By TIOL News Service

NEW DELHI, NOV 17, 2014 : THE Question: The sole question of law which arises for consideration is as to whether the Customs, Excise and Service Tax Appellate Tribunal has the power to dismiss the appeal for want of prosecution or not.

The Facts: The appellant filed an appeal before the Tribunal against the order passed by the Commissioner of the Central Excise & Customs, Aurangabad which was placed for hearing on 22.08.2012. On the very said date, the appellant as also his counsel were not present. The Tribunal, therefore, dismissed the appeal for want of prosecution. The restoration application was also dismissed. The appellant preferred an appeal before the High Court of Bombay, Bench at Aurangabad. The High Court dismissed the appeal on the ground that no substantial question of law arises for consideration.

Against the said order, the appellant is before the Supreme Court.

The Arguments by the appellant: Even if the appellant was not present before the Tribunal when the appeal was taken up for hearing, it could not have been dismissed for want of prosecution as Section 35C of the Central Excise Act, 1944 enjoins upon the Tribunal to pass orders thereon as it thinks fit, that is, confirming, modifying or annulling the decision or order appealed against or may refer the case back to the authority which passed such decision or order with such directions as it may think fit, for a fresh adjudication or decision, as the case may be, after taking additional evidence, if necessary. Thus, there is no power vested in the Tribunal to dismiss the appeal for want of prosecution even if the appellant therein has not appeared when the appeal was taken up for hearing.

Rule 20 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 cannot be resorted to as the Section itself does not give power to the Tribunal to dismiss the appeal for want of prosecution.

The Arguments by the respondent - Revenue: Under Rule 20 of the Rules, the Tribunal has been given the power to dismiss the appeal for want of prosecution if the appellant does not appear, and therefore, the order passed by the Tribunal as also by the High Court calls for no interference.

The Law: Section 35C(1) of the Act which deals with the powers of the Tribunal reads as under:-

"35C. Orders of Appellate Tribunal.--(1) The Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against or may refer the case back to the authority which passed such decision or order with such directions as the Appellate Tribunal may think fit, for a fresh adjudication or decision, as the case may be, after taking additional evidence, if necessary."

Rule 20 of the Rules which gives a power to the Tribunal to dismiss the appeal for default in case the appellant does not appear when the appeal is called on for hearing reads as:-

"RULE 20. Action on appeal for appellant's default. -- Where on the day fixed for the hearing of the appeal or on any other day to which such hearing may be adjourned, the appellant does not appear when the appeal is called on for hearing, the Tribunal may, in its discretion, either dismiss the appeal for default or hear and decide it on merits:

Provided that where an appeal has been dismissed for default and the appellant appears afterwards and satisfies the Tribunal that there was sufficient cause for his non-appearance when the appeal was called on for hearing, the Tribunal shall make an order setting aside the dismissal and restore the appeal."

The Findings: From a perusal of the aforesaid provisions, the Act enjoins upon the Tribunal to pass order on the appeal confirming, modifying or annulling the decision or order appealed against or may remand the matter. It does not give any power to the Tribunal to dismiss the appeal for default or for want of prosecution in case the appellant is not present when the appeal is taken up for hearing.

A similar question came up for consideration before the Court in The Commissioner of Income-Tax, Madras vs. S. Chenniappa Mudaliar, Madurai wherein the Court considered the provisions of Section 33 of the Income-tax Act, 1922 and Rule 24 of the Appellate Tribunal Rules, 1946 which gave power to the Tribunal to dismiss the appeal for want of prosecution.

Considering those provisions, the Court then held as under:-

"The scheme of the provisions of the Act relating to the Appellate Tribunal apparently is that it has to dispose of an appeal by making such orders as it thinks fit on the merits. It follows from the language of Section 33(4) and in particular the use of the word "thereon" that the Tribunal has to go into the correctness or otherwise of the points decided by the departmental authorities in the light of the submissions made by the appellant. This can only be done by giving a decision on the merits on questions of fact and law and not by merely disposing of the appeal on the ground that the party concerned has failed to appear……………….

Thus looking at the substantive provisions of the Act there is no escape from the conclusion that under Section 33(4) the Appellate Tribunal has to dispose of the appeal on the merits and cannot short-circuit the same by dismissing it for default of appearance."

Applying the principles laid down in the aforesaid case to the facts of the present case, as the two provisions are similar, the Tribunal could not have dismissed the appeal filed by the appellant for want of prosecution and it ought to have decided the appeal on merits even if the appellant or its counsel was not present when the appeal was taken up for hearing. The High Court also erred in law in upholding the order of the Tribunal.

Decision:  The Orders of the Tribunal and the High Court are set aside and the Tribunal is directed to decide the appeal on merits. Accordingly, the appeal is allowed with a cost of Rs. 25,000/- to be payable by the Respondent.

(See 2014-TIOL-92-SC-CX-LB)