Tribunal cannot abdicate its duty of deciding the matter on merits till the outcome of pending matter

Supreme Treves Pvt. Ltd. Vs Union of India (Gujrat high court)

Gujarat High Court held that Tribunal cannot abdicate its duty of deciding the matter on merits till the outcome of pending matter before Apex Court. Section 35C(1) of the the Central Excise Act, mandates the Tribunal to dispose of the appeals on merits.

Facts- It is the grievance of the petitioners that the Tribunal instead of deciding the matter has remanded it to the Assessing Officer in view of the fact that the matter being a case of M/s. PCM Cement Concrete Private Limited vs. Commissioner of Central Excise Customs and Service Tax (Civil Appeal Nos.005702-005703/2018) is pending before the Supreme Court.

Conclusion- We notice that the entire basis of remand ordered by the Appellate Tribunal is on the ground of pending aforesaid Civil Appeal. