Appeal - not permitted on the basis of fresh evidence. - Some precautionary measures to avail justice in some circumstances.

[C.A. DEV KUMAR KOTHARI]

Reference and relevant link:

CCE, NAGPUR V. INDUSTRIAL SECURITY SERVICE [2007] 10 STJ 274 (CESTAT - Mumbai). [In the CESTAT, West Zonal Bench, Mumbai (Court No. III)]

Appeal No. ST/41/2006 in Order No. A/676/C-IV/SMB/2007,

decided on 03/04//2007,

decided by Shri M.V. Ravindran, Member (Judicial).

Summary: As a general rule we can say that appeal is decided by appellate authority based on material available to it. Therefore, further appeal can also be filed only on the basis of such material and not on the basis of new material. However, in some circumstances, by giving opportunity to all concerned parties a fresh material can be considered to render justice. The author explains that if a party to the case want to rely on some material which is yet to be obtained from external agencies or parties, it is desirable to request the appellate authority to keep in abeyance the disposal of appeal in meanwhile or to seek directions to lower authorities to reconsider the matter after such new material is made available. In absence of such plea taken before lower authorities, it would be difficult to keep matter alive and avail justice even by appeal before higher forum. 

Appeal by revenue:

In various specified situations, the revenue is entitled to file an appeal before higher forum against the order passed by a court or tribunal of lower forum. In case of every direct and indirect tax law we find provisions for appeal by tax payer and revenue.  Right to file an appeal is a statutory right and it is provided  for redressal of grievances or to seek relief against alleged denial of justice, reason of grievances or damages or injury caused or alleged  wrong done by lower authority or court.

Material before lower authority or court:

The lower authority or court passes an order based on the material brought on record or available on record by the appellant and respondents.  Usually appeal order is passed after hearing the parties to the suit or in any case after providing opportunity of hearing to the parties.  In case of order passed in absence of one or more parties (exparte orders) the material available on record and material brought to notice of the court by the party appearing before it (if any) are considered.

Therefore, the authority or court passes an order based on material available to it at the time of disposal of the case.  Naturally therefore, the parties can feel aggrieved only if the material available is not considered, is not properly considered or a wrong decision seems to have been passed.  A party can not be said to be aggrieved merely because some material, which was not on record has not been considered.  In such a case, reason to appeal arises only if the party to the suit can show that he was not provided sufficient opportunity of hearing.

Judgments having binding or advisory or persuasive value:

In this regard, however, the author feels that the court or appellate authority should consider any relevant precedent even if the party to the case could not place the same. This is for the simple reason that the taxpayer and even his counsel may not be aware of such judgments or orders because only few judgments are reported and come to knowledge of the taxpayer and his counsel. Furthermore, the taxpayer and /or his counsel may not be an expert in the field because they work for several enactments. Whereas, generally the authority or court dealing with the case are specializing in particular few enactments. The judges have also access to unreported judgments etc.  Judgments rendered subsequently are also relevant at the time of hearing and decision in higher forum.

Therefore, absence of a particular judgment or its reference on record before lower authority is not relevant to reject the appeal on the ground that judgment was not referred to before lower authority.  

Fresh material and evidences

In an appeal, the party to the suit cannot take a ground based on fresh evidence or material which was not placed before the lower authority or the court before such authority or court passed the order meaning thereby that an appeal cannot be based on fresh evidence.  As discussed in earlier paragraph, on the basis of fresh evidence, appeal may be preferred only if the authority or court did not allow sufficient time or opportunity to the party to file relevant material or evidence.  In that situation appeal can be filed on the ground that sufficient time was not allowed to file relevant material.  For example, suppose a party seeks further time and opportunity to furnish certain reports to be obtained from other concern, agency or authority or an expert and the lower court or authority does not grant such time then the party to the suit, who sought further time, can have grievance and therefore can file an appeal on this ground alone.  However, in absence of such a ground available to the party, further appeal may not be entertained at higher forum if appeal is based on fresh evidence.

Judgment of CESTAT, Mumbai

In CCE, NAGPUR V. INDUSTRIAL SECURITY SERVICE [2007] 10 STJ 27(CESTAT- Mumbai) a matter of appeal based on fresh evidence came for consideration.  The Tribunal found that when the Commissioner (Appeals) passed his order and reduced service tax liability, he passed order base don documents available. Certain documents which have been relied on by the revenue for filing an appeal before the tribunal were not available before the Commissioner (Appeals).

