Commissioner, Customs, Central Excise and Service Tax vs Devson Steels

We have heard Shri R.C. Shukla, learned counsel appearing for the Central Excise department. Shri M.P. Devnath and Shri Nishant Mishra appear for the respondent-company. This Central Excise Appeal u/s 35G of the Central Excise Act, 1944 has been filed against the order of the Customs, Excise & Service Tax Appellate Tribunal, New Delhi (CESTAT) dated 12.3.2013 passed in Appeal No. E/2644-2645/2005 by which the CESTAT dismissed the appeal filed by the revenue following the judgment of Delhi High Court in Commissioner of Central Excise Vs. Kundalia Industries, where the Delhi High Court held that the decision of the Committee of Commissioners of Central Excise u/s 35B(2) should be by a meaningful consideration and which should be reflected on the note sheets in order to comply with the requirement of Section.

The short order of the CESTAT is quoted as below:--

This is another occasion that has come to notice where review order appearing at pages 4 to 10 of appeal folder indicates that while that order was authenticated by one of member Commissioner of the committee on 23.06.2005, the other member authenticated on 24.06.2005. There was no ad idem on the same date either on 23.06.2005 or 24.06.2005. In similar such situation, there was matter before Hon''ble High Court of Delhi in the case of Commissioner of Central Excise Vs. Kundalia Industries, where Hon''ble High Court has held that the decision of committee should be by a meaningful consideration which should be reflected on the note sheets in order to comply with the requirement of section 35(2) of the Central Excise Act, 1944 in accordance with law.

When the proceeding before committee of Commissioner shows no regards to law laid down by Hon''ble High Court of Delhi in the aforesaid decision, present case suffers from legal infirmity to the extent indicated hereinbefore for which Revenue appeals are dismissed.

(Dictated & pronounced in the open court).

Sd/- (D.N. PANDA) JUDICIAL MEMBER

Sd/- (MANMOHAN SINGH) TECHNICAL MEMBER

It is submitted by Shri R.C. Shukla, appearing for the revenue that the CESTAT proceeded to examine the validity of the authentication on the ground that one of the members of the Commissioners of the Committee authenticated the order on 26.3.2005, whereas the other member authenticated on 24.6.2005. There was no ad idem on the same date i.e. either on 23.6.2005 or 24.6.2005. The CESTAT, thereafter referring the order of the Delhi High Court, made a sharp comment on the proceedings of the Committee of Commissioners for having shown no regard to the law laid down by Hon''ble Supreme Court and Delhi High Court whereas in the present case the Allahabad High Court being jurisdictional High Court had held in Central Excise Appeal Defective No. 158 of 2010 ( Commissioner of Central Excise Vs. UFAN Chemicals, connected with Central Excise Appeal Defective No. 188 of 2010 (CCE v. Jagdish Rolling Works) decided on 5.9.2012 that the method and manner, in which such authorisation is obtained, is not an issue on which the Tribunal could in the absence of any objection make an enquiry to arrive at a finding whether such authorisation was given in accordance with the law.

Shri Shukla submits that in Ufan Chemicals (supra) the same question was raised as to whether the signing of the order by the Commissioners constituting the Committee of Commissioners on different dates would amount to non-application of mind as there was no meaningful consideration. It was found by this Court that there are no statutory rules providing that the Commissioner will sit on the same date and at the same time and take a decision authorising the Central Excise Officers to file the appeal. This Court held as follows:--

In Collector of Central Excise, Calcutta Vs. Berger Paints India Ltd., the Supreme Court considered the object of authorisation for filing the appeal and held as follows:--

Having regard to the purpose of these rules as we conceive it, namely, to ensure that there was an application of mind to the points in respect of which the question for filing an appeal arose and that the appeal was duly authorised by the Collector, and was filed by the person authorised by the Collector in order to ensure that frivolous and unnecessary appeals are not filed, we are of the opinion that in the present context and in view of the terms of the rules and the purpose intended to be served, the appeal was competent and was duly filed in compliance with the procedure as enjoined by the rules. It has to be borne in mind that the rules framed therein were to carry out the purposes of the Act. By reading the rules in the manner canvassed by Dr. Pal, counsel for the respondent, before us which had prevailed over the tribunal, in our opinion, would defeat the purposes of the rules. The language of the relevant Section and the rules as we have noticed, do not warrant such a strained construction.

In the aforesaid view of the matter we are of the opinion that the tribunal was in error in dismissing the appeal on the ground that it did. In the premises, the judgment and order of the tribunal cannot be sustained. We accordingly set aside the judgment and order of the tribunal dated 10th November, 1987. In as much as, however, the tribunal has not disposed of the appeal on merits, we remand the matter to the tribunal for consideration of the appeal on merits and in accordance with law. The appeal herein is disposed of as aforesaid.

In the present case, the observation of the Tribunal, that the Commissioners did not take the decision on the same day and thus they were not ad idem at the same time to authorise the filing of appeal, apparently goes beyond the object of authorisation u/s 35B(2) of the Act. In order to avoid filing of frivolous appeals and unnecessary appeals, the legislature has provided for an authorisation by the Committee of Commissioners of Central Excise. The method and manner, in which such authorisation is obtained, is not an issue on which the Tribunal could in the absence of any objection make an enquiry to arrive at a finding whether such authorisation was given in accordance with the law.

We may also observe here that there are no statutory rules, providing that the Commissioner will sit on the same day at the same time and take a decision authorising a Central Excise Officer to file the appeal. The decision would not suffer from any fatal error unless it is shown that the decision is obtained without application of mind by the Commissioners either sitting together or at different time or dates at different places.

We may also observe here that the appeal did not lack merits inasmuch as the question as to whether the penalty u/s 11AC of the Act can be levied when the duty is deposited prior to issuing show cause notice, is covered by the judgment of Supreme Court in Union of India (UOI) Vs. Rajasthan Spinning and Weaving Mills, . In the order authorising the filing of appeal the Committee of Commissioners, Central Excise have noticed the decision of the Punjab & Haryana High Court to the same effect.

For the aforesaid reasons, we find that the order dated 23.2.2010 dismissing the appeal and the order dated 31.3.2010 dismissing the recall application suffer from gross error of jurisdiction by the Tribunal in examining the validity of the authorisation, which it did not possess.

Both the appeals are allowed. The orders dated 23.2.2010 and 31.3.2010 passed by the Customs, Excise & Service Tax Appellate Tribunal are set aside. The matter is remanded to the Tribunal for a decision on merits in accordance with the law.

The CESTAT, instead of following the judgment of the jurisdictional High Court, has proceeded to examine the judgment of Delhi High Court, which had the opportunity to peruse the records. There is nothing in the order of the CESTAT to show that it had examined the record in arriving at a conclusion that the authorisation was not valid.

Shri M.P. Devnath, appearing for the respondent-assessee has relied upon judgment of Supreme Court in Collector of Central Excise, Vadodra Vs. Rohit Pulp Paper Mills, judgment of Gujarat High Court in CCE & C v. Shree Ganesh Dyeing & Ptng. Works [Tax Appeal No. 276 of 2007, dated 13-11-2008] judgment of Delhi High Court in Kundalia Industries (supra) and the judgment of Chhattisgarh High Court in MSP Steel and Power Ltd. Vs. Commr. of C. Ex. and Cus., .

The object and purpose of enacting Section 35B(2) is to avoid filing of frivolous and unnecessary appeals. The legislature has provided the mechanism for authorisation of Committee of Commissioners to apply their mind and form an opinion as to whether the interest of the revenue will suffer in case the appeal is not filed. The provision also serves the purpose to avoid filing of the appeals in routine manner against every order u/s 35B of the Act. If the Committee of Commissioners of Central Excise is of the opinion that the order passed by the Appellate Authority (Commissioner, Central Excise) u/s 35 or the Commissioner (Appeals) u/s 35A is not legal and proper, it may direct Central Excise Officers authorised by him in his behalf to Appellate Authority against the order.

In our view the opinion of the Board of Commissioner of the Central Excise u/s 35B is not justiceable on merits in Court. The opinion to be formed by the Board of Commissioners is a prima facie opinion and is not conclusive in nature which may be subject to challenge by the assessee on merits. If such an order is subjected to judicial review, it may give rise to taking ground to be agitated in almost every case and will cause unnecessary delay in disposal of the appeals u/s 35B of the Act.

It is fairly well settled that the orders passed by the designated authorities, by which the department authorises an appeal to be filed, is to avoid the filing of frivolous and unnecessary appeals. Such an order may be challenged, like a sanction in a criminal case only on the ground of non-application of mind, absence of material on which the mind has been applied by the authority, and lack of bona fides. The merit of the order of the Committee of Commissioner of Central Excise granting approval may not be subjected to challenge, as the appeal in any case has to be considered and decided on merit by the Appellate Authority on merits u/s 35B of the Act.

For the aforesaid reasons we are unable to sustain the reasons of the CESTAT in dismissing the appeal filed by the revenue. The Central Excise Appeal is allowed. The matter is remanded to the Customs, Excise & Service Tax Appellate Tribunal, New Delhi to decide the appeal on its merits.