Case Law Details
HIGH COURT OF KARNATAKA
Commissioner of Central Excise
versus
GE Medical Systems
C.E.A. Nos. 64, 65, 86 & 87 of 2009
NOVEMBER 11, 2009
JUDGMENT
D.V. Shylendra Kumar, J.
CEA Nos. 64 & 86 of 2009 :These two appeals are preferred by the Central Excise Department u/s 35-G of the Central Excise Act, hereinafter referred to as (‘the Act’ for short). These two appeals go together for the reason that both appeals have their origin to an appellate order dated 16-11-2006 passed by the CESTAT, Bangalore wherein the Tribunal had allowed the appeal of the Assessee M/s. GE Medical Systems X-Ray (South/Asia) Limited to get over an adjudication order that had been passed by the Commissioner, Central Excise, Pune in Original Order F. No. V(30)15-58/Adj/Commr/03, dated 18-4-2005. The question of law raised in the respective appeals are as follows :
1. The following substantial questions of law arise from the impugned order of the CESTAT :
(a) Whether the order of CESTAT is sustainable in law and whether the Order of CESTAT is legally correct in its interpretation of section 35C(2) in holding that the RoM has been filed beyond the period of six (6) months especially in view of the fact that the Final Order No. 1897 & 1898/2006 is dated 16-11-2006 was received only on 22-1-2007. The application for Rectification of Mistake was filed on dated 5-6-2007?
(b) Whether the order of the CESTAT is sustainable in law especially as it has been dismissed on the ground that the department has not filed the RoM within Six months but yet in another case vide Misc. Order No. 82/2008, dated 11-3-2008, in Wipro Ltd. v. Commissioner of Customs (Appeals)[2008 (228) ELT 275 (Tri. – Bang.)] has been pleased to allow the RoM even after six months?
(c) Whether Hon’ble CESTAT is correct in considering that the demand is hit by time-bar and therefore not discussing/deciding the issue of classification of spares of x-ray machines and spares of FRU “Mobile Image Intensifiers” (MII) even though suppression, wilfulmis-statement is involved as mentioned in the grounds of appeal, and clear-cut evidence is available on record to prove the suppression, and therefore extended period is rightly invokable so far as the issue of classification of spares of x-ray machines and spares of FRU “Mobile Image Intensifiers” (MII)?
(d) Whether the Hon’ble CESTAT is correct in allowing appeal filed by the assessee without considering the merit of the case were in question of law pertaining to classification is involved. Rate of duty is determined on the basis of tariff classification of the particular commodity. Unless the classification is decided properly, duty aspect cannot be determined. This aspect has to be considered on the basis of which the entire issue of classification of spares of x-ray machines and spares of FRU “Mobile Image Intensifiers” (MII) is based?
CEA No. 86
1. The following substantial questions of law arise from the impugned order of the CESTAT :
(a) Whether the order of the Hon’ble CESTAT is correct and legally sustainable in considering that the demand is hit by time-bar and therefore not discussing/deciding the issue of classification of spares of x-ray machines and spares of FRU “Mobile Image Intensifies” (MII) even though suppression, wilfulmis-statement is involved as detailed in para 2 (a to c) of the abovementioned grounds of appeal, and clear-cut evidence is available on record to prove the suppression, and therefore extended period is rightly invokable so far as the issue of classification of spares of x-ray machines and spares of FRU “Mobile Image Intensifiers” (MII)?
(b) Whether the order of the Hon’ble CESTAT is correct and legally sustainable in allowing appeal filed by the assessee without considering the merits of the case were in question of law pertaining to classification is involved. Rate of duty is determined on the basis of tariff classification of the particular commodity. Unless the classification is decided properly, duty aspect cannot be determined. This aspect has to be considered on the basis of which entire issue of classification of spares of x-ray machines and spares of FRU “Mobile Image Intensifiers” (MII) is bases?
2. The following a show-cause notice dated 27-1-2003 issued to the Company and its Manager (Finance), the Commissioner had passed the following order:
“I. I confirm the demand of Rs. 11,53,04,274/- (Rs. Eleven Crore fifty three lakh four thousand two hundred seventy four only), out of the demand of Rs. 11,80,29,801/- on S-cat items vide show cause notice No. DCCEI/PRU/INT/30/2001, dated 21-7-2003, under the provisions of section 11 A(2) of the Central Excise Act, 1944.