 The order of the adjudicating authority and the Commissioner (Appeals) were dated 24.03.2005 and 30.11.2005 respectively whereas the documents relied for filing the appeal i.e. certificates given by MSEB and Central Railway were issued in the month of February, 2006 i.e. after the Commissioner (Appeals) passed his order.  In such circumstances, the tribunal held that it is not open to the revenue to prefer appeal on the strength of fresh evidences, which were collected subsequent to the adjudication order and also the first appellate proceedings and on this ground alone the tribunal dismissed the appeal of the revenue.

Views of the author

It is noticed that before the Commissioner (Appeal), any plea was not taken or request was not made to the effect that the confirmations or certifications from MSEB or Central Railway were expected and were necessary for determination of tax liability. Revenue did not request to keep the matter pending. Revenue did not seek further time and requested for further opportunity to furnish such documents after obtaining them from MSEB and Central Railway. Had that plea be taken before the Commissioner (Appeals), the revenue could have taken a ground that the Commissioner (Appeal) was not justified in not allowing further time for furnishing such evidence.  It could be accepted that if such a plea was taken before the Commissioner (Appeal) then he could have either kept in abeyance disposal of the appeal if it was possible or he could have directed the adjudicating authority to consider the reports or certificates which the revenue may obtain from MSEM and the Central Railway Division and therefore, the position could have been kept open.  However, as such pleas were not taken before the Commissioner (Appeal), he passed his order based on the material available to him which could only be considered for further appeal and fresh evidence could not be taken.

An analysis of the decision of Tribunal:

The issue- service tax liability of the respondents on the security services provided by them to various government agencies.

The adjudicating authority has confirmed the demand of Rs. 3, 80,096 and imposed penalty of Rs. 7, 60,192 under section 78 of the Finance Act, 1994 and equivalent amount of penalty under section 76 of the Finance Act.

Before Commissioner (Appeals) the respondents produced certificates issued by chartered accountants, and Commissioner (Appeals) reduced tax from what was confirmed by the adjudicating authority.

The learned Commissioner (Appeals) while reducing liability has held that:

"the department has failed to bring on record evidence of realization of the billed amount on which the service tax demand has been confirmed and penalty imposed."

Against this observation the Revenue has filed an appeal in which they have relied upon the certificates issued by MSEB and by the Central Railway Divisional Office and submitted that the appellant had suppressed the value of the services provided by them in order to evade the service tax.

Certificate relied and filed along with the appeal shows that all these certificates were given by MSEB and Central Railway in the month of February, 2006.

Whereas the adjudicating order was passed by the adjudicating authority on 24/03/2005 and by the Commissioner (Appeals) on 30/11/2005 that is much before the certificates now relied on and filed before the Tribunal.

The Tribunal held that "Suffice to say; it is well settled law, that an appeal, if any, has to be on the same set of documents which were on record at the time of adjudication. It is not open for the Revenue to prefer appeal on the strength of fresh evidence, which were collected subsequent to the adjudication order and after the first appellate proceedings.  On this ground itself the appeal filed by the revenue is liable to be dismissed. The appeal is dismissed without going into any other grounds."

Lesson from the above judgment

What is applicable in case of appeal by revenue is also applicable in case of appeal by tax payers. Suppose in this case, based on certificates of external authorities or customers the tax payer expected further relief then he could have requested the Commissioner (Appeals) to allow further time or to keep disposal of appeal pending or at least to issue directions to revenue to re decide the issue after filing of such evidences.

In view of decision in this case, one can learn that whenever it is desirable to seek further time for better representation of the case or for furnishing of necessary documents, details or other evidence, it is always desirable that the party to the appeal should seek further opportunity or at least should point out that such further evidence which are yet  to be obtained are necessary for deciding the tax liability and it will take some time so further opportunity may be allowed and in meanwhile, the  appeal can be kept pending. In case appellate authority cannot or do not want to allow time then  as an alternative, party may seek  directions to the lower authority or court to consider such evidence so that matter is kept alive and does not come to the end.

Even after such plea is taken but appellate authority do not accept the same, the party to the appeal can plead denial of natural justice before further higher forum and can seek consideration of such material by such court at higher forum or can request for remitting the matter to lower authority to reconsider the matter in light of such new materials. 

Appeal/Security Service