as "Received after Repair". This imputation was not denied by the 1st petitioner. Further, the nature and extent of his involvements and to what extent the 1st petitioner as an Officer of 5th respondent was responsible with regard to alleged violation of the statutory provisions in importing Winchester Disc Drivers by misdeclaring them as items brought for repair is pure simple question of fact, which cannot be decided by this Court in exercise of its jurisdiction under Art.226 of the Indian Constitution. At any rate, after considering the reply on behalf of the 5th respondent, which was adopted by the 1st petitioner, the Order-in-Original came to be passed and in the absence of any legal infirmity with respect to the jurisdiction error in passing order or violation of principles of natural justice, a Writ of Certiorari cannot be issued in the case of the petitioner No.1. Further, he had already invoked the jurisdiction of the CEGAT under the provisions of the Act.
28) In the light of the discussion above, I am inclined to allow the Writ Petition so far as petitioner No.2 quashing the Order-in- Original dated 16.10.1992. In the facts and circumstances narrated above and a Writ of Certiorari deserves to be issued in favour of the petitioner No.2, while rejecting such relief to the petitioner No.1.
29) In the light of the fact, Reference Cases filed under Section 130(3) of the Act, and the Writ Petitions filed questioning the Order-in-Original are clubbed together and heard together, in the final result, I allow the Writ Petition so far as petitioner No.2 is concerned quashing the Order-in-Original. L In the light of allowing the Writ Petition quashing the impugned order, RC No.2 of 1997 need not be ordered and hence rejected.
So far as petitioner No1 is concerned, Writ Petition is dismissed and R.C.No.3 of 1997 is allowed. Accordingly, jurisdictional Tribunal is directed to state a case with respect to question of law referred to in Para No.5 of this Order. There shall be no order as to costs.
____________________________ CHALLA KODANDA RAM, J Date: 08.10.2014 Ssv [1] (S) AIR 1957 SC 49 [2] 232 ITR 170 [3] 271 ITR 362 [4] 79 STC 163 [5] 1994 (71) ELT 81 (TRI-Delhi) [6] 1985 SCALE (2) 1416 [7] Bombay 1923 Privy Council [8] (1928) 30 BOMLR 1172 [9] 1961 42 ITR 589 (SC) [10] 1985 SCALE (2) 1416 [11] (1996) 62 ITR 576 (SC) [12] 52 ITR 28 [13] 66 ITR 619