Case Law Details
Facts
• Taxpayer is a Central Government Public Sector Undertaking (“PSU”)
• Show cause notice was issued by the adjudicating authority to the tax payer alleging that the taxpayer is not entitled to avail/utilize the MODVAT/CENVAT credit in respect of units whose values stood written off. Hence it was proposed to be reverse such MODVAT/CENVAT credit
• The taxpayer contended that write off was made only with reference to the accounting requirements under AS-2. The inputs, lying in the factory, were useful for production and hence were entitled to MODVAT/CENVAT credit. The adjudicating authority rejected the contention of the taxpayer.
• The taxpayer challenged the order passed by the adjudicating authority by filing an appeal before the Customs, Excise and Service Tax Appellate Tribunal (“CESTAT”) and accordingly applied before the Committee of Disputes (“COD”)
• The COD refused to grant clearance though on identical facts in case of another taxpayer, the COD had given clearance. The High Court dismissed the writ petition filed against the order of COD.
• The taxpayer filed Special leave petition (“„SLP”) before the Supreme Court challenging the order of the High Court.
Issue before the Supreme Court
• Whether it was correct for the COD to refuse to grant clearance to the taxpayer for an appeal before the CESTAT?
Observations and Ruling of the Supreme Court
• In earlier orders of the Supreme Court
– The Supreme Court noted that PSUs of Central Government and Union of India should not fight their litigations in the Court.
– The Supreme Court directed to set up the COD to monitor disputes between Government and PSUs and give clearance on the matters to be proceeded by way of appeal before the jurisdictional authorities or to settle the issue {ONGC v. Collector of Central Excise 104 CTR 31 (SC)}.
– The Supreme Court further directed that the appeals and petitions could be filed without COD approval to save them from being barred by limitation. However application to COD could be made within one month from such filing {ONGC v. Collector of Central Excise 116 CTR 643 (SC)}.
• The Supreme Court in the present case observed that
– The idea behind setting up the COD was to ensure that no litigation comes to the court without the parties having an opportunity of conciliation before an in-house committee.
– Though the principle of formation of the COD was unexceptionable and complimentary, experience showed that the COD mechanism had not achevied the best results as expected and had in fact led to delays in litigation causing loss of revenue.
–Grant of clearance to one taxpayer and not to another may result in more litigation.
• Under the circumstances, the Supreme Court held that the directions in its earlier orders mentioned above relating to setting up of the COD and reference of disputes to the said Committee could be dispensed with.
Conclusion
• PSUs would no longer be required to obtain COD approval in case of any litigation
Source: Electronics Corporation of India Ltd. Vs. UOI & Ors (Civil Appeal No. 1883 of 2011 arising out of SLP 2538 of 2009) (SC)
How unfortunate! Babus were entrusted with a responsibility, and they have failed.