QUAGMIRE OF LITIGATION

[vijay kalia]

Quagmire of Litigation

The scope for unnecessary litigation can be weeded out if only we have the inclination to grant an unassailable fundamental and substantial right of appeal which squarely falls within four corners of the gamut of excise law by allowing Courts to condone the delay beyond the stipulated period in the special law on special cause being shown. If viewed from the perspective of earlier decisions of the apex court the law appeared to have been very aptly held though over the years the same was rendered topsy-turvy by making reference to special legislation though the view is again holding the sway if we view the recent amendment that have been made retrospectively under section 35G and 35H but then Section 35 of Central Excise Act, 1944 and S.128 of Customs Act, 1962 remained untouched. There appears to be a big blunder if that is allowed to continue which is not in the interest of justice which should allow at least one appeal from the orders emanating from the administrative machinery down below. Blocking prematurely the vested right does not go down well and instead of strengthening the justice delivery system it weakens it irreparably.  

Section 35 deals with appeal to Commissioner (Appeals)

(1) Any person aggrieved by any decision or order passed under this Act by a Central Excise Officer, lower in rank than a Commissioner of Central Excise, may appeal to the Commissioner of Central Excise (Appeals) hereafter in this Chapter referred to as the Commissioner (Appeals) within sixty days from the date of the communication to him of such decision or order:

Provided that the Commissioner (Appeals) may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of sixty days, allow it to be presented within a further period of thirty days.

(1A) The Commissioner (Appeals) may, if sufficient cause is shown at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing:

Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal.

(2) Every appeal under this section shall be in the prescribed form and shall be verified in the prescribed manner.

The section acts as a deterrent to the assessee as well as the department who do not file their appeal in the normal period of sixty days from the date of the communication of the order of Central Excise Officer who is lower in rank than a Commissioner of Central Excise. The Commissioner (Appeals) may allow a further period to file the appeal by thirty days. The CESTAT as well as the High Courts and even the Supreme Court have pronounced that the authorities constituted under the Act cannot condone the delay beyond the period provided in the special statute.

It is the normal practice in the department not to supply relied upon document resumed during the search by the anti-evasion department even after the completion of such search and subsequent issue of a show cause notice by the concerned Deputy/Assistant Commissioner of the division concerned. In M/S. Tribhuwan Das Bheemji Jhaveri V. Commissioner of Central Excise 1992(92) ELT467 (SC) wherein the Apex Court had held that to deny the appellants the documents on the plea that the same are not readily available with the officers is no ground to deny vital information to a person who is to be visited with a penalty under the Act. It further held as under:

"We are of the view that failure to supply this important piece of information to the appellants and to this extent; we agree with Mr. Deewan that the principles of natural justice would stand violated."

There is growing anxiety in the mind of the aggrieved party with no palpable respite to approach the higher authorities who under the garb of spate of judgements delivered by the courts conclude that the CESTAT or the High Court do not have the powers to grant condonation of delay beyond the period of ninety days including the extended period of thirty days as laid down in the special statute. This is affirmed by the Supreme Court in quite a number of judgements. In M/S. Rayman Shoe Co. V. CCE reported in 2002 -TMI - 51589 - (CEGAT, NORTHERN BENCH, NEW DELHI) later on confirmed by the Supreme Court where there was a delay of six hundred nineteen days in filing the appeal and the same was dismissed and the Civil Appeal was dismissed on merits too as the Apex Court held that "Even on merits we see no reason to interfere. The Civil Appeal is dismissed." The Tribunal in this case initially have held that merits of a case cannot be considered by it where appeal was dismissed by the Commissioner (Appeal) as time barred. 

But the journey, if recapitulated, began from a favourable platform to end at a place of disaster later. The adverse judgements have been delivered over a specified period of time. The formidable aspect of the whole matter is further accentuated by the fact that the most recent judgment would constitute the law depending further on the fact, by which superior court of law is the same delivered whether by its divisional or larger or full bench or the constitutional bench. Further the lower authorities are bound by the decision of the higher forum as is held by the Supreme Court in the case of UOI V. Kamlakshi Finance Corporation Ltd. 1999 (55) ELT 443 (SC) and East India Commercial Company Ltd. V. Collector of Customs AIR1962 SC 1893 and Barada Kanta Mishra V. Bhimsen Dixit AIR1972 SC 2466. This is further fortified by the Article 141 of the Constitution of India with respect to decisions of Supreme Court which are binding on all courts in India.

