2024 (5) TMI 1579 - AT - Central Excise

Rectification of mistake application - mistake apparent on the face of record or not - typographical error - appropriate forum - HELD THAT - It can be said that apart from making a distinction between what is being observed in the said order of Sterlight Industries India Limited 2019 (2) TMI 1249 - CESTAT CHENNAI which is extraneous to the facts on issue namely the operational distinction between Corporate Guarantee and Bank Guarantee no other reasoning was found in the said order to justify its conclusion whereas in Edelweiss Financial Services Ltd. 2022 (2) TMI 1359 - CESTAT MUMBAI the ratio that both Corporate Guarantee and Bank Guarantee are akin to each other is well accepted and taken as a ratio to give our findings in this order and only a typographical error that presence of one would mean presence of the other was noted to be apparently left out from the said observation. Rule of precedent dictates that if the reasoning of the order forms the ratio decidendi then Co-ordinate Bench and Subordinate Authority should follow the same to maintain judicial propriety. In the instant case there is no departure from the ratio of the judgment of Edelweiss Financial Services Ltd. is forthcoming and as the ratio in the judgment of Starlight Industries India Limited is found wanting and only a distinction between operational procedure is noted the findings are given by well differentiating/distinguishing those judgments that would not require a reference to the President for constitution of Larger Bench for the reason that instead of mitigating the grievance of the parties here it would cause undue hardship to them. If the Appellant has found the order to be a departure from judicial propriety this being an appealable order and taxability being one of the issues wherein appeal lies before the Hon ble Supreme Court alone in view of the provision contained in Section 35G read with 35L(2) of the Central Excise Act equally applicable to Service Tax matter it could have exercised its right to appeal instead of filing a rectification of mistake application without any mistake being apparent on the face of record. Conclusion - The miscellaneous petition is rejected as no error is noticeable to be apparent on the face of record and right to appeal before the Hon ble Supreme Court alone is available to the Appellant against the final order passed on dutiability to the parties aggrieved herein. Petition dismissed.

1. ISSUES PRESENTED and CONSIDERED

The Tribunal considered the following core legal questions:

(a) Whether the Tribunal's earlier finding that the Appellant had accepted the tax liability raised in the audit report for the period post 1-7-2012 requires rectification on the ground that the Appellant never accepted the demand, interest, and penalty but had contested the same from the beginning.

(b) Whether the Tribunal erred in not following the precedents set by coordinate benches in the cases of Sterlight Industries India Limited and Edelweiss Financial Services Ltd., and whether this non-adherence necessitated a reference to the President for constitution of a Larger Bench as per established judicial conventions.

(c) Whether the remedy of rectification of mistake application was appropriate in the absence of any apparent error on the face of the record, particularly when the appropriate remedy was to file an appeal before the Hon'ble Supreme Court under the relevant statutory provisions.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Acceptance of Tax Liability Post 1-7-2012

Relevant legal framework and precedents: The issue pertains to the interpretation of factual admissions or acceptances made by the Appellant in response to audit findings and show-cause notices, which form the basis for confirming tax demand. The principles governing acceptance of liability and its effect on adjudication are well established in tax jurisprudence.

Court's interpretation and reasoning: The Tribunal examined the language of the earlier order dated 22-8-2023, particularly paragraph 3, which stated that the Appellant had "accepted the tax liability" raised in the audit report for the relevant period. The Appellant contended that it had never accepted the demand but had consistently contested it.

However, the Tribunal referred to the show-cause notice and the Appellant's own reply thereto, which explicitly stated that, "to avoid dispute and buy peace," the Appellant discharged the service tax liability along with interest for the Corporate Guarantee Fee and Credit Protection fee for the period after 1-7-2012. This factual admission was deemed sufficient to conclude that the Appellant had accepted the tax liability, although the order did not use adjectives such as "voluntarily" or "willingly."

Key evidence and findings: The show-cause notice annexed to the appeal memo and the Appellant's reply thereto (Para A.8) were pivotal. They indicated payment of tax and interest, which the Tribunal interpreted as acceptance of liability for the specified period.

Application of law to facts: The Tribunal held that the factual record supported the conclusion that the Appellant had accepted the tax liability post 1-7-2012, and therefore, no rectification of the earlier order was warranted.

Treatment of competing arguments: The Appellant's argument that it never accepted the demand was rejected on the basis of documentary evidence. The Tribunal emphasized that the order's language was consistent with the evidence and did not require modification.

Conclusion: The Tribunal affirmed that the finding of acceptance of tax liability post 1-7-2012 stands and no rectification is necessary.

