2007 (5) TMI 21 - SC - Central Excise

Maintainability of the appeal - Territorial jurisdiction of the High court - Determination of the situs of the High Court for appeals under Section 35G(1) of the Central Excise Act - term cause of action - HELD THAT - We may notice some incongruities if the contention of the appellant is taken to its logical conclusion. It is possible that in a case of emergency while the Tribunal holding its sitting at Allahabad or Bombay may entertain a matter where the cause of action had arisen at Delhi. But that would not mean that when the Tribunal pronounces its judgment at Allahabad or Bombay although the cause of action had initially arisen at Delhi the Delhi High Court would have no jurisdiction in relation thereto. The situs of a Tribunal may vary from time to time. It could be Delhi or some other place. Whether its jurisdiction would be extending to 3 States or more or less would depend upon the Executive order which may be issued. Determination of the jurisdiction of a High Court on the touchstone of Sections 35G and 35H of the Act in our opinion should be considered only on the basis of statutory provisions and not anything else. While defining High Court in terms of Section 36B of the Act the Parliament never in our opinion contemplated to have a situation of this nature. An appeal may have to be filed by the Commissioner of Central Excise. His office may be located in a different State. If he has to prefer an appeal before the High Court he would be put to a great inconvenience whereas the assessee would not be. Keeping in view the expression cause of action used in clause (2) of Article 226 of the Constitution of India indisputably even if a small fraction thereof accrues within the jurisdiction of the Court the Court will have jurisdiction in the matter though the doctrine of forum conveniens may also have to be considered. Thus we are of the opinion that the High Court was correct in its view. These appeals therefore being devoid of any merit deserve to be dismissed.

Summary

The core legal question considered by the Court was the determination of the appropriate situs of the High Court in which appeals lie under Section 35G(1) of the Central Excise Act, 1944, particularly where the Central Excise and Service Tax Appellate Tribunal (CESTAT) exercises jurisdiction over multiple States. The issue arose from an appellant assessed in Lucknow, whose appeal was heard by the CESTAT in New Delhi, and the subsequent question whether the appeal under Section 35G should be entertained by the Delhi High Court or the High Court having territorial jurisdiction over the place of assessment.

Related questions included:

• Whether the situs of the appellate Tribunal or the situs of the original Assessing Authority determines the territorial jurisdiction of the High Court for appeals under Section 35G.
• The applicability and effect of sub-section (9) of Section 35G, which incorporates the Code of Civil Procedure (CPC) provisions mutatis mutandis for appeals under this section.
• The relevance of the "cause of action" doctrine and its applicability in determining High Court jurisdiction in such appeals.
• The impact of constitutional provisions, particularly Article 226(2) and Article 227, on the territorial jurisdiction of High Courts in appeals arising from multi-State Tribunals.
• The potential for forum shopping and judicial anarchy if multiple High Courts could entertain appeals arising from the same Tribunal orders.

Issue-wise Detailed Analysis

1. Determination of Territorial Jurisdiction of High Court under Section 35G(1) of the Central Excise Act

Legal Framework and Precedents: Section 35G(1) provides for appeals to the High Court from orders passed by the Appellate Tribunal, subject to the High Court being satisfied that the case involves a substantial question of law. Sub-section (9) states that the provisions of the CPC relating to appeals to the High Court shall apply mutatis mutandis to appeals under this section. Prior to 1999, references to the High Court were made by the Tribunal under Section 35G, but post the Finance Act, 2003, appeals lie directly to the High Court.

Precedents from the Income Tax domain, such as Commissioner of Income Tax, Madras v. S. Sivaramakrishna Iyer and Seth Banarsi Dass Gupta v. Commissioner of Income Tax, were considered, where it was held that the High Court having jurisdiction over the territory of the Assessing Officer would have jurisdiction to entertain appeals or references. Similarly, decisions under the Customs Act and Central Excise Act, including Bombay Snuff Pvt. Ltd. v. Union of India, were analyzed.

Court's Interpretation and Reasoning: The Court rejected the appellant's contention that the situs of the Tribunal alone determines the jurisdiction of the High Court. It was held that the situs of the Assessing Authority (the place where the original assessment was made) is the appropriate factor for determining the territorial jurisdiction of the High Court. The Court reasoned that if the situs of the Tribunal were to be the sole criterion, it would lead to judicial anarchy and forum shopping, as an appellant could choose any High Court to take advantage of favorable precedents, thereby undermining the binding effect of High Court decisions within their territorial jurisdiction.

The Court emphasized that the doctrine of dominus litis (the party having the choice of forum) and the doctrine of situs of the Tribunal are inconsistent if applied together. The former implies multiple forums available to the litigant, while the latter restricts appeal to a single High Court. The Court preferred the latter to avoid multiplicity of forums.

Key Evidence and Findings: The Tribunal in question exercises jurisdiction over Uttar Pradesh, Delhi, and Maharashtra, each having its own High Court. The appellant's business and assessment were in Lucknow (Uttar Pradesh). The appeal was heard in Delhi, but the Delhi High Court declined jurisdiction based on earlier precedent. The Court found that allowing appeals to be filed in the High Court at the Tribunal's seat would cause inconsistency and forum shopping.

Application of Law to Facts: Since the assessment was made in Lucknow, the Court held that the appeal should lie before the High Court having territorial jurisdiction over that place, i.e., the High Court at Allahabad (which exercises jurisdiction over Lucknow). The Delhi High Court was held to lack jurisdiction despite the Tribunal's seat being in Delhi.

Treatment of Competing Arguments: The appellant argued reliance on sub-section (9) of Section 35G and the cause of action doctrine under Article 226(2) of the Constitution, which allows a writ petition to be filed where a cause of action arises wholly or partly. The Court distinguished writ jurisdiction from statutory appeal jurisdiction, emphasizing that the latter must be governed by the statute and not by general principles of cause of action. The Solicitor General's submission that the situs of the Assessing Officer is the determinative factor was accepted.

Conclusion: The Court concluded that the High Court having jurisdiction over the place where the original assessment was made is the appropriate forum for appeals under Section 35G. The appeal before the Delhi High Court was therefore not maintainable.

2. Applicability of the Cause of Action Doctrine and CPC Provisions under Section 35G(9)

Legal Framework and Precedents: Clause (9) of Section 35G refers to the application of CPC provisions relating to appeals to the High Court. The appellant contended that under Section 100 of the CPC, a second appeal lies to the High Court from the first appellate court's decree, and that the cause of action doctrine under Article 226(2) applies.

Court's Interpretation and Reasoning: The Court held that the cause of action doctrine under Article 226(2) and the CPC cannot be mechanically applied to determine the territorial jurisdiction of High Courts in statutory appeals from multi-State Tribunals. The CPC contemplates territorial jurisdiction of courts within States, and a District Judge cannot exercise jurisdiction beyond his territorial limits unless specifically provided by law. The Court observed that the statutory scheme under the Central Excise Act does not contemplate multiple High Courts entertaining appeals from the same Tribunal order.

Key Findings: The Court noted that the cause of action doctrine applies to suits and writ petitions but is not suitable for determining jurisdiction in statutory appeals where the statute prescribes a specific forum. It also observed that the doctrine of dominus litis (party's choice of forum) would cause anomalies if applied here.

Application of Law to Facts: The appellant's reliance on the cause of action doctrine to file the appeal before the Delhi High Court was rejected. The Court emphasized that the statutory provisions and the territorial jurisdiction of the Assessing Authority are the proper touchstones.

Treatment of Competing Arguments: The Court distinguished the cause of action doctrine as applicable in writ jurisdiction and civil suits from the statutory appeal jurisdiction under the Central Excise Act.

Conclusion: The cause of action doctrine and CPC provisions do not override the statutory scheme prescribing the territorial jurisdiction of the High Court for appeals under Section 35G.

3. Impact of Multi-State Jurisdiction of the Tribunal and Potential for Forum Shopping

Legal Framework and Precedents: The Tribunal exercises jurisdiction over multiple States, each with its own High Court. The Court referred to decisions such as Suresh Desai & Associates v. CIT and Commissioner of Central Excise v. Technological Institute of Textile, which caution against allowing appeals in multiple High Courts from the same Tribunal order.