In State of Nagaland V. Lipok AO 2005 (183) ELT 337 (SC) the Supreme Court had very succinctly held: "....The Courts, therefore, have to be informed with the spirit and philosophy of the provision in the course of the interpretation of the expression of sufficient cause. Merit is preferred to scuttle a decision on merits in turning down the case on technicalities of delay in presenting the appeal. Delay as accordingly condoned, the order was set aside and the matter was remitted to the High Court for disposal on merits after affording opportunity of hearing to the parties.

In Prabha V. Ram Parkash Kalra (1987) Supp. SCC 339, this Court had held that the Court should not adopt an injustice-oriented approach in rejecting the application for condonation of delay. The appeal was allowed, the delay was condoned and the matter was remitted for expeditious disposal in accordance with law."

In Sardar Amarjit Kalra V. Pramod Gupta (Smt.) (Dead) by Lrs. And Others reported in (2003) 3 SCC 272 that the procedural laws must be liberally construed to really serve as handmaid, make it workable and advance the ends of justice, technical objections which tend to be stumbling block to defeat and deny substantial and effective justice should be strictly viewed for being discouraged, except where the mandate of law inevitably necessitates it. Consequently, having regard to the nature of proceedings under the Act and the purpose of reference proceedings appeal therefrom, the courts should adopt a liberal approach in the matter of condonation of the delay as well as the consideration which should weigh in adjudging the nature of the decree.

 Again, in the case of Collector, Land Acquisition, Anantnag and another V.Mst.Katiji and others, reported in AIR 1987 (SC) 1353, in paragraph 3 that the Courts therefore, have to be informed with the spirit and philosophy of the provision in the course of the interpretation of the expression, "sufficient cause". When substantial justice and technical considerations are pitted against each other, cause of substantial justice  deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. It was further held in the said case that it must be grasped judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.

In the case of Jai Hind Bottling Company (P) Ltd. And others V. Commissioner (Appeals), Central Excise, Allahabad and others, reported in 2000 UPTC 1018 which had decided the matter under S.35 and held that the delay beyond the period prescribed under the said section in filing the appeal is condonable. Section 29(2) and S.5 of the Limitation Act have not been specifically excluded under S.35 of the Central Excise Act, 1944 and the High Court held "S.5 read with S.29(2) are applicable even in the case where there is a time limit prescribed by Special Act." The High Court of Allahabad while coming to the said conclusion took in to consideration the following judgments:

(1).Mst. Katiji's case (Supra) of the Apex Court

(2).Eureka Forbes Ltd. V. UOI

(3). (1998)98 ELT 591,

(4). 2002 UPTC 333 Darshan Tent House V. C.T.T,

(5). 1990 -TMI - 44921 - (SUPREME COURT OF INDIA) ITC Ltd. V. UOI,

(6).CMWP No. 3650 of 1995 (Del.) Eureka Forbes Ltd. V. UOI.   

