STRICTURES AGAINST ‘CESTAT’ /DEPARTMENTAL OFFICERS

[Mr. M. GOVINDARAJAN]

In taxation matters there are two tier systems of judicial proceedings.   The first tier consists of the Departmental Officers and the second tier consists of quasi judicial Tribunals and judiciary bodies of High Court and Supreme Court.  The adjudication and appeal are also treated as quasi judicial functions.   The Adjudicating authority and the first appellate authority are Departmental Officers.   The provisions of tax laws and rules prescribes procedure for dealing with the adjudication as well as appeal  by the first appellate authority.   The Tribunals is mostly the second appellate authority and in some case it would be first appellate authority and the procedures for the conduct of the Tribunal and rules are separately framed for the functioning of the Tribunals.   The Quasi judicial bodies are required to adopt the procedure given in the enactments and to adopt the principles of Natural Justice and use the discretionary powers given to them rationally.   Omission of anything will attract the strictures of higher fora.   In this article the circumstances under which strictures have been passed against CESTAT as well as Departmental Officers.

Strictures against CESTAT

Exercise of discretionary power

In ‘Hindustan Petroleum Corporation Limited V. Commissioner of Central Excise’ – 2013 (11) TMI 1575 - KARNATAKA HIGH COURT the department raised demands on issues settled by Supreme Court.   The assessee is forced to prefer statutory appeal to get relief from Judicial Forum.  The Tribunal also failed to take note of the decision of the Supreme Court and its own decisions before ordering 50% of deposit.  The discretion power is not properly exercised.   The High Court cannot be a silent spectator.  The High Court allowed the appeal and set aside the impugned order.

In ‘Commissioner of Central Excise, Mumbai- III V. Emco Limited’ – 2015 (8) TMI 200 - SUPREME COURT it was held that the perfunctory manner in which the appeal of the assessee was allowed by the Tribunal cannot be countenanced.  If the Tribunal was confirming the decision of the authority below, may be detailed discussion was not required as the reasons given in detail could be found in the order appealed against, though even in such a case brief reasons are to be given by the Tribunal, in particular, to meet the arguments advanced by the appellant while challenging such an order.   In this case there is a detailed discussion in the order of the Commissioner on the facts of the case.   Those facts are not averted to or dealt with.   The decision of the Commissioner is overruled with single observation that the case is covered by the judgment in ‘Escorts JCB Limited’ without discussing as to how it was so covered.  The Supreme Court set aside the order of the Tribunal and remitted the case back to the Tribunal for fresh consideration.

Finding fault with other members

In ‘Sans Electro Equipments Private Limited V. Union of India’ – 2015 (6) TMI 861 - BOMBAY HIGH COURT the High Court held that there should be harmony, co-ordination and co-operation between Members, particularly in dealing with revenue matters.   The difference of opinion essentially ought to be on issues, construction of legal provisions and interpretation of law.   On recording of facts and matters in connection with, Members should not differ repeatedly.   If facts are undisputed and agreed upon by parties and present legal issues for resolution, those deserve prominence.   One Member should not have attitude of finding fault with other while dealing with contentions of parties and essentially on facts.   In this case the difference of opinion was formulated after four months of final order and despite several hearings, no order has been passed by the third Member to whom the matter was referred to.  As the third Member had not rendered the final opinion, in the interest of service, the High Court quashed the impugned order.

Imposition of penalty without referring to provisions

In ‘Chandrakant Thakkar V. Commissioner of Customs (Exports)’ – 2015 (3) TMI 778 - BOMBAY HIGH COURT the show cause notice alleged isolation of Handling of Cargo in Customs Area Regulations, 2009 and Section 8(b) and 141(2) of the Customs Act, 1962.   The Tribunal imposed penalty only under Section158 by single paragraph reasoning without referring to other provisions of the Act and regulations specified in the show cause notice.  The High Court held that the Tribunal failed to apply its mind to most important and crucial factors regarding imposition of penalty under Section 158.  It was especially required as imposition of penalty could result in suspension of approval or withdrawal of it or non renewal thereof.

Strictures against Department Officers

Delay in adjudication

In ‘Lanvin Synthetics Private Limited V. Union of India’ – 2015 (9) TMI 291 - BOMBAY HIGH COURT show cause notice was issued in 1997.   The case has not been adjudicated till June 2015.   There is a delay of 18 years.   The High Court felt that it is disturbing state of affairs.   The onus is on the superior to ensure timely adjudication before records are destroyed or lost.  The public money involved in such litigations and non adjudication is detrimental to public interest.  The Courts cannot be silent spectator to such state of affairs.

