Commissioner of Central Excise vs JSW Steel Ltd.

The Appeal challenges the order passed by the Customs Excise and Services Tax Appellate Tribunal, West Zonal Bench at Mumbai, Court No. 2, dated 26th February, 2011. The respondent-assessee filed an Appeal before the said Tribunal against the order passed by the Commissioner of Central Excise, Thane-1. The respondent also applied for stay of recovery of the duty pending the Appeal. Such application was placed before the Tribunal and the Tribunal proceeded by the consent of both sides took up the Appeal itself and disposed it of finally. It is this final order which is challenged before us.

Mr. Bhate, learned counsel appearing for the appellant submitted that the Revenue may have agreed to the disposal of the Appeal at the stage of consideration of the stay application but, beyond that there is no agreement. In other words, the manner in which the Appeal is disposed of and the conclusion has no consent of the Revenue. Therefore, a substantial question of law would arise and based on the manner of the disposal itself, namely without discussing the rival cases and finding out whether the decision and rulings cited have any application to the cases and the facts before the Tribunal. The Tribunal has erred in disposing of the Appeal, and setting aside the order passed by the Commissioner of Central Excise, Zone-I, Thane.

The issue involved is whether the services which have been availed of could be said to be input services within the meaning of Rule 2(1) of the Cenvat Credit Rules, 2004. It is submitted that the words "input services" has been defined to mean any services used by manufacturer whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal. The latter part may be inclusive but, in the instant case, the assessee claims Cenvat credit on commission of export sales, bank commission charges and aviation charges. These could not be said to be falling within the definition. Therefore, the adjudication order could not have been set aside.

On the other hand, the learned counsel appearing for the assessee supported the Tribunal''s order by relying on the judgment of this Court in the case of The Commissioner Central Excise Vs. Ultratech Cement Ltd. and The Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench, .

Having perused the order passed by the Tribunal and impugned in this case, we are of the opinion that in certain matters and depending upon the agreement between the parties, the Tribunal may dispose of an Appeal finally at the stage of hearing of stay application or while disposing of and deciding the stay application. However, beyond that, the Tribunal is not expected to pass a cryptic order and by not assigning cogent and satisfactory reasons for its conclusion. It is too well settled to require any reiteration that appeal is a creature of the statute. A right of Appeal would confer in a litigant so as to enable the litigant to assail the original order on law and facts. The Court of Appeal is therefore expected to apply its independent mind and not endure same finding or conclusions in the original order. In the case of Patesinghrao Anandrao Naik Vs. R.V. Deshmukh, , it has been observed that the appellate authority is not a mere rubber stamp, but expected to independently apply its mind to the facts and circumstances, analyse the submissions and the legal provisions. Equally, it should consider as to whether the decisions cited have any application to the facts of the case brought before it. In that case, this is what is held:

As observed in Pandit Bhullan''s case (supra) an appeal is a creature of statute. Further there is a vast difference between the revisional powers and the appellate powers. An appeal, as stated by Lord Davery in Pannamma v. Arumoosa - (1905) A.C. 383 is a proceeding in which a question is whether the order of the Court from which the appeal is brought was right on the materials which the court had before it. In legal parlance appeal means judicial examination of the decision by the higher Court of an inferior Court. It amounts to in essence and pith a complaint to higher forum that the decision of the subordinate Tribunal is erroneous and therefore liable to be rectified or set aside. From this it would follow that an appellate Court has power to go not only into the question of law, but also into questions of fact. Such a power would further enable the appellate Court to review or reassess the entire evidence and come to its own conclusion. Litigant is entitled to a full, fair and independent consideration of evidence and the material at the appellate stage. u/s 152 of the Act, right of appeal is provided in very wide and general terms. The appellate authority has to decide the appeal as a quasi-judicial authority. To say the least the appellate authority cannot act mechanically as a mere rubber stamp. In the present case in memorandum of appeal various substantial questions of fact were raised by the appellants. All these contentions are disposed of by the appellate authority by observing:

I have gone through the appeal memo, the records produced before me. The Joint Director has given sufficient reasons in para. 5 of his order why the action of supersession is necessary. It is not necessary for me again to reproduce all these facts. I totally agree with him. I therefore, pass the following order.

