Dalal Auto Engineering Industries vs Commissioner of Central Excise

Ajay Kumar Mittal, J.

Civil Miscellaneous No. 2782-CII of 2014

This is an application u/s 151 of the CPC for placing on record affidavit of Shri Arjun Lal, Assistant Commissioner, Division II, Central Excise, Faridabad. The affidavit filed along with the application is taken on record subject to all just exceptions.

The civil miscellaneous stands disposed of accordingly.

Central Excise Appeal No. 89 of 2013

This appeal has been preferred by the assessee u/s 35G of the Central Excise Act 1944 (in short "the Act") against the order dated July 30, 2012 (annexure A-4) (Dalai Auto Engineering Industries v. CCE [2014] 26 GSTR 239 (Trib.-Delhi)) passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (hereinafter referred to as "the Tribunal") whereby the appeal filed by the assessee had been dismissed and the order dated April 12, 2013 (annexure A-6) vide which application for restoration of the appeal was dismissed. The assessee has claimed the following substantial questions of law:

(a) Whether the impugned order has been passed in violation of principle of natural justice?

(b) Whether the learned Tribunal has failed to consider merits of the case and has passed cryptic and perfunctory order?

(c) Whether demand on the basis of mere entry in balance-sheet can be raised?

(d) Whether the learned Tribunal has failed to consider actual facts and figures, therefore, order is perverse and contrary to the record?

Put shortly, the facts necessary for adjudication of the present appeal as narrated therein are that the assessee is engaged in the business of manufacture of aluminium and zinc dye cast components and is availing of Cenvat credit on duty paid inputs and capital goods in terms of the Cenvat Credit Rules, 2004. An audit was conducted on November 26/28, 2008 and during the course of audit, it was found that the assessee is manufacturing finished goods on job-work basis as well as their own account. The raw material supplier had allowed wastage of seven per cent which includes five per cent wastage on account of burning/heating losses and approximately two per cent recoverable scrap. The assessee had submitted Form 3CD along with income tax return showing recoverable aluminium/zinc scrap in the range of ten per cent to 17 per cent during the financial years 2005-06, 2006-07 and 2007-08. According to the respondent-Department, the assessee has wrongly availed of Cenvat credit on inputs and, therefore, issued a show-cause notice dated October 22, 2009 to the assessee. The assessee submitted its reply dated November 26, 2009 pleading that the demand could not be raised on the basis of mere scrap declared in the income tax documents. The adjudicating authority vide order-in-original dated March 31, 2010 (annexure A-1) confirmed the duty amounting to Rs. 4,44,995 and also imposed equal amount of penalty u/s 11AC of the Act. Feeling aggrieved, the assessee filed an appeal before the Commissioner (Appeals) who vide order-in-appeal dated November 4, 2010 (annexure A-2) upheld the order-in-original and dismissed the appeal. Still dissatisfied, the assessee filed an appeal before the Tribunal. The Tribunal vide the order dated July 30, 2012 (annexure A-4) (Dalai Auto Engineering Industries v. CCE [2014] 26 GSTR 242 (Trib.-Delhi)) dismissed the appeal ex parte as none had appeared on behalf of the assessee. Thereafter, the assessee filed an application for restoration of appeal. The Tribunal vide order dated April 12, 2013 (annexure A-6) dismissed the said application. Hence, the present appeal.

We have heard the learned counsel for the parties.

The learned counsel for the appellant submitted that an error had crept in noting the date as August 30, 2012 instead of July 30, 2012 and, therefore, non-appearance on July 30, 2012 was unintentional. He placed reliance upon the judgments of the hon''ble Supreme Court in M/s. J.K. Synthetics Ltd. Vs. Collector of Central Excise, and Allahabad High Court in Pioneer Glass Industries Vs. Commissioner of Central Excise, in support of his contention that the Tribunal was empowered to set aside ex parte order where it was found that there was sufficient cause for non-appearance.