In the case of Mst. Katiji the Supreme Court very aptly allowed the leave to appeal and that the same to be disposed of on merits after granting the appeal to be registered thereby condoning the delay of fifty seven days in a case under the Code of Criminal Procedure Code, 1973 after relying on some fourteen cases having bearing on the judgment. In this case single judge of Gauhati HC Kohima refused to condone the delay by rejecting the application filed under Section 5 of the Limitation Act, 1963 on the ground that it is the duty of the litigants to file an appeal before the expiry of the limitation period. In New India Insurance Co. Ltd. Case [1975 (2) SCC 840] the court held that discretion given by S.5 should not be defined or crystallised so as to convert a discretionary matter into a rigid rule of law. The expression sufficient cause should receive a liberal construction. It was observed that true guide for a court to exercise the discretion under S.5 is whether the appellants acted with reasonable diligence in prosecuting the appeal as held in Brij Inder Devi Jain ILR (1918) 45 Cal 94 (PC) and in AIR1969 SC 575 a Bench of three Judges had held that unless want of bona fides of such inaction or negligence as would deprive a party of the protection of S.5 is proved, the application must not be thrown out or any delay cannot be refused to be condoned. A delayed pursuit of remedy by a litigant on account mistake of counsel, the condonation is grantable held in Concord of India Insurance Co. Ltd. [1979 (4) SCC 365] but the delay should be bona fide as held in Lala Matu Din's case [1969 (2) SCC 770]. It was held in State of Kerala V. E.K. Kuriyipe [1981 Supp SCC 72] sufficient cause for condonation of delay is a question of fact depending upon the facts and circumstances of the case. But if there is a grave miscarriage of justice in not granting the condonation then it would be ground for condonation of delay as held in O.P.Kathpalia V.Lakhmir Singh [1984 (4) SCC 66]. The court should not adopt an injustice-oriented approach in rejecting the application for condonation of delay as held in Prabha V. Ram Prakash Kalra [1987 Supp SCC 339]. In State of Haryana V. Chandra Mani and Ors. And Special Tehsildar, Land Acquisition, Kerala V. K.V. Ayisumma that adoption of strict standard of proof sometimes fail to protect public justice, and it would result in public mischief by skilful management of delay in process of filing an appeal. Significant highlights of the decision were as under:

Length of delay is immaterial but its shortness is a circumstance in exercise of discretion by Court- Pragmatic approach is required and not the technical detection of explanation of every day's delay-Case should be heard on merits unless it is hopelessly time barred.[ paras 10,17].

Some latitude is permissible due to red tape in Government functioning and also on account that if appeal is dismissed, public interest suffers.

When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. There is no presumption that delay is occasioned deliberately or on account of culpable negligence or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk. Judiciary is not respected on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so. Making a justice-oriented approach from this perspective, there was sufficient cause for condoning the delay in the institution of the appeal.

RECENT GLEANINGS OF JUDGMENTS:

In CCE Ludhiana V. M/S. Rajit Paints Ltd. It was held that in the absence of any clause condoning the delay for showing sufficient cause after the prescribed period, there is complete exclusion of S.5 of the Limitation Act. Therefore the appeal has to be held time barred by limitation. The reference to the judgment of the Apex Court in CCC & E V Hogno India (P) Ltd. was also made. 2009-TMI-34352 (Punjab & Haryana HC). In T.Prabhakaran Rao V. CCE Hydrabad-III a delay of eight years was condoned on different set of facts. The OIO was stated to be received by the party late for which the party produced its sworn affidavit and no acknowledgment of the party was produced by the department except the proof of registered post. The citation of Margra Industries Ltd. V.CC New Delhi 2006 -TMI - 656 - CESTAT, NEW DELHI was relied besides the decision in Reliance Telecom Ltd. V. CC New Delhi 2004 (172) ELT 86 (TRB.Del.)

In Singh Brothers case no. Appeal (Civil) 5949 of 2007 (SC) the plea that the High Court has the power to condone the delay was not accepted even after the reliance having been placed on the judgment in ITC Ltd. V. UOI (1998 (8) SCC 610) before the High Court. The Apex Court distinguished the peculiar circumstances and background facts of the ITC case stating "In that case there was no law declared by this Court that even though the Statute prescribed a particular period of limitation, this Court can direct condonation. That would render a specific provision providing for limitation rather otiose. In any event, the causes shown for condonation have no acceptable value. In view of the matter, the appeal deserves to be dismissed which we direct." In CCE V. Punjab Fibres Ltd. 2008 -TMI - 3023 - SUPREME COURT OF INDIA the Supreme Court held that the High Court has no power to condone delay in filing of a reference application under section 35H(1) of Central Excise which pertained to S.35G of the CEA, 1944. The same was the view of the Bombay High Court in the case of CCE Pune-II V. Shruti Colorants Ltd. 2009 -TMI - 32248 - HIGH COURT BOMBAY. However a contrary judgment was reported on 19th of December, 2008 by the same Court in CCE V. Shree Rubber Plast (P) Ltd. for an appeal filed under S.130 of Customs Act, 1962 and or S.35G of CEA, 1944 to appeal filed stating that S.5 of the Limitation Act would be applicable-when a statute is silent, the presumption is not drawn automatically about the exclusion of S. 29(2) or for that matter of S.5 of the Limitation Act. Hence the appeal stands restored to file.   

