Jharkhand High Court
M/S. National Buildings Construction ... vs Commercial Of Central Excise & Services ... on 10 December, 2020
Equivalent citations: AIRONLINE 2020 JHA 1404
Author: Aparesh Kumar Singh
Bench: Aparesh Kumar Singh, Anubha Rawat Choudhary
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Tax Appeal No. 29 of 2013
M/s. National Buildings Construction Corporation Limited,
New Delhi .... Appellant
Versus
Commercial of Central Excise & Services Tax, Ranchi......Respondent
....
CORAM: Hon'ble Mr. Justice Aparesh Kumar Singh
Hon'ble Mrs. Justice Anubha Rawat Choudhary
....
Through Video Conferencing
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For the Appellant : Ms. Amrita Sinha, Advocate
For the Respondent : Mr. Ratnesh Kumar, Advocate
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12/10.12.2020 Heard learned counsel for the appellant, Ms. Amrita Sinha and
Mr. Ratnesh Kumar representing the respondent-Central Excise & Service Tax Department.
This appeal has been heard on the following substantial question of law:
i) Whether learned Customs, Excise and Service Tax Appellant Tribunal (CESTAT) was justified in law in dismissing the appeal preferred by the appellant herein only on the ground that Committee on Disputes (COD) permission has not been taken at the time of filing of the appeal and till its disposal, in the light of Constitution Bench decision of the Apex Court in the case of Electronics Corporation of India Limited Vs. Union of India and others reported in (2011) 3 SCC 404 and in the case of Northern Coalfields Limited Vs. Heavy Engineering Corporation Limited and another reported in (2016) 8 SCC 685?
2. Bereft of unnecessary details, the relevant facts necessary for adjudication of this appeal are briefly indicated hereinafter:
Appellant, a Government of India undertaking, engaged in works contract and duly registered before Service Tax Department under the category of 'Commercial or Industrial Construction Service' entered into a contract with Bharat Heavy Electrical Limited (BHEL) on 25th February, 2005 for construction of civil, structural and architectural work at Chandrapura Thermal Power Station, DVC, Jharkhand. As per the work order, materials were required to be provided by the appellant, National Buildings Construction Corporation at its own cost with the 2 exception that cement and steel were supplied by BHEL. Under Government Notification no. 15/2004-ST dated 10th September, 2004, exemption was granted in the matter of levy of service tax on 67% of 'Gross Amount Charged' for construction services. By a clarification Notification no. 04/2005-ST dated 1st March, 2005, it was indicated that 'Gross Amount Charged' shall include the value of goods or services or materials supplied or provided or used by the provider. Later, a consolidated Notification no. 1/2006-ST was issued on 1st March, 2006. The Directorate General of Central Excise Intelligence (DGCEI), Jamshedpur initiated an enquiry which led to issuance of show-cause notice dated 16th October, 2008 upon the appellant asking him as to why the benefit of Exemption Notification dated 10th September, 2004 and 1st March, 2006 should not be disallowed and service tax for the period 2005-06 to 2007-08 be not raised to Rs. 4,17,74,199/-. Appellant submitted its reply on 16th February, 2009. The order in original confirming the demand was passed on 24th February, 2010, rejecting the reply.
3. Being aggrieved by the order in original, the appellant preferred an appeal before the learned CESTAT, Kolkata along with stay petition. Meanwhile, in the case of Commissioner of Central Excise Vs. Bharat Petroleum Corporation Limited reported in (2010) 13 SCC 42, by order dated 6th April, 2010, the Division Bench of the Apex Court referred the matter relating to working of committee of disputes constituted earlier by an order passed by a Bench of Three Judges of the Apex Court in the case of Oil and Natural Gas Commission and another Vs. Collector of Central Excise reported in 1995 Supp (4) SCC 541 before the Larger Bench, taking note of the fact that numeral difficulties have been experienced by COD in relation to disputes between the Ministry of Government of India and public sector undertakings of the Government of India. The Hon'ble Court also took into note the submission advanced by learned Attorney General that time had come to revisit the orders passed by the three-Judge Bench of the Apex Court in the case of Oil and Natural Gas Commission (Supra). The matter was thereafter heard by a Constitution Bench of Five Judges and the directions issued by the Apex Court in its various orders earlier were recalled. Para 17 & 18 of the report is quoted hereunder:
17. The mechanism was set up with a laudatory object.
However, the mechanism has led to delay in filing of civil appeals causing loss of revenue. For example, in 3 many cases of exemptions, the Industry Department gives exemption, while the same is denied by the Revenue Department. Similarly, with the enactment of regulatory laws in several cases there could be overlapping of jurisdictions between, let us say, SEBI and insurance regulators. Civil appeals lie to this Court. Stakes in such cases are huge. One cannot possibly expect timely clearance by CoD. In such 8 cases, grant of clearance to one and not to the other may result in generation of more and more litigation. The mechanism has outlived its utility.
18. In the changed scenario indicated above, we are of the view that time has come under the above circumstances to recall the directions of this Court in its various Orders reported as (i) ONGC-II dated 11.10.1991, (ii) ONGC-III dated 7.1.1994 and (iii) ONGC-IV dated 20.7.2007.
4. Meanwhile, learned CESTAT by order dated 8th October, 2012 (Annexure-4) dismissed the appeal for want of COD clearance, observing therein that the appellant cannot take the benefit of the judgment of Constitution Bench of Hon'ble Supreme Court as the instant appeal had been preferred prior to the decision in the case of Electronics Corporation of India Limited( Supra). The Tribunal further observed that the applicant/appellant had not produced any clearance from COD, nor have they produced any evidence that their application for clearance is pending before COD.
5. However, the issue relating to COD clearance in respect of disputes between the Government Corporation in terms of the permanent-in-house administrative machinery taken to a court of law prior to the decision of the Constitution Bench in the case of Electronics Corporation of India Limited (Supra) once again went up to Hon'ble Supreme Court in the case of Northern Coalfields Limited Vs. Heavy Engineering Corporation Limited and another reported in (2016) 8 SCC 685. In the said case, the dispute between the parties were referred for settlement in terms of the Permanent Machinery for Arbitration in the year 1993-94. Appellant therein filed a suit challenging an arbitral award and inter-alia claimed a declaration that the contracts were rendered null and void on account of breach of Clause 3 thereof and the respondent Company was not entitled to claim any relief under the contract. The matter went before the learned Division Bench of Delhi High Court, which dismissed the appeal and affirmed the rejection of the plaint by the learned Single Judge primarily on the ground that since the special procedure prescribed by the Government for adjudication of disputes 4 between Government Corporation have been effectuated and resorted to by the parties in terms of the judgment of the Apex Court in ONGC cases, the appellant was not entitled to seek a declaration that the award so made were illegal or liable to be set aside. The correctness of the judgment of Delhi High Court was called in question in the case of Northern Coalfields Limited (Supra). Hon'ble Supreme Court referred the decisions rendered in the ONGC cases earlier and the Constitution Bench judgment in the case of Electronics Corporation of India Limited ( Supra) and further the office memorandum dated 12th June, 2013 issued by the Government of India, Ministry of Industries and Public Enterprises Department of Public Enterprises revising the guidelines and deleting the earlier guidelines Para-13 that required clearance from the committee on disputes. The net effect of the discussions in the preceding paragraphs, have been summarized by Hon'ble Court at paragraph-23. We may profitably quote para -23 to 25, which have a seminal bearing upon the issue before us.
"23. The net effect of the above can be summarized as under:
23.1. The Permanent Machinery of Arbitration was put in place as early as in March, 1989, even before ONGC-2 was decided on 11-10-1991.
