Shree Ganesh Forging Co. vs Union of India

The Court: This appeal is directed against order dated 30th April, 2014 passed in WP No. 236 of 2014 (M/s. Shree Ganesh Forging Co. & Anr. v. Union of India & Ors.). The learned Single Judge had dismissed the Writ Petition on the opinion the application filed by the appellant-petitioner before the Tribunal was in substance an application to rectify the mistakes made in the order and not a simplicitor application for recalling the order of dismissal of an appeal by default. The facts relevant for the adjudication of this appeal are an Order-in-Original dated 19th December, 2008 was made in which it was recorded, inter alia, that:

"It is further submitted that late Sri Maram Lakhmi Narayana was the proprietor of the firm. Since he is no more, penalty cannot be imposed in this case inasmuch as he was responsible for all the activities of his firm. In Black''s Law Dictionary 6th edition, "proprietorship" has been defined as under:--

"A business which is owned by a person who has either the legal right and exclusive title, or dominion or the ownership of that business; a business usually unincorporated, owned and controlled exclusively by one person, such business is commonly designated as sole proprietorship." Since in the present case, the proprietor had died, no penalty is imposable on the firm inasmuch as in a proprietary firm, the proprietor and the proprietary firm is the same. After his demise, no penalty is imposable on him inasmuch as the firm has got no separate entity."

By that order the Commissioner Central Excise, Kolkata-II Commissionerate, determined the noticee had to pay an amount of Rs. 97,86,300/- as Central Excise Duty and penalty of similar amount was imposed under the Central Excise Act, 1944.

Incidentally the noticee being Shri Maram Lakshmi Narayan, the proprietor of the firm had expired on 5th March, 2008. Aggrieved by the said order the elder son of the noticee on 24th April, 2009 had preferred appeal before the CESTAT. As evident from the said appeal preferred the appellant described therein was M/s. Shree Ganesh Forging Co. In paragraph 3 of the statement of facts in the said appeal it was stated as under:

"A show cause issued on 28-5-2007 to the appellant. But as the proprietor of the appellant firm had been seriously ill, the same could not be attended to. The appellant ultimately died on 5th March, 2008 of cancer. After the demise of Shri Maram Lakshmi Narayan, the proprietor of the firm, (the appellant), his elder son Sri Satya Murthy had taken over the firm. He made effort to retrieve records and documents for the material period and on the basis of such records and documents and whatsoever information could be recovered. A reply was prepared and submitted to the department on 9-9-2008."

The said appeal was verified on 24th April, 2009 by the writ petitioner No. 2, M. Madhu Murthy. It was submitted by Mr. J.P. Khaitan, learned Senior Advocate, on instruction from his client present in Court, the writ petitioner No. 2 and not Sri Satya Murthy is the eldest son of the deceased noticee.

Before any steps could be taken for hearing of the appeal, the appellant had filed an application, verified by the writ petitioner No. 2, on 26th November, 2010 alleging, inter alia:

"It is submitted that with the demise of the proprietor of M/s. Shree Ganesh Forging Co., the firm no more exists. The trade licence was surrendered, Central Excise Registration was surrendered. Sales Tax Registration Certificate was also surrendered and everything related to the said firm no more remained functional. Hence, the firm M/s. Shree Ganesh Forging Co., became extinct.

It appears that being wrongly advised, the eldest son of Late M. Lakshmi Narayana being Shree M. Madhumurthy proceeded with the proceeding initiated under the show cause notice issued during the time when Late M. Lakshmi Narayana was alive, i.e., on 28-5-2007. But practically the case cannot be proceeded with the demise of the proprietor of the firm."

By order dated 25th April, 2011 the Tribunal on such application made passed the following order:

"The Counsel appearing on behalf of the appellant submits that the appellant is a proprietary firm and the proprietor died. Therefore, the appeal abates.

In these circumstances, as per the provisions of Rule 22 of the CESTAT Procedure Rules, the Appeal along with Stay Petition abates and is dismissed as such."

Mr. Khaitan, relied on the judgments of the Hon''ble Supreme Court in Grindlays Bank Ltd. Vs. Central Government Industrial Tribunal and Others, and in M/s. J.K. Synthetics Ltd. Vs. Collector of Central Excise, to submit the Tribunal in recording abatement of appeal in the facts and circumstances had committed an error which required procedural review, which is either inherent or implied in a Court or Tribunal, to set aside a palpably erroneous order passed under misapprehension by it. He, therefore, submitted the Tribunal by its order dated 4th March, 2014 in dismissing the miscellaneous application of the appellant for recalling of the order dated 25th April, 2011 had refused to exercise such inherent power conferred under Rule 41 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982.

Mr. Saraf, Learned Advocate appearing on behalf of the Revenue submitted the order dated 25th April, 2011 was made under Section 35C(1) of the Central Excise Act, 1944 and the miscellaneous application made by the appellant was correctly adjudicated by the Tribunal by its order dated 4th March, 2014 to be one made under Section 35C(3) of the said Act, as also correctly not interfered with by the Writ Court. Mr. Saraf further submitted the conduct of the appellant was such that it was apparent he had not come with clean hands and in such circumstances was not entitled to any order under the Writ jurisdiction of the High Court.

It will appear from the facts noted above the adjudicating authority was aware the noticee had expired as evident from the Order-in-Original. It is also evident the order dated 25th April, 2011 was passed in the presence of the Junior Departmental Representative pursuant to the appeal containing the statement of facts referred to by us earlier having been served on the Department. In such situation the mistake made by the Tribunal in passing the order on 25th April, 2011 recording abatement of appeal though at the instance of the appellant himself, was made in presence of the Department, which was aware about the identity of the appellant and the fact that it was the noticee who had died and not the appellant. This is how the gross mistake came about which by the miscellaneous application the writ petitioners sought to correct, but was turned down by the Tribunal by its order dated 5th March, 2014 impugned in the writ petition.

We find the Hon''ble Supreme Court of India in the case of Grindlays Bank Ltd. (supra) had held, "The expression ''review'' is used in two distinct senses, namely (1) a procedural review which is either inherent or implied in a Court or Tribunal. " By a later judgment in the case of J.K. Synthetics Ltd. (supra) the said Court also held, "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. 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."

We find the orders impugned in the writ petition being orders dated 25th April, 2011 and 4th March, 2014, both of the Tribunal, are not such as could be said to be touching on the merits of the case which would involve a substantial question of law, rather it delves on the procedural aspect of the matter. Hence we accept the submission of Mr. Khaitan that the miscellaneous application of the writ petitioner was one for procedural review of the impugned order dated 25th April, 2011. We are of the opinion the Tribunal should have recalled the said order dated 25th April, 2011 in the light of Rule 41 to secure the ends of justice. In the facts and circumstances noted above, the Tribunal ought to have proceeded to have the appeal heard on merits. We direct accordingly.

There will be an order in terms of prayer (a) of the writ petition. The writ petition and appeal are allowed to that extent. The appeal in the Tribunal is restored to its original file and number as it was on or before 25th April, 2011. Urgent certified copy of this order be supplied to the parties, if applied for, upon compliance of all requisite formalities.