TMI Blog2000 (2) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... ect the second respondent to hear the stay application afresh after granting personal hearing to the petitioner. 3.W.P. No. 15141 of 1999 has been filed by M/s. Tapan Preci Tec Limited praying for the issue of a Writ of Certiorarified Mandamus to call for the records of the interim Order, dated 1-6-1999 passed by the second respondent in Appeal No. 380 of 1998 (M-III), quash the same and direct the second respondent to hear the stay application afresh after granting personal hearing to the petitioner. 4.W.P. No. 15142 of 1999 has been filed by M/s. Pradeep Drug Company Limited who is also the petitioner in W.P. No. 15140 of 1999 praying for the issue of a writ of declaration to declare the CBEC Circular No. 459/16/99, dated 30-3-1999 passed by the first respondent as ultra vires of Sections 35A, 35F and 37B of the Central Excise Act, 1944 and Sections 128-A and 129-E of the Customs Act, 1962 and Articles 14, 19 (1) (g) and 265 of the Constitution of India in so far as the petitioner is concerned. 5.W.P. No. 15143 of 1999 has been filed by M/s. Tapan Preci Tec Limited, Chennai who is the petitioner in W.P. No. 15141 of 1999 praying for the issue of writ of declaration to decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) to hear the Counsel instead of passing chamber orders. 10.It is further contended that the circular issued by the Central Board of Excise and Customs is also without authority and amounts to interference with the quasi-judicial powers of the Statutory Appellate Authority viz., the first respondent and liable to be quashed. It is further contended that being the Appellate Authority the first respondent Commissioner (Appeals) has to consider the request or application for stay and dispose of them fairly and not arbitrarily, lest the provision of appeal itself is rendered futile or nugatory. It is further contended that the Appellate Authority has to act reasonably and fairly coupled with a duty besides exercising quasi-judicial powers. 11.It would be sufficient to refer to the facts in one of the writ petitions as points raised are identical in all the writ petitions. To be on the safer side, the petitioners have challenged the circular issued by the Central Board of Excise and Customs. Even the said contentions are also identical. 12.In W.P. No. 15140 of 1999, M/s. Pradeep Drug Company Limited being aggrieved by the Order passed by the Assistant Commissioner, Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunity of hearing and it is the second respondent who alone had taken such a view. The reliance is placed upon the circular issued by the Central Board of Excise and Customs, New Delhi which circular is being challenged as one issued without authority of law and without jurisdiction. It is also being contended by the petitioner that the decision of the Apex Court in Union of India v. Jesus Sales Corporation Limited reported in 1996 (83) E.L.T. 486 has no application to Section 35F of the Central Excise Act as the direction issued by the Supreme Court in the said case was in respect of Section 4(M) of the Imports and Exports (Control) Act, 1947 and the said decision of the Supreme Court is clearly distinguishable and has no application to the appeals preferred before the Commissioner of Central Excise (Appeals). 16.Further when the petitioner had specifically requested the Commissioner (Appeals) to post the application for personal hearing, there is no reason or justification to deny an opportunity of hearing when substantial question as well as quantum of tax are involved and by denying an opportunity and passing a routine chamber order and refusing to exercise the powers a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended by the petitioners. The issuance of Circular by Central Board of Excise and Customs is valid and the same would not amount to interfering with the discretion vested with the Appellate Authority while passing an Order under Section 35F of the Central Excise Act. 20.The decision of the Apex Court in Union of India v. Jesus Sales Corporation Limited reported in 1996 (83) E.L.T. 486 is to be read with respect to the proposition of law declared by the Apex Court and the argument advanced by the petitioner in that respect is untenable. According to the respondent, Section 35F clearly speaks that it is for the appellate authority who has the discretion to afford a personal hearing or not and he has to exercise the same in a judicial manner being a quasi-judicial authority and there is no unfettered discretion given to the Appellate Authority and Section 35F is to safeguard the interest of the revenue. It is further contended that the Circular is only informative in nature and the Circular is neither inconsistent with the statutory provisions of the Act or Section 35F nor it confers extra power beyond the stipulation in Section 35F. 21.It is further contended that the second re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground for issuing a writ under Articles 32 and 226 and in the case of petitioner, there is no violation of principles of natural justice since the petitioner had been afforded full opportunity before the original authority and he will be given further opportunity by the Appellate Authority while disposing the appeal. 