Court's Interpretation and Reasoning: The Court held that allowing appeals to be filed in any High Court where the Tribunal sits or hears the case would lead to conflicting decisions and judicial anarchy. It would enable an appellant to "shop" for a forum with favorable precedents, undermining the principle of binding precedent within territorial jurisdictions.

Key Findings: The Court emphasized the need for uniformity and consistency in judicial decisions and that the territorial jurisdiction of the original adjudicating authority should determine the appellate forum.

Application of Law to Facts: Since the assessment was made in Lucknow, the appeal should lie before the High Court having jurisdiction over that territory, not the High Court at the Tribunal's seat in Delhi.

Conclusion: The Court rejected the appellant's contention and upheld the Delhi High Court's dismissal of the appeal for lack of territorial jurisdiction.

4. Interpretation of Constitutional Provisions and Relevant Statutes

Legal Framework and Precedents: The Court examined Article 226(2) and Article 227 of the Constitution, which confer writ and supervisory jurisdiction on High Courts within their territorial limits. It also considered Section 20(c) of the CPC, which provides that suits shall be instituted where the cause of action arises wholly or in part.

Court's Interpretation and Reasoning: The Court held that while Article 226(2) and Section 20(c) allow for jurisdiction where a cause of action arises partly within the territory, these provisions do not apply to statutory appeals under Section 35G of the Central Excise Act. The Court reasoned that the statutory scheme must prevail, and the territorial jurisdiction of the High Court over the place of assessment is determinative.

Key Findings: The Court noted that the phrase "cause of action" in writ jurisdiction and civil suits is not analogous to the determination of appellate jurisdiction under statutory provisions.

Application of Law to Facts: The appellant's argument based on cause of action was rejected in light of the statutory scheme.

Conclusion: Constitutional and procedural provisions relating to cause of action do not govern the territorial jurisdiction of High Courts in appeals under Section 35G.

5. Effect of Amendments and Legislative Intent

Legal Framework and Precedents: The Finance Act, 2003 amended Sections 35G and 35H of the Central Excise Act, substituting the reference mechanism with direct appeals to the High Court. The Court examined the legislative intent behind these amendments.

Court's Interpretation and Reasoning: The Court held that the amendments did not intend to alter the territorial jurisdiction of High Courts but only changed the mode of challenge from reference to appeal. It emphasized that Parliament did not contemplate appeals being entertained by multiple High Courts at the appellant's choice.

Conclusion: The amended provisions maintain the principle that appeals lie before the High Court having jurisdiction over the original adjudicating authority.

Significant Holdings

"If the decision of the High Court in the aforementioned question is taken to its logical conclusion, the same would lead to a great anomaly. It would also give rise to the problem of forum shopping. An assessee affected by an assessment order in Bombay may invoke the jurisdiction of the Delhi High Court to take advantage of the law laid down by it which may be contrary to judgments of the High Court of Bombay. This cannot be allowed."

"In such a situation, in our opinion, the High Court situated in the State where the first court is located should be considered to be the appropriate appellate authority."

"The doctrine of dominus litis or doctrine of situs of the Appellate Tribunal do not go together. Dominus litis indicates that the suitor has more than one option, whereas the situs of an Appellate Tribunal refers to only one High Court wherein the appeal can be preferred."

"The cause of action doctrine may not be invoked in a case of this nature."

"The provisions of the Code of Civil Procedure, 1908, do not contemplate a situation where a court exercises jurisdiction beyond its territorial limits save and except in matters where the law specifically provides therefor."

"The High Court having jurisdiction over the place where the original assessment was made is the appropriate forum for appeals under Section 35G."

"The phraseology used in Section 20(c) of the Code of Civil Procedure and Clause (2) of Article 226, being in pari materia, the decisions of this Court rendered on interpretation of Section 20(c) of CPC shall apply to the writ proceedings also. However, the expression 'cause of action' used in clause (2) of Article 226 of the Constitution of India is not applicable to the determination of the appellate jurisdiction under Section 35G."

The Court finally dismissed the appeals for lack of territorial jurisdiction of the Delhi High Court, affirming that appeals under Section 35G must be filed before the High Court having jurisdiction over the place where the original assessment was made or where the adjudicating authority functions.