23.2. The Permanent Machinery of Arbitration was outside the statutory provision then regulating arbitrations in this country, namely, the Arbitration Act, 1940 (10 of 1940). 23.3. The award made in terms of the Permanent Machinery of Arbitration being outside the provisions of the Arbitration Act, 1940 would not constitute an award under the said legislation and would therefore neither be amenable to be set aside under the said statute nor be made a rule of the court to be enforceable as a decree lawfully passed against the judgment-debtor. 23.4. The Committee on Disputes set up under the orders of this Court in the series of orders passed in ONGC cases did not prevent filing of a suit or proceedings by one PSE/PSU against another or by one government department against another. The only restriction was that even when such suit or proceedings were instituted the same shall not be proceeded with till such time the Committee on Disputes granted permission to the party approaching the Court.
23.5. The time-limit fixed for obtaining such permission was also only directory and did not render the suit and/ or proceedings illegal if permission was not produced within the stipulated period.
23.6. The Committee on Disputes was required to grant permission for instituting or pursuing the proceedings. If the High-Powered Committee (COD) was unable to resolve the dispute for reasons to be recorded by it, it was required to grant clearance for litigation.
23.7.The Committee on Disputes' experience was found to be unsatisfactory and the directives issued by the Court regarding its constitution and matters incidental thereto were recalled by the Constitution Bench of this Court thereby removing the impediment which was placed upon the court's/tribunal's 5 powers to proceed with the suit/ legal proceedings. The Department of Public Enterprises has subsequent to the recall of the orders in the ONGC line of cases modified its guidelines deleting the requirements for a COD clearance for resorting to the Permanent Machinery of Arbitration; and 23.8. The Permanent Machinery of Arbitration was and continues to be outside the purview of Arbitration Act, 1940 now replaced by the Arbitration and Conciliation Act, 1996.
24. Let us now see the case at hand in the light of the above propositions. It is true that the disputes between the appellant and respondents were referred for settlement in terms of the Permanent Machinery for Arbitration as early as in the year 1993/1994. It is also not in dispute that as on the date of the said reference the Committee on Disputes was already set up but no permission for a reference was taken. That the Arbitrator made an award under the Permanent Machinery of Arbitration which was questioned in appeals before the Law Secretary who made some alterations in the same is also admitted. That the award so made has not been accepted by the appellants is also common ground inasmuch as the appellant has filed a suit challenging an arbitral award in Civil Suit No.1709 of 2000 in which the appellant claimed a declaration that the contracts were rendered null and void on account on the breach of Clause 3 thereof. The appellant also sought a declaration that the respondent company was not entitled to claim any relief under the said contract nor was respondent 2 entitled to do so and that the so-called arbitral award was vitiated on the face of record hence liable to be set aside. That such a suit could be filed but could not be proceeded with till such time the CoD granted permission is also beyond dispute as on the date of the institution of the suit the direction of this Court in ONGC group of cases still held the field. Such permission could be obtained within 30 days which was not sacrosanct but the institution of the suit itself could not be faulted as a litigant was in terms of the direction of this Court entitled to institute the proceedings to save limitation. The High Court has, all the same, rejected the plaint on the ground that permission from CoD was not obtained. In doing so the High Court obviously understood the direction of this Court to mean as though absence of such permission was a fatal defect which it was not. The orders of this Court to which we have made a reference earlier unequivocally make it clear that filing of the suit in itself was not barred. What was restrained was further progress in the suit till such time permission from the CoD was obtained. Inasmuch as the High Court considered the absence of permission from CoD to be a mandatory legal requirement for the institution of the suit it committed a mistake. No such legal requirement could be read into the judgment of this Court nor has any such requirement been pointed out by Mr. Ranjit Kumar, learned Solicitor General appearing before us.
25. The question then is whether the requirement of the clearance of CoD could be insisted upon even at this stage. Our answer is in the negative. We say so because CoD stands abrogated/dissolved and the orders directing constitution of such a Committee reversed. Since there is no CoD at present there is no question of either obtaining or insisting upon any clearance from the same. The upshot of the above discussion is that the orders passed by the High Court rejecting the plaint on the ground that the same was not preceded or accompanied by permission from CoD is unsustainable, are hence, liable to be set aside." (Underline supplied to add emphasis) 6
6. On the part of the appellant, Ms. Amrita Sinha has vehemently argued that filing of the appeal before learned CESTAT was not barred in the light of the directions issued in ONGC group of cases. The requirement of taking permission within 30 days from the Committee of Disputes was also not sacrosanct. The only bar was on the learned Court to proceed in the matter till such time COD permission is granted and produced before it. As such, on the date on which the appeal was decided by learned CESTAT i.e,. 8th October, 2012, the requirement of obtaining COD permission had been lifted by the Constitution Bench decision rendered in the case of ECIL (Supra) on 17th February, 2011. In those circumstances, the only bar over proceeding with the matter upon learned CESTAT in the light of previous directions of the Hon'ble Supreme Court in the ONCG group of cases having been lifted, the appeal was perfectly in order and should not have been dismissed on the sole ground without consideration on merits. The legal position stands further fortified by the judgment rendered in the case of Northern Coalfields Limited (Supra) by the Apex Court.
7. Learned counsel for the respondent- Central Excise & Service Tax Department has also based his argument on the same decisions of the Apex Court. However, he is of the view that the appeal preferred prior to 17th February, 2011 i.e., decision of the Constitution Bench in the case of ECIL where to mandatorily accompany COD permission, failing which, the appeals could not be heard on merits. The appellant failed to obtain COD clearance before filing of the appeal and even till the date, it was decided by the learned CESTAT on 8th October, 2012. Therefore, the appeal was hit by the law prevailing at the relevant point of time in the light of ONGC directions. Therefore, learned CESTAT was right in dismissing the appeal on that ground.
8. We have considered the submissions of learned counsel for the parties and taken note of the relevant facts in issue, undisputed by them, and also legal position as it stands by virtue of judgments rendered by the Apex Court in the case of ECIL (Supra) and Northern Coalfields Limited (Supra). The extract of the decisions quoted above do not leave any room of doubt that in a case of inter corporation dispute or dispute between PSU and Ministry of Government, the aggrieved party could file a suit or a case or appeal before a Tribunal/ Court of Law but the Tribunal/Court could not proceed till the COD permission was granted. The requirement of obtaining COD permission within 30 days was also 7 not sacrosanct, but the institution of the suit was not prohibited, as the litigant was entitled to institute the proceeding to save limitation. The only rider was that the concerned Tribunal or Court could not proceed with the suit so long the COD permission was not taken. This prohibition or rider in proceeding with the case or suit by a Tribunal or a court of law was lifted by virtue of Constitution Bench decision in the case of ECIL(Supra) vide judgment dated 17th February, 2011, Para-18 thereof has been quoted hereinabove. Therefore, on the date on which appeal was dismissed by the learned CESTAT, there was no bar in proceeding with the matter in the absence of COD permission. The legal position rendered by Hon'ble Supreme Court in the case of ECIL was further clarified in the case of Northern Coalfields Limited (Supra), of which the relevant extract has been quoted hereinabove.
9. In those circumstances, we are of the considered view that the learned CESTAT proceeded on an erroneous understanding of law that the appeal instituted by the appellant on 1st June 2010 could not be decided on merits in the absence of COD permission. The argument advanced on behalf of Respondent - Central Excise & Service Tax Department also suffers from the same misunderstanding of the true purport of law. In those circumstances, the order of learned CESTAT rejecting the appeal bearing no. S.T.180/10 preferred by the appellant herein only on the ground that COD permission had not been obtained, cannot be sustained in the eye of law and on facts. The substantial question of law posed for determination in the instant appeal is answered in favour of the appellant. The impugned order dated 8th October, 2012 (Annexure-4) by CESTAT is set aside. The appeal and all pending applications before learned CESTAT connected with it, shall be considered in accordance with law. Let parties appear before learned CESTAT on 8th January, 2021 so that the appeal is decided expeditiously.
(Aparesh Kumar Singh, J.) (Anubha Rawat Choudhary, J.) Jk