Issue (b): Non-adherence to Coordinate Bench Precedents and Necessity for Larger Bench Reference

Relevant legal framework and precedents: The doctrine of stare decisis mandates that coordinate benches follow the ratio decidendi of earlier decisions to maintain judicial propriety. However, exceptions exist where a precedent is found erroneous or inapplicable. The judgments of Sterlight Industries India Limited and Edelweiss Financial Services Ltd. represented coordinate bench decisions on the taxability and distinction between Corporate Guarantee and Bank Guarantee fees. Additionally, the procedure for referring matters to a Larger Bench is governed by judicial conventions and the precedent set in Gammon India and Mercedez Benz cases.

Court's interpretation and reasoning: The Tribunal analyzed the earlier order and noted that the Sterlight Industries decision was distinguished on factual grounds, specifically the operational distinction between Corporate Guarantee and Bank Guarantee. The Tribunal found the ratio in Edelweiss Financial Services Ltd. more applicable, which treated both guarantees as akin for tax purposes.

The Tribunal observed that the earlier order did not depart from the ratio of Edelweiss but merely distinguished Sterlight on facts. It held that such a distinction does not amount to a departure from judicial propriety requiring a Larger Bench reference.

Further, the Tribunal cited the Supreme Court's ruling in Maktul v. Manbhari, which permits departure from precedent to avoid grievous wrong, emphasizing judicial discretion in applying stare decisis.

Key evidence and findings: The Tribunal relied on paragraphs 7, 8, and 9 of its previous order and the relevant judicial precedents cited by both parties.

Application of law to facts: The Tribunal applied the principle that factual distinctions can justify differing conclusions without violating the rule of precedent. It also applied the principle that not every divergence necessitates a Larger Bench reference, especially if it avoids undue hardship.

Treatment of competing arguments: The Appellant argued for strict adherence to coordinate bench decisions and a Larger Bench reference. The Tribunal rejected this, emphasizing the need for pragmatic judicial administration and the permissibility of limited departures.

Conclusion: The Tribunal concluded that no Larger Bench reference was warranted and that its order was consistent with judicial principles.

Issue (c): Appropriateness of Rectification Application Versus Appeal Remedy

Relevant legal framework and precedents: The rectification of mistake under procedural law is intended to correct errors apparent on the face of the record and not to re-agitate substantive issues. The right to appeal against orders on taxability issues lies exclusively before the Hon'ble Supreme Court under Sections 35G and 35L(2) of the Central Excise Act, which are applicable to Service Tax matters.

Court's interpretation and reasoning: The Tribunal found no apparent error on the face of the record warranting rectification. It held that the Appellant's remedy against the final order on dutiability was to file an appeal before the Supreme Court, not a rectification application.

Key evidence and findings: The Tribunal relied on the statutory provisions governing appeals and the absence of any mistake in the order to deny the rectification petition.

Application of law to facts: The Tribunal applied the procedural law strictly, emphasizing that rectification is not a substitute for appeal and should not be used to circumvent the appellate process.

Treatment of competing arguments: The Appellant sought rectification as a means to challenge the order; the Tribunal rejected this as impermissible and premature.

Conclusion: The rectification petition was rightly rejected, and the Appellant's sole remedy lies in appeal before the Supreme Court.

3. SIGNIFICANT HOLDINGS

"...the order containing finding that 'Appellant had accepted the duty liability raised in the Audit report for the period post 1-7-2012' needs no rectification as not contrary to the evidence available on the record."

"...Rule of precedent dictates that if the reasoning of the order forms the ratio decidendi then Co-ordinate Bench and Subordinate Authority should follow the same to maintain judicial propriety. In the instant case there is no departure from the ratio of the judgment of Edelweiss Financial Services Ltd. is forthcoming and as the ratio in the judgment of Starlight Industries India Limited is found wanting and only a distinction between operational procedure is noted, we have given our findings by well differentiating/distinguishing those judgments that would not require a reference to the President for constitution of Larger Bench..."

"...Previous decisions should not be followed to the extent that grievous wrong may result; and accordingly the courts ordinarily will not adhere to a rule or principle established by previous decision(s) which they are convinced is erroneous. The rule of stare decisis is not so imperative or inflexible as to preclude a departure therefrom in any case..." (quoting Supreme Court in Maktul v. Manbhari)

"...No error is noticeable to be apparent on the face of record and right to appeal before the Hon'ble Supreme Court alone is available to the Appellant against the final order passed on dutiability..."

Core principles established include:

- Acceptance of tax liability can be inferred from payment and admissions in show-cause notices even if not expressly stated as voluntary.

- Coordinate bench decisions must be followed unless distinguished on facts or found erroneous; limited departures do not mandate Larger Bench reference.

- Rectification of mistake applications are not a substitute for appeals and require an apparent error on the face of the record.

- The exclusive appellate jurisdiction of the Supreme Court under specific statutory provisions must be respected.

Final determinations:

- The finding that the Appellant accepted tax liability post 1-7-2012 is upheld.

- No Larger Bench reference is required despite distinctions from coordinate bench decisions.

- The rectification application is rejected for lack of apparent error; the Appellant's remedy lies in appeal before the Supreme Court.

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