The Tribunal had adjudicated the issue ex parte as counsel for the appellant had failed to appear in spite of the fact that an application was filed giving plausible explanation for non-appearance on July 30, 2012. The Tribunal had refused to recall its earlier order dated July 30, 2012 vide which the lis between the parties was decided on merits. In M/s. J.K. Synthetics Ltd. Vs. Collector of Central Excise, , the hon''ble Supreme Court had held as under:

In Grindlays Bank Ltd. Vs. Central Government Industrial Tribunal and Others, , the same principles were applied in relation to the Industrial Tribunal constituted under the provisions of the Industrial Disputes Act. It was held that where a party was prevented from appearing at a hearing due to sufficient cause and was faced with an ex parte award, it was as if the party was visited with an award without notice of the proceedings. Where an Industrial Tribunal proceeded to make an award without notice to a party, the award was nothing but a nullity. In such circumstances, the Industrial Tribunal had not only the power but also the duty to set aside the ex parte award and to direct the matter to be heard afresh. The rule in question rule 22 of the Industrial Disputes (Central) Rules, 1957 provided that without sufficient cause being shown, if any party to proceedings before the Industrial Tribunal failed to attend or be represented, the Industrial Tribunal would proceed as if the party had duly attended or had been represented. If, therefore, there was no sufficient cause for the absence of a party, the Industrial Tribunal had the jurisdiction to proceed ex parte. But if sufficient cause was shown which prevented a party from appearing, the Industrial Tribunal had the power to set aside the ex parte award, the power to proceed ex parte carried with it the power to enquire whether or not there was sufficient cause for the absence of a party at the hearing.

Rule 20 of the CEGAT (Procedure) Rules deals with cases where the appellant has defaulted. Rule 21 empowers CEGAT to hear appeals ex parte. The fact that rule 21 does not expressly state that an order on an appeal heard and disposed of ex parte can be set aside on sufficient cause for the absence or the respondent being shown does not mean that CEGAT has no power to do so. Rule 41 gives the CEGAT wide powers to make such orders or give such directions as might be necessary or expedient to give effect or in relation to its order or to prevent abuse of its process or, most importantly, to secure the ends of justice.

If, in a given case, it is established that the respondent was unable to appear before it for no fault of his own, the ends of justice would clearly require that the ex parte order against him should be set aside. Not to do so on the ground of lack of power would be manifest injustice. Quite apart from the inherent power that every Tribunal and court constituted to do justice has in this respect, CEGAT is clothed with express power under rule 41 to make such order as is necessary to secure the ends of justice. The CEGAT has, therefore, the power to set aside an order passed ex parte against the respondent before it if it is found that the respondent had, for sufficient cause, been unable to appear.

Further, in Pioneer Glass Industries Vs. Commissioner of Central Excise, , the Allahabad High Court had observed as under (page 240 of 26 GSTR):

An appeal was filed by the Department against the order of the Commissioner (Appeals), dated March 24, 2009. In the appeal a cross-objection was also filed by the appellant. Notice was issued to the appellant in the appeal which was returned with the endorsement of postal authorities ''there is nobody in the factory''. The Tribunal proceeded to decide the appeal on merits and allowed the appeal of the Revenue and disposed of the cross-objection of the appellant by the order dated February 3, 2011. The appellant filed an application to recall the order of the Tribunal which has been rejected by the impugned order. The Tribunal while rejecting the application of the appellant has observed as follows in paragraph 4:

I have carefully considered the submissions from both sides and perused the records.

The records show that the notice had been sent to the respondent but the same had been returned back with the remarks that "there is nobody in the factory" implying that the factory is closed. Moreover, I also find that the respondent had filed a cross-objection in respect of the Revenue''s appeal and while deciding this appeal, the submissions made in this cross-objection had been considered. In view of this, I do not find any merit in this application and the same is dismissed.

The endorsement by the postal authority that ''there is nobody in the factory'' cannot tantamount to the refusal of the appellant nor that can be read as factory is closed as has been read by the Tribunal. The Tribunal ought to have taken fresh steps for service to the appellant in the manner prescribed under law.

The Tribunal committed error in rejecting the application of the appellant. Admittedly, the order was passed without hearing the appellant hence we are satisfied that there was sufficient cause for recall of the order dated February 3, 2011 and hearing Appeal Nos. E/1227/2009-SM and E/CO/192/2009-SM(BR) on merits afresh.

The explanation of the learned counsel for the appellant that the counsel who had represented the assessee before the Tribunal had wrongly noted the date as August 30, 2012 instead of July 30, 2012 and it was under these circumstances that the counsel for the appellant could not appear on the due date appears to be plausible. Moreover, unless a litigant is gross negligent in pursuing the litigation and the delay is enormous, the litigant should not be made to suffer for any bona fide error of his counsel. In view of the above, the present appeal is allowed and the orders dated July 30, 2012 (annexure A-4) (Dalal Auto Engineering Industries v. CCE [2014] 26 GSTR 242 (Trib.-Delhi)) and dated April 12, 2013 (annexure A-6) passed by the Tribunal are set aside. The matter is remitted to the Tribunal to decide the same afresh on merits in accordance with law.