II. I confirm the demand of Rs. 1,67,96,857/- (One Crore sixty seven lakh ninety six thousand eight hundred fifty seven only), out of the demand of Rs. 1,85,68,517/- on Spares of X-ray machines and Mobile Image Intensifiers, under the provisions of section 11A(2) of the Central Excise Act, 1944.
III. I impose penalty of Rs. 13,21,01,131/- (Rupees Thirteen crore twenty one lakh one thousand one hundred thirty one only) on M/s. G.E. Medical Systems X-Ray (South Asia) Ltd., under the provisions of section 11 AC of the Central Excise Act, 1944.
IV. I order recovery of interest at appropriate rate on the amounts confirmed at Sr. No. I and 11 above, under the provisions of section 11AB of the Central Excise Act, 1944.
V. As the penalty imposed at Sr. No. III above is sufficient to meet both the ends of justice, I do not propose to impose any penalty under Rule 9(2) or 173Q(1) or 226 of the erstwhile Central Excise Rules, 1944 and also not to confiscate the land, building, plant, machinery etc.
VI. I impose penalty of Rs. 10,00,000/- (Rupees Ten lakh only) on Shri M.C. Sudarshan, Manager (Finance), the Notice No. 2, under the provisions of Rule 209A of the Central Excise Rules, 1944.”
3. The assessee met with success before the Tribunal as the appeal was allowed and the order passed by the Commissioner not only redetermining the duty but also in levying penalty were all set aside and it was by the order dated 16-31-2006.
4. The Revenue thought it proper to seek ‘for rectification of this order and for such purpose filed rectification application by invoking the power of rectification conferred on the Tribunal in terms of sub-section (2) of section 35C of the Act.
5. While application seeking for rectification was dismissed on the ground that it was beyond the period of limitation and therefore the Revenue having found that they are struck with the earlier order of the Tribunal which was sought to be rectified and thereafter have approached this Court by filing appeal each against the original order of the Tribunal and the order passed on the application for rectification of the original order of the Tribunal.
6. There was considerable delay in preferring appeals and therefore the Respondent Assessee and its office bearers had been put on notice. They are represented by counsel.
7. The application for condonation of delay having been allowed on certain terms and thereafter the appeals having listed for admission have been coming up before us for couple of occasions and we have heard Sri N.R. Bhaskar, learned Senior Central Government Standing Counsel appearing for the appellant and Sri G. Shivadas, learned counsel appearing for the respondent-assessee.
8. Sri Shivadas, learned counsel for the Assessee has raised a preliminary objection regarding the maintainability of the appeals though for two different reasors. Insofar as, the appeal relating to the order of the Tribunal on merits is concerned, the objection is an appeal of this nature cannot be maintained before this Court u/s 35G as what is sought to be corrected by the Revenue in the order of the Tribunal is a finding relating to rate of duty or classification as it can be called and the question involved to rate or classification having been expressly excluded from the scope of appeal u/s 35G of the Act and in fact such matters to be taken up by way of appeal directly to the Supreme Court and not to the High Court and therefore the appeals are not maintainable.
9. Sri Bhaskar, learned Senior Standing Counsel has very vehemently urged that it is misnomer to call that the present appeals involve any question relating to rate of duty, in fact it is begging question, to be precise, grievance of the appellant in the main appeal is that the Tribunal has failed to record a finding with regard to correctness or otherwise of the order passed by the Commissioner particularly for the purpose of determining the tax liability of the assessee and if no finding is recorded with regard to precise liability of the assessee with reference to the products which the assessee manufactures in the course of its business/manufacturing activity but nevertheless does not pay excise duty and on the Commissioner having noticed this deficiency, had under the order not originally brought to tax such excise duty which had escaped assessment particularly as Revenue had woken up to its stand that the product was dutiable at 16% and not at 8% as claimed and therefore had sought to bring him to the books the short payment and as such the order of the Commissioner having not been expressly held to be bad or illegal by any precise finding by the Tribunal, the order being a non-speaking order and on such premise the present appeal having been filed, there is no reason or justification to drive the appellant to go to Supreme Court for seeking a satisfactory resolution of this aspect of the matter, that on the basis if this court should agree with the stand of the appellant revenue, the matter will have to go back to the Tribunal without recording such a finding and it is only thereafter if at all the Revenue should suffer an adverse order, there may be need or necessity to take up the matter to the Supreme Court u/s 35-L of the Act and therefore the prsent appeal is very much maintainable on the question of law as indicated above.