25.It is pointed out that only in the interim application, the Appellate Authority is not hearing the petitioner in person as it has not been stipulated or contemplated in Section 35F and such a view is also in consonance with the precedents of the Apex Court. The judgment of the Apex Court in Union of India v. Jesus Sales Corporation Limited is very much applicable to the provisions of the Central Excise Act. The validity of Section 35F has not been challenged. Hence such a challenge to the Circular issued by the Board of Central Excise cannot be sustained. The contention that the circular will amount to interfering with the discretion of the second respondent who is exercising his appellate powers is unsustainable in law, as the circular in no way curtails the discretionary powers of appellate authority while passing an Order under Section 35F in the interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side that before issue of circular by the Board, the Appellate Authority used to hear the appellant in respect of exemption application for pre-deposit and even after the issuance of the said circular by the Board, the other Commissioner (Appeals) heard the appellant but the respondent alone as a matter of course rejected the application for waiver of pre-deposit of the disputed tax-penalty and had passed chamber orders. This had necessitated the filing of the writ petitions to challenge the circular issued by the Board as well as individual order passed by the appellate authority in refusing to stay or grant exemption with respect to pre-deposit. Contentions :IV. 30.The points that arise for consideration in these writ petitions are :- Whether the impugned Circular issued by the Central Board of Excise and Customs in No. 459/16/99, dated 30-3-1999 is ultra vires and Sections 35A, 35F and 37B of Central Excise Act, 1944, Sections 128A and 129E of the Customs Act, 1962 and Articles 14, 19(1)(g) and 265 of the Constitution of India? Whether the impugned Circular issued by the Central Board interferes or fetters with the appellate powers of the Commissioner of Central Excise ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attention of the appropriate authorities about the latest legal position and it is not as if the Board had issued any directions much less a specific direction. 34.In the light of the above contentions, the first two points are to be taken up for consideration. It is being contended vehemently that the Board has no powers to issue any circular to the Commissioner (Appeals) and issuance of such circular is ultra vires of Section 37B of the Central Excise Act, Article 14, 19(1)(g) and 265 of the Constitution of India. Though the circular do not refer to Section 37B of the Act, it is sought to be contended that the circular had been issued by the Board in purported exercise of powers conferred under Section 37B. Section 37B of the Act reads thus :- Instructions to Central Excise Officers :-"37B. The Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) may, if it considers it necessary or expedient so to do for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods, issue such orders, instructions and directions to the Central Excise Officers as it may deem f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excisable goods or with respect to levy of duties of excise on such goods. Certainly, this section does not authorise the Board to issue directions which is contrary to the decision rendered by the Tribunal. Mr. Ajmera, learned Advocate could not point out anything which would suggest that the Board has such powers or that the Board was justified in issuing such circulars. It may be that the Board may not be in agreement with the view taken by the Tribunal. Then in that case, the Board may carry the matter in appeal, but once the decision has become final by issuing circular, the decision rendered by the Tribunal cannot be made to be nugatory." 39.The Division Bench of the Gujarat High Court further held thus :- "Thus, Section 37B, does not empower or authorise the Board to issue directions which are contrary to the decision rendered by the Tribunal. It may be that the Board may not be in agreement with the views expressed by the Tribunal. Then in that case, the Board may carry the matter in appeal. But once the decision has become final by issuing circular the decision rendered by the Tribunal cannot be made to be nugatory. The Board cannot use its authority or powers in issui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Central Excise (Appeals) with respect to the exercise of powers or to the grant of stay. But what has been directed is as to how the Commissioner (Appeals) should dospose of the applications for stay/exemption and the Commissioner (Appeals) shall not normally afford an opportunity of hearing but opportunity of hearing in a stay application is an exception. Powers of Appellate Authority includes and will take in all incidental powers including grant of stay. 43.Even if there is no particular provision for grant of stay, it is by now well settled that the Appellate Authority who has got the power to set aside, modify or reverse the orders of the Original Authority has also the incidental power to grant stay of order appealed against. In this respect, it is useful to refer to the decision of the Apex Court in Income Tax Officer, Cannanore v. M.K. Mohammed Kunhi reported in AIR 1969 Supreme Court 430. The Apex Court held that the Tribunal has got power to grant stay as it is an incidental or ancillary to its appellate jurisdiction and also expressed a view that the appellate jurisdiction implies doing all such acts, or employing such means, as are essentially necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Vol. 2 (Administrative Law), Article 340 P. 155 "where the statute does not require any particular method of procedure to be followed by an administrative agency, the agency may adopt any reasonable method to carry out its functions." (see also Corpus Juris Secondum, Vol. 73 (Public Administrative Bodies and Procedure, Article 73, p. 399). The Regional Transport Authority has complete discretion in the matter of allowing or refusing substitution." 46.Here, the Apex Court has emphasized that such quasi-judicial bodies should follow or adopt any reasonable method or fair procedure to carry out its functions. In terms of Section 37B, the Central Board of Excise and Customs, it is to be pointed out that it cannot neither or fetter restrict not enlarge the scope of the powers of the appellate authority. Such circulars cannot be issued to restrict the powers of the appellate authority nor it could be issued to direct that the discretion should be used in a particular manner or fashion or in a particular style or procedure. The Board also cannot issue a circular directing the quasi-judicial authority viz., the Collector (Appeal) to follow a particular fashion or style of hearing or to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unctionary. Hence, the circular though it is sought to be contended as informative or merely bringing to the notice of the appellate authority about the pronouncements of various courts, in my considered view, the said circular is an instruction or direction, viz., Commissioner (Appeals) not to afford an opportunity of hearing in all stay applications and such opportunity should be an exemption or a rarity. Hence, on a consideration of the entire facts, the first two points are to be answered against the Revenue and in favour of the petitioners and consequently the Circular has to be quashed and a direction has to be issued to the Commissioner (Appeals) to adopt a fair procedure without reference to the Circular issued by the Central Board while considering the application for stay and pass orders thereon. 51.Taking up the next contentions whether the Commissioner (Appeals) the appellate authority should afford an opportunity of hearing in an application for stay/exemption, it has been emphasized that hearing of an application forms part of the principles of natural justice and therefore, a hearing should be afforded and it is a must according to the Counsel for the petitioners e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was considered by this Court in the case of Shyam Kishore and others v. Municipal Corporation of Delhi and Another (1993) 1 SCC 22 under Delhi Municipal Corporation Act, 1957. In that Act, pre-deposit is a must before an appeal can be heard. This Court held that the Appellate authority has no jurisdiction to waive the condition or stay collection of tax pending disposal of the appeal. The grievance that the said provision in that event shall be deemed to be violative of Article 14 of the Constitution being harsh in nature was rejected. But there are statutes which vest power in the Appellate Authorities to waive deposit unconditionally or with conditions. So far the present case with which we are concerned, as already pointed out above, the third proviso vests power in the Appellate Authority to dispense with the amount of penalty unconditionally or subject to conditions. As such it is different from the provision under the Delhi Municipal Corporation Act referred to above. Here the discretion has been vested specifically in the Appellate authority to dispense with such deposit whether unconditionally or subject to such conditions as it may impose taking into consideration the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en it has to apply its mind on that question like a quasi-judicial authority taking into consideration all the facts and circumstances of the case including the undue hardship which has been pointed out on behalf of the appellant. In that proviso the two expressions 'opinion' and 'discretion' both have been used. In view of the settled position that whenever a statutory authority has to form an opinion on a question, it does not mean that it has to be formed in a subjective or casual manner. That opinion must be formed objectively on relevant considerations. Same is the position in respect of the exercise of discretion. The (framers) of the Act require such Appellate authority to exercise its discretion in a reasonable and rational manner taking into consideration the relevant facts and circumstances of a particular appeal while considering the question as to whether the deposit of the amount of the penalty be dispensed with unconditionally or subject to the conditions." 54.It is clear from the said pronouncement that on the facts of the said case, their Lordships of the Supreme Court had taken the view that the failure to afford an opportunity while considering the request for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant material is not taken into consideration by the Appellate Authority while passing orders on the stay petition/waiver application, the Court could interfere with such orders in exercise of powers of judicial review and remit the matter back to the Appellate Authority for fresh consideration. So also by the statutory Tribunals if such an order is found to be deficient or the Authority has not taken into consideration of the relevant material and it passed an order rejecting the application without application of mind, it warrants exercise of power of judicial review. But with an appearance or the hearing of the stay petition/exemption application definitely enables the Commissioner (Appeals) to decide the request for exemption or stay in a manner expected of the said Appellate Authority, which application also requires to be disposed in a fair manner as a quasi judicial functionary. 59.The Counsel appearing for the writ petitioners referred to the later decision of the Apex Court in 1998 (103) E.L.T. 5 (S.C.) Sangfroid Remedies Ltd. v. Union of India as well as the decision of the Calcutta High Court in Bongaigaon Refinery Petrochem. Ltd. v. Collector of C.Ex. (A), Cal. r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s nor it confer a right of audience at the appellate stage as has been observed in F.N. Roy v. Collector of Customs - 1983 (13) E.L.T. 1296 (S.C.) = 1957 S.C.R. 1151 at 1160. However, it is pointed in Mohindersingh Gill v. Chief Election Commissioner reported in 1971 (1) SCC, 405, right of hearing has been claimed and assured. There is no dispute that the Commissioner (Appeals) is exercising quasi-judicial powers as the said Appellate authority has been constituted as the statutory Authority to determine questions affecting the rights of parties and it has the duty to act judicially. In Nagendra Nath Bora and Another v. Commissioner of Hills Division and Appeals, Assam and Others reported in AIR 1958 Supreme Court 398, the emphasis being whether or not any rules of natural justice had been contravened should be decided not in a preconceived notion, but in the light of the statutory rules and provisions. 62.In the considered view of this court, Section 35F of the Act does not preclude a personal hearing, yet it may be contended that personal hearing is not a must. But when as a result of rejection of an application for stay/exemption, but if such an Order leads to the dismissal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the nature of the statutory duty imposed itself necessarily implied an obligation to hear before deciding that the audi alteram partem rule could be imported." (Emphasis supplied) 65.In Ravi S. Naik v. Union of India and others reported in 1994 Supp (2) Supreme Court Cases 641, the Apex Court held that principles of natural justice have an important place in modern Administrative Law and whether the requirement of natural justice have been complied with or not has to be considered in the context of the facts or circumstances of a particular case. It has been held thus :- "Principles of natural justice have an important place in modern Administrative Law. They have been defined to mean "fair play in action". (See Menaka Gandhi v. Union of India, Bhagwati, J.) As laid down by this Court: "They constitute the basic elements of a fair hearing, having their roots in the innate sense of man for fairplay and justice which is not the preserve of any particular race or country but is shared in common by all men" (Union of India v. Tulsiram Patel). An order of an authority exercising judicial or quasi-judicial functions passed in violation of the principles of natural justice is proced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 533, 591 : (AIR 1981 SC 818 at p. 846), J. Mahapatra and Co. v. State of Orissa, (1985) 1 SCR 322, 334-5 : (AIR 1984 SC 1572 at Pp.1576-77) and Menaka Gandhi v. Union of India (1978) 2 SCR 621, 681 : (AIR 1978 SC 597 at p. 629)." 67.In the light of the above pronouncements and catena of decisions, principles of natural justice has to be followed when a decision or Order being final or interim is arrived at which results in civil consequences or deprivation of a valuable right of appeal or right of appeal is denied as a result of such decision. The decision will also include a decision or Order in interlocutory stage and the expression of adjudication cannot be confined to the final adjudication or Order alone but it may take interim orders as well in a given circumstances. If such interim orders results in rejection of remedy of appeal or appeal is rendered nugatory and it merely confirms the order of adjudication or proceedings passed by the Original Authority. Even in respect of interim orders where there is no bar or a statutory exclusion of the applicability of principles of natural justice, the rule of audi alteram partem has to be read into, less it will offend Art. 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall safeguard the interests of the revenue. 71.The Appellate Authority is required to examine as to whether in a given case, deposit of duty demanded or penalty levied would cause undue hardship to the appellant before it and also has to decide with reference to the facts of each case as to rate or quantum or extent to which such predeposit could be dispensed with and also subject to such conditions as the said Appellate Authority may impose and deem fit. All these aspects have to be taken care of by the Commissioner (Appeals). 72.It is not as if Section 35F excludes the applicability of principles of natural justice and it is not as if that the entire duty demanded or penalty levied has to be deposited without there being any exception. It may be that proviso could be considered as an exception and not as a general rule, but when an appeal is filed, it is in respect of a disputed tax and/or penalty. If such disputed tax/penalty is not remitted, the resultant position is the appeal stands rejected, which is the Order passed in the present case. 73.According to the impugned Orders, if the disputed duty/penalty is not deposited and direction is issued if not complied with wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner and without referring to the amount so deposited which is admitted by the Assessing Authority, directions have been issued by the Appellate Authority to deposit the entire disputed tax and penalty levied. If an opportunity had been given, the appellant would have definitely pointed out the actual amount due after giving credit to the duty if any remitted. 76.In fact, in W.P. No. 11047 of 1999, I.T.C. Limited v. Commissioner of Central Excise (Appeals), the Appellate Authority, it has been rightly pointed out has not taken into consideration of what has already been deposited towards pre-deposit or remitted and without reference to the said remittances, substantial amount is directed to be deposited and exemption application is rejected. Such an eventuality could have been avoided, had an opportunity been given. There are many developments after the passing of the orders of adjudication and equally there will be a situation which might have financially worsened the assessee and this could as well be brought to the notice or placed before the Appellate Authority. Subsequent developments which are relevant which do not have a hearing also brought to the notice of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rules of natural justice, unreasonableness, the fiduciary duty of local authorities and "in future, perhaps, the principle of proportionality". A passage in Administrative Law, Sixth Edition by H.W.R. Wade page 424 reads thus:- "These are revealing decisions. They show that the courts now expect Government departments to honour their published statements or else to treat the citizen with the fullest personal consideration. Unfairness in the form of unreasonableness here comes close to unfairness in the form of violation of natural justice, and the doctrine of legitimate expectation can operate in both contexts. It is obvious, furthermore, that this principle of substantive, as opposed to procedural, fairness may undermine some of the established rules about estoppel and misleading advice, which tend to operate unfairly. Lord Scarman has stated emphatically that unfairness in the purported exercise of a power can amount to an abuse or excess of power, and this seems likely to develop into an important general doctrine." Another passage at page 522 in the above book reads thus :- "It was in fact for the purpose of restricting the right to be heard that 'legitimate expectati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin its powers to fulfil. The protection is limited to that extend and a judicial review can be within those limits. But as discussed above a person who bases his claim on the doctrine of legitimate expectation, in the first instance, must satisfy that there is a foundation and thus has locus standi to make such a claim. In considering the same several factors which give rise to such legitimate expectation must be present. The decision taken by the authority must be found to be arbitrary, unreasonable and not taken in public interest. If it is a question of policy, even by way of change of old policy, the courts cannot interfere with a decision. In a given case whether there are such facts and circumstances giving rise to a legitimate expectation, it would primarily be a question of fact. If these tests are satisfied and if the court is satisfied that a case of legitimate expectation is made out then the next question would be whether failure to give an opportunity of hearing before the decision affecting such legitimate expectation is taken, has resulted in failure of justice and whether on that ground the decision should be quashed. If that be so then what should be the relief is ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