In another case of Delta Impex V. CC (AUC), New Delhi decided by Delhi High Court 2004 (173) ELT 0449 (Del.) where the delay pertained to S.128 of the Customs Act, 1962 where a delay of more than thirty days was there after the period of sixty days from the date of communication of order. The delay was sought to be condoned on medical grounds but the appeal was dismissed as time barred even though the Commissioner was fully aware of the sufficient cause. The Tribunal also affirmed that the Commissioner was not competent to condone the delay relaying on the decision in the case of Abhshek Auto Industries V. CC Mumbai(Import) 2003 (160) 0695 (T). The learned counsel also called in aid S.5 read with S.29(2) of the Limitation Act, 1963 for condonation. The single judge case of Jai hind Bottling Co (P) Ltd. decided by Allahabad HC was also cited by the appellants though Andhra HC case of Shanti Alloys Pvt. Ltd. V. CCE Hyderabad reported in 1999 (109) ELT 79 cited against the assessee stated that in view of the specific provision under S.35(1) of the Act, delay beyond 90 days cannot be condoned. The right to appeal is a statutory right but it that does not mean that there cannot be any restriction on that right to be exercised within the statutory period and Parliament has the power to put restriction on that right by making legislation unless the same is exercised within the stipulated period. The Customs Act, 1962 is a complete Code and governs the matters provided by it and the provision of S.5 of the Limitation Act, 1963 called in aid to supplement the provision of the Act which is a special law with the nature and remedies provided therein. The case of Doaba Co-operative Sugar Mills 1998 (037) ELT0 478 (SC) the Supreme Court pointed out that authorities functioning under the Act are bound to by the provision of the Act. If the proceedings are taken under the Act by the department, the provision of limitation prescribed in the Act will prevail. In the aforesaid case the Court also referred the case of Mills India Ltd. V. AC of Customs reported in 1987 (037) ELT 0641 (SC) and pointed out that the customs authorities acting under the Act were bound by the period of limitation provided in the relevant provisions of the Customs Act, 1962. The word s "expressly excluded" used in S. 29 (2) of the Limitation Act, 1963 refers to the exclusion by express words i.e by express reference and not by logical process of reasoning and from S4 to S.24 both inclusive also refer to S.29 (2). But the provisions of S.128 of the Customs Act, 1962 clearly mentions that condonation can be made for 30 days subject to the satisfaction and not beyond and therefore S.5 of the Limitation Act, 1963 is excluded as specific provision is made. However this view is contrary to the views expressed in Jai Hind Bottling case (Supra) of Allahabad HC. In the case of Parson Tools & Plant 35 STC 413 Supreme Court held that the for filing of a particular application under a special statute is prescribed in clear terms and if the same is extendable by sufficient cause being shown then maximum to a specified time-limit and no further. The legislature did not after due application of mind incorporated the provision of S.5 of the Limitation Act, 1963 in the Sales Tax and the same cannot be imported into it by analogy. The Court laid down that the taxing authorities are not "Courts" and therefore S.5 of the Limitation Act, 1963 cannot be invoked as that sections empowers the Court to extend the period of limitation on being satisfied. In this case of Parson Tools S. 14(2) of the Limitation was sought to be invoked but the Court observed that the said section cannot be invoked for the purpose of prosecuting an application under S.68 of the UP Sales Tax rules, 1948 for setting aside an order of dismissal of appeal in default in computing the period of limitation by filing a revision under S.10 of the UP Sales Tax Act, 1948. Appellate authorities and the Judge(Revision) are merely administrative tribunals. Maxwll on Interpretation of Statute in XI Edition states, "The Will of the legislature is the supreme law of the land and commands perfect obedience". Somewhat same principles laid down in a case under M.V.Act, 1939 by SC while it examined the provisions of S. 58(2) in the case of Mohd. Ashfaq V. STAT AIR 1976 SC 2116. The Delhi High Court therefore, rejected the petition in Delta Impex case holding that Commissioner (Appeals) had no power to condone the delay beyond the extended period of 30 days from the expiry of the period within which the appeal ought to have been filed. Similar views were expressed by division Bench of Delhi HC in M.R.Tobacco V. UOI reported in 2004 (178) ELT 137 but the stay was granted to by the CESTAT, Principal Bench in the case of UP State Irrigation Workshop Division V. CCE, Allahabad 2006 (202) ELT 0655 (Tri.Delhi) holding that appeal raises highly debatable issue. 