In view of this cryptic order it is difficult to say that there is no substance in the contention raised by Shri Rane. In The Siemens Engineering and Manufacturing Co. of India Ltd. Vs. The Union of India (UOI) and Another, , the Supreme Court has reiterated as to why the order should be speaking one and the authority making such an order in exercise of the quasi-judicial function should record its findings with reasons. It appears to be a settled law that where the authority makes an order in exercise of quasi-judicial functions, it must record its reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons, This is what the Supreme Court has observed in Simens Engineering''s case (at page 1789):

If Courts of law are to be replaced by administrative authorities and tribunals, as indeed, in some kinds of cases, with the proliferation of administrative law, they may have to be so replaced, it is essential that administrative authorities and tribunals should accord fair and proper hearing to the persons sought to be affected by their orders and give sufficiently clear and explicit reasons in support of the orders made by them. Then alone administrative authorities and tribunals exercising quasi-judicial function will be able to justify their existence and carry credibility with the people by inspiring confidence in the adjudicatory process. The rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not satisfy the requirement of law. The Government of India also failed to give any reasons in support of its order rejecting the revision application. But we may presume that in rejecting the revision application it adopted the same reason which prevailed with the Collector. The reasons given by the Collector, was, as already pointed out, hardly satisfactory and it would, therefore have been better if the Government of India had given proper and adequate reasons dealing with the arguments advanced on behalf of the appellants while rejecting the revision application. We hope and trust that in future the Customs Authorities will be more careful in adjudicating upon the proceedings which come before them and pass properly reasoned order, so that those who are affected by such orders are assured that their case has received proper consideration at the hands of the Customs Authorities and the validity of the adjudication made by the Customs Authorities can also be satisfactorily tested in a superior tribunal or Court. In fact, it would be desirable that in cases arising under Customs and Excise laws an independent quasi-judicial tribunal, like the income tax Appellate Tribunal or the Foreign Exchange Regulation Appellate Board, is set up which would finally dispose of appeals and revision applications under these laws instead of leaving the determination of such appeals and revision applications to the Government of India. An independent quasi-judicial Tribunal would definitely inspire greater confidence in the public mind.

By the cryptic orders as are passed in this case, it is difficult for the Higher Court then to find out as to what prevailed with the appellate authority in reaching a particular conclusion. In the present case, when we were taken through the definition of the term "input service" and the facts in the present case, that we found that none of these aspects have been considered by the Tribunal. The Tribunal merely proceeds on the footing that being an exporter, all services have been availed of during the course of export of goods and that is how this Cenvat credit was admissible. Which of the services during the course of export availed of by the present assessee would be covered by this definition and the judgment of this Court has not been considered or decided by the impugned order. Such unsatisfactory and unhappy disposal of Appeals in matters of Revenue and Taxes therefore leaves a lot to be desired. The expectation given from the Appellate Tribunal is therefore not fulfilled and particularly when it is manned by persons drawn from judicial services. In these circumstances, we have no alternative but to allow this Appeal only on this short, but substantial question of law and that is that the Appeals cannot be disposed merely by recording rival submissions and not discussing them elaborately but, in a perfunctory manner.

The impugned order is therefore quashed and set aside. The order of CESTAT shall be treated as confined and restricted to the stay application. It will be held that the assessee has made out a strong prima facie case for grant of an unconditional stay, but beyond that the Appeal cannot be said to be finally disposed of by the impugned order.

The Appeal therefore shall stand restored to the file of the Appellate Authority/Tribunal for being dealt with and disposed of, in accordance with law and uninfluenced by any of the earlier observations and findings. The present Appeal is allowed in these terms. No costs.