10. Insofar as the order of the Tribunal rejecting the application for rectification of the earlier order which again is subject matter of another appeal u/s 35G of the Act, the submission is that the Tribunal had erroneously assumed that the period of six months operates even for examining the rectification application, that it is within the inherent powers of the Tribunal to entertain an application for rectification of this nature the statutory limitation imposed u/s 35C(2) which stipulates an outer limit of six months from the date of the order, that the submission is well supported by the authority of the judgment of the Supreme Court and has brought to our notice in the case of SunitadeviSinghania Hospital Trust v. Union of India 2009 (233) E.L.T. 295 and would submit that as laid down by the Supreme Court in this judgment, the period of limitation should not be a deterrant factor of the quasi-judicial Tribunal like the CESTAT to render justice, that the application filed by the Revenue seeking for rectification of the order of the Tribunal should not have been rejected with reference to sub-section (2) of section 35C of the Act. Mr. Bhaskar, learned Senior Standing Counsel would submit that even when the Department had sought to bring it to the notice of the Tribunal, that there was a failure of duty on the part of the Tribunal is not recording a finding relating to the question of levy of duty under the Act in respect of spares of Mobile Image Intensifires and X-ray machine and as such the order of the Tribunal was silent on this aspect to that extent it was required to be corrected and finding recorded, but the Tribunal had missed the point and had simply rejected the application only on the ground of limitation that by itself would constitute question of law worthy an examination u/s 35G of the Act.
11. Sri Shivadas, learned counsel appearing for the assessee pointed out that the judgment of the Supreme Court in the case of Sunitadevi, referred to supra, is not conclusive, that the Supreme Court had an occasion to review the legal position in the case of CCE v. Hongo India (P) Ltd. 2009 (236) E.L.T. 417 (S.C.) wherein the Supreme Court had an occasion to make a distinction about the possibilities for entertaining applications/appeals beyond the normal period of limitation only when it is a limitation supported under the Limitation Act for which even section 5 may also come into play but where the particular statutory enactment itself prescribes a precise period of limitation, it is not open to the Tribunal or court to go beyond that period as submitted and in the present case. Section 35C(2) having contained an outer limit of six months which reads as under :
“(2) The Appellate Tribunal may, at any time within six months from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1) and shall make such amendments if the mistake is brought to its notice by the Commissioner of Central Excise or the other party to the appeal:”
That the judgment of SunitadeviSinghania Hospital Trust’s case (supra) cannot govern the present situation and therefore it cannot be said that the Tribunal is in error in rejecting the application for rectification as barred by limitation.
12. Though Mr. Bhaskar, learned Senior Standing Counsel valiantly tried to submit that the law itself has been amended subsequently and relating to a procedural aspect would take effect from an earlier date also, but here again Mr. Shivadas learned counsel for the Assessee would point out that the amendment that was carried out to the period of limitation and conferring a discretion on the ground to entertain an appeal beyond the period was only to the statutory provision of appeal u/s 35G of the Act. No corresponding amendment of like nature having been brought about to section 35C of the Act. the position does not change from the law as declared by Supreme Court in Hongo India (P.) Ltd.’s case (supra) and that has to be applied.
13. Insofar as Appeal No. 64/2009 is concerned relating to the correctness or otherwise of the order of the Tribunal rejecting the rectification application on the ground of limitation, even assuming, that it is a question of law, there is no error in the finding on the question of law also and therefore there is no way of keeping this appeal pending on the board of this Court for further examination, the order of the Tribunal is fully in consonance of the law declared by the Supreme Court in Hongo India (P) Ltd’scase (supra) the appeal inevitably has to be dismissed and it is accordingly dismissed.
14. Insofar as appeal relating to main matter namely C.E.A. No. 86/2009 is concerned, we wish to examine the preliminary objection raised by Mr. Shivadas.
15. Though the real question involved is one relating to levy of duty on the spares which are manufactured by the Assessee which they go as intermediary for their products of X-ray machines and mobile image intensifiers are as products by themselves sold, also dispute being as to whether such spares were subject to duty at 8% as claimed by the assessee or 16% as claimed by the Revenue, it is essentially a dispute relating to the rate of duty with reference to tariff classification and if such is the question it is a subject matter of appeal to Supreme Court after the order passed by the Tribunal and not to the High Court under section 35G.