In ‘Lanvin Synthetics Private Limited V. Union of India’ – 2015 (8) TMI 387 - BOMBAY HIGH COURT there was no adjudication for more than 18 years.   The entire of amount of demand was paid under protest prior to issue of show cause notice.   For the non adjudication the Adjudicating Authority pleaded that records are not traceable despite their best efforts and requests for copies of documents from petition for adjudication.   The High Court did not convince on the explanation offered.   The Revenue objected belated approach by petitioner to High Court, is not sustainable for grant of relief to the petitioner.   The High Court quashed the show cause notice for non adjudication.   Non mentioning of time in statue for adjudication is not in the meaning that proceedings can be concluded at will and fancies of the Department.  Such proceedings are required to be concluded in reasonable time.   Delay in adjudication on the part of departmental officers resulting in loss to exchequer as show cause notices quashed by the High Court.  The Secretary, Ministry of Finance was asked to initiate departmental and other legal proceedings to bring to book all guilty officers.

Principles of Natural Justice

In ‘General Mills India Private Limited V. Union of India’ – 2014 (9) TMI 699 - BOMBAY HIGH COURT  the High Court held that the Deputy Commissioner had not implemented and carried out the orders and directions of the court which were specific and clear.   The High Court did not see how the approach of the officer in this case can be countenanced even in the present matter.  When he is aware of the requirement of a personal hearing before a adverse order is passed, then the impugned order shows either a uncalled for or undue enthusiasm which could safely be termed as arrogance as well.  The High Court did not approve of such a hasty course and quashed and asset aside the impugned order.   The High Court further directed that the refund claim of the petitioners shall be directed in accordance with law meaning thereby after hearing the petitioners and giving them an opportunity of producing the relevant material and reasoned order shall thereafter be passed by the authority and uninfluenced by the earlier actions.

Service of order

The tax laws prescribe the procedure for service of notice/orders in their respective Acts.  It is settled law that if the manner of doing a particular act is prescribed in statute, act must be done in that manner or not at all.  In ‘Saral Wire Craft Private Limited V. Commissioner of Customs, Central Excise and Service Tax’ – 2015 (7) TMI 894 - SUPREME COURT the Supreme Court held that the Inspector who ostensibly serviced copy of adjudication order, ought to have known requirement of statutory provisions of service of orders.   He should have served order either on appellant or his authorized agent by seeking their acknowledgement and not on unauthorized kitchen boy.  The Inspector of Central Excise has statutory functions to fulfill and not perfunctory.

Failure to follow the precedents

In ‘Sunil Sponge Private Limited V. Commissioner of Central Excise & Service tax, Raipur’ – 2015 (9) TMI 1336 - CESTAT NEW DELHI it was held that once the law is declared all the authorities below are expected to follow the same in deciding various matters.   If such declaration of law by the Larger Bench or by any other decision of the Tribunal is ignored by the authorities, deciding on the issue, the entire purpose of declaring the law gets defeated.   Such an action on the part of the lower authorities leads to unnecessary litigation involving litigation cost on the part of the appellant as also unnecessary burdening the higher authorities and increasing the pendency apart from the fact that the same shows the scant respect for the higher judicial authorities.   The same also reflected upon attitude and anxiety of the lower authorities to confirm the demands at any costs, without appreciating the law declared by the judicial forum, which behaviors cannot be appreciated and has to be depreciated.   Since the Commissioner (Appeals) has not followed the law declared by the Larger Bench the Tribunal deemed it fit to impose an exemplary cost of ₹ 2500/- for burdening the appellant for unnecessary litigation costs, for burdening the Tribunal as also for showing scant respect for the law declared by the higher authorities.

Tracking of cases

In ‘Commissioner of Central Excise, Thane-II V. Milton Polyplas (I) Private Limited’ – 2015 (9) TMI 1337 - BOMBAY HIGH COURT filing appeal to High Court, each Commissionerate choose advocates to represent them, to issue valakatnama and have a legal cell headed by the Assistant Commissioner level officer to keep track of cases.   Nodal officers are also there to present in High Court.   However despite this position the High Court waited on several occasions without indication as to who will argue appeals on behalf of Commissioner and no decision has been taken on replacement of Advocates.  Many old matters are pending for more than 10 years having servious revenue implication.   When complaints are made in this regard they are not taken up and given priority.   The High Court directed higher level officers in the office of the Chief Commissioner and each Commissioner to apply their mind so as to enable the High Court to take up old appeals for hearing and disposal.

Delay in filing appeal

In ‘Commissioner of Service Tax V. Glaxo Smithkline Pharmaceutical Limited’ – 2015 (8) TMI 904 - BOMBAY HIGH COURT the High Court passed strictures against the Department for delay in filing restoration applications.   There was an extreme delay of 947 days in filing application for restoration of appeal.   There is gross negligence by Department.  The delay is not condonable.  The High Court directed the senior officers in charge of the matter to take not and proceed against concerned persons.

Conclusion

The above are only examples.  There are so many cases in which the higher authorities pass strictures against CESTAT and the Departmental Officers.  Following the judicial discipline by the concerned authorities only will reduce such strictures.