By TIOL News Service

MUMBAI, MAR 03, 2014: WE reported the CESTAT order more than eight years ago.

In this case, a ROM application was filed by the appellant on the ground that the Tribunal while passing the order dated 01.09.2004 did not consider the plea of limitation inasmuch as since there was no misdeclaration, the extended period of limitation could not have been invoked.

They inter alia relied on the decision in Sarabhai M. Chemicals vs. CCE - (2004-TIOL-104-SC-CX) to buttress their argument that since the classification lists filed have been approved from time to time, there is no question of any misdeclaration and even if the adjudicating authority had reached the conclusion that there is misdeclaration in the classification list, the same cannot amount to suppression. Furthermore, since the Commissioner has only alleged suppression in his order but not spelt out as to how the suppression has occurred, invoking extended period without a clear-cut finding is improper.

The Bench was satisfied with the argument and held -

"In the present case as mentioned above, there is no finding of the Commissioner on mis-representation, fraud, suppression etc. Therefore, we are of the opinion that the larger period cannot be invoked and as such, the demand of Rs.12,68,162/- + Rs.24,38,045/- = Rs.37,06,207/-, which is solely attributable to the extended period cannot be sustained."

As mentioned, we had reported this order as (2006-TIOL-62-CESTAT-MUM).

The department was not at all happy with this order and had filed an appeal before the Bombay High Court and the same was admitted in November, 2007.

The respondent assessee raised a preliminary objection in respect of maintainability of this appeal under Section 35G of the CE Act by submitting that the order dated 01.09.2004 of the Tribunal raises issues with regard to rate of duty and they had already preferred an appeal therefrom to the Supreme Court under Section 35L of the Act and the same was admitted on 11 February 2005.

The counsel for the Revenue submitted that the departmental challenge is to the CESTAT order passed on ROM application and furthermore the objection taken is only to delay proceedings as no such objection was taken at the time of admission of the appeal on 2 nd November 2007.

The High Court agreed with this submission of the Revenue and, therefore, took up the appeal for final disposal.

After narrating the facts involved, the High Court, in the matter of the first substantial question of law held -

1. Whether in the facts and in the circumstances of the cases the Tribunal was justified in passing an order under Section 35C(2) of the Central Excise Act 1944 after a period of six months from the date of passing of the order under Section 35C(1)?

++ This question is no longer  res integra. The Apex Court in  Sree Ayyanar Spinning and Weaving Mills Ltd - (2008-TIOL-106-SC-IT) has analyzed an identical provision found in Section 254(2) of Income Tax Act 1961 and held that the time limit of 4 years provided therein applied only to the Tribunal rectifying its errors  suomoto. However, when an application for rectification is made within 4 years by a party, the Tribunal can pass an order on such an application even beyond a period of 4 years.

The question No.1 was answered in the affirmative i.e. against the revenue and in favour of the respondent-assessee.

As regards question nos. 2 & 3 -

2. Whether in the facts and in the circumstances of the case, the impugned order of the Tribunal amounts to review of its own order dated 1-9-2004 and not simply rectification of a mistake?

3. Whether in the facts and circumstances of the case, the Tribunal is justified in recalling its entire order, which was earlier confirmed and thereafter holding that the extended period of limitation is not available and as a result thereof, reducing the duty of Rs.42,07,807/- to Rs.5,01,600/-?"

The High Court held -

++ The jurisdiction of the Tribunal under Section 35C(2) of the Act is to rectify mistakes apparent from the record i.e. the mistake must be obvious and self-evident. The discovery of mistakes must not require a long process of reasoning. The question whether there is a mistake in the order sought to be rectified or not should not be a subject of debate. Once a mistake is brought to the notice of the Tribunal, it is duty bound to correct the mistake in its order, where an issue has been argued and/or submission made on the issue and the same is not recorded and/or considered in the order, it follows that there is a mistake apparent from the record.

++ Our attention was also invited to the synopsis submitted at the hearing on 18 August 2004 before the Tribunal leading to order dated 1 September 2004. We find that in page 8 of the synopsis, it is urged that the demand to the extent of Rs.12.68 lakhs and Rs.24.38 lakhs aggregating to Rs.37.06 lakhs are time barred. This was entirely on the ground that classification lists were approved earlier as well as the fact that the Commissioner has given no finding of suppression on the classification issue to warrant invoking the extended period of limitation. On a close perusal of the order dated 1 September 2004 of the Tribunal, we find that the issue of limitation has not been adverted to at all by the Tribunal. The issue of limitation as pointed out in the application for rectification of the Respondent-Assessee was urged during the hearing before the Tribunal but the same was not dealt with in its order dated 1 September 2004. This non-consideration of an issue urged before the Tribunal but not dealt with by it would give rise to a mistake apparent from the record.

++ The Tribunal was correct in exercising its jurisdiction under Section 35C(2) of the Act and correct its mistake by considering the issue of limitation. The fact that the demand to the extent of Rs.37.07 lakhs in the aggregate is time barred, is based on the fact that the classification lists were approved earlier and there is no finding in the order of the Commissioner of Central Excise invoking the extended period of limitation that there has been any suppression etc. on the part of the respondent-assessee. Thus, this reduction of demand by the impugned order dated 20 December 2005 is on account of it allowing the rectification application and not on account of review of an order. It is pertinent to note that the revenue was represented before the Tribunal at the hearing of the rectification application and have not contended that the demand is not time barred.

++ The question Nos.2 and 3 were answered in the affirmative i.e. in favour of respondent-assessee and against the revenue.

In fine, the Revenue appeal was dismissed.

In passing:- Mistakes live in the neighborhood of truth and therefore delude us - Rabindranath Tagore, Fireflies.

(See 2014-TIOL-262-HC-MUM-CX)