16. Though Sri Bhaskar, learned Senior Standing Counsel would make valiant efforts to point out that there is no finding recorded by the Tribunal to indicate as to whether it is dutiable at 8% or 16% and therefore in the absence of a finding, the effort of the revenue being only to elucidate a finding from the Tribunal. For such purpose we have to embark upon the examination of rates of duty as are applicable with reference to classification of the product and as to whether it is a product subject to duty in terms of 9022.10 as claimed by the Assessee.
17. That again being a question which can be made a subject matter of appeal before the Supreme Court u/s 35-L alone, it will not be proper and in fact not only improper to embark on an where the High Court has no jurisdiction upon such question of appeal expressly preferred u/s 35G of the Act, and it is for this reason we are upholding the preliminary objection raised by Sri Shivadas and dismiss this appeal in liminewithout admitting the same and without prejudice to the options of the appellant Revenue to have recourses to the remedy in accordance with the statutory provisions but elsewhere.
CEA No. 65 & 87/2009 :
18. The appeal CEA No. 65/2009 is filed u/s 35G of the Act though very much akin to CEA No. 86/2009 disposed of as above but relating to the question of levy of penalty is nevertheless governed by the order passed in CEA No. 86/2009. For the reason that this is also an order rejecting the application filed by the Revenue seeking for rectification of the impugned order levying penalty and which the Tribunal has rejected as being barred by limitation in terms of sub-section (2) of section 35C of the Act, we do not find any distinguishing feature from the reasons given by us while disposing of the CEA No. 86/2009 and for the very reason this appeal is also dismissed.
19. CEA No. 87/2009 is also an appeal preferred by the Revenue u/s 35G of the Act challenging the order of the Tribunal dated 16-11-2006 wherein the Tribunal had allowed the appeal of the Assessee Company as well as that of its officer who had suffered a personal penalty and both the additional duty and penalty had been set aside and insofar it relates to setting aside of the penalty on the officer of the company.
20. Mr. Bhaskar, learned Senior Standing Counsel for the appellant submits that the present appeal only rising a question of setting aside of the penalty levied by the Department adjudicating authority under Rule 209-A of the Central Excise Rules, 1944 that is not necessarily governed by the result in main appeal No. 86/2009, that question relating to justification of levy of penalty is not a question that can be taken to Supreme Court u/s 35L and question of this nature can necessarily be examined only in the appellate jurisdiction of this High Court u/s 35G and therefore the appeal has to be examined by this Court alone.
21. The submission of Sri Shivadas, the learned counsel for the respondent who had been put on notice, the appeal itself having not raised any question of law relating to justification or otherwise of the levy of penalty, no need for either admitting the appeal or for further examination.
22. Though Sri Bhaskar, learned Senior Standing Counsel would submit that while it is not incumbent upon the Assessee to indicate substantial question of law in the memorandum of appeal itself and it is for court to formulate such questions and the learned Standing Counsel is very right in his submission and it is only satisfaction of the High Court to an awareness that case involves a substantial question of law and we can show awareness if question is rightly shown to us and even otherwise we are required to examine and find out as to whether substantial question of law arises for examination and we having undertaken such an exercise, we find that it is not necessary to keep this appeal pending here for the simple reason penalty is only a consequential action pursuant to redetermination of duty or adjudicating authority and Sri Shivadas, the learned counsel appearing for the assessee respondent on instruction submits that respondent is ready to take its stands for sustainability or otherwise of the penalty depending upon the sustainability or otherwise of the levy of additional duty and if so the question will be directly linked to an additional duty being sustained or otherwise and as of now setting aside of the additional duty being an order in terms of the order of the Tribunal and until and unless such an order is set aside, levy of penalty also automatically goes out of picture and therefore we do not entertain the appeal but dismiss the appeal with the observation that it is open for the Revenue to seek for revival of the penalty order before the forum wherein they have succeeded on the main matter and as and when they do that and not before this Court any further. The submission made on behalf of the Assessee by its learned counsel is recorded so also the submission made on behalf of the learned Senior Standing Counsel on behalf of the appellant revenue is also noted and the appeal is accordingly dismissed.