FINANCE ACT 2009 AMENDMENT:

S. 35G(9) of CEA, 1944 has been amended to stipulate that the provision of Code of Civil Procedure, 1908 relating to appeals to High Court shall as for as may be apply in the case of appeals under the section. In this respect the circular of legal section of MOF, DOR is relevant bearing no. 888/8/2009 dated 21/5/2009 on S.35H and S.35G of CEA, 1944.

S.130 and S.130A of Customs Act, 1962 are pari- material to S.35G/35H of the CEA, 1944 and the Finance Act, 2009 has also amended those sections. Now the High Courts have the powers to condone the delay beyond the stipulated period on sufficient cause being shown for such delay. The circular of the department bearing number-895/15/2009 CX dated 27/8/2009 is also relevant. The sections have been amended since the date of insertion of those sections namely with effect from 1st July, 2003 for S.35G and 1st of July, 1999 in respect of S.35H.

In the budget for 2010-11 too an amendment to S.260A of the Income Tax Act, 1961 is sought read with Section 49 of the Finance Bill, 2010 so as to empower the High Court to admit an appeal after stipulated period of one hundred twenty days referred to S.260A (2) clause (a) if the Court is satisfied that there exists sufficient cause for not filing the appeal within the period specified. This amendment after the passing of the Bill shall appear as S.260A (2A) in the I. Tax Act, 1961 and to be operative retrospectively from 1st day of October, 1998. S.256 is also like wise amended to the same effect by S.48 of the Finance Bill, 2010 with effect from 1st of June, 1981and after amendment the section shall stand as S.256 (2A) of the Act. There had been growing view that S.35 of CEA,1944 is peri-materia to S.256 and S.260A of the Income Tax Act, 1961. However in the case of CCE V. Arun Asher it was held that the judgment of Full Bench in Velingkar Brothers 289 ITR 382 (Bom) that the Limitation Act applies to appeals filed under S.260A of the Income Tax Act, 1961 can not be termed as correct exposition of law in the face of judgment in the case of Singh Enterprises V. CCE 2008 (221) ELT 163 (SC) where the Apex Court took the view that in the absence of statutory provisions for condoning the delay the recourse to inherent powers would not be permissible. 

CONCLUSION:

The matter of condonation is now finally settled by virtue of amendments that have been incorporated in Central Excise Act and Customs Act made retrospectively but the step motherly treatment that is made to the S.35 of CEA, 1944 and S.128 of Customs Act, 1962 is highly deplorable. It appears that the Finance Minister has just glossed over the ramifications of not amending the said section because the basic question relates to the right of the High Courts in condonation of delays in entertainment of appeals beyond the stipulated period. The contrary positions in different sections cannot be allowed to co-exist on same set of facts prevailing.

This is a hard fact that the department is bound to suffer more than the assessee because of the long delays that take place in obtaining permissions and movement of files for decisions of the appropriate authorities.

It is rightly said that the right of appeal being a statutory right can be circumscribed by conditions in the grant. Right to appeal is neither absolute right nor an ingredient of natural justice as held in Vijay Prakash D. Mehta 1989(39) ELT 178(SC).

Is it not a travesty of law that substantive right of appeal of a party is assailed as one appeal against an administrative action or order in original is not allowed to examine if the law is correctly applied by the decision making authority failing which the order how so ever harsh come to be stay notwithstanding the incorrect position of law expounded by the show cause issuing authority. The Administrative Law by Wade also suggest the same and the citation held true in Ridge V. Baldwin.

The current anomalous position of law in not amending S.35 is bound to lead to desultory situation and it is but in fitness of things to amend the section without involving colossal waste of precious time and legal cost. The initially views of Courts have equal force where the substantial justice when pitted against technicalities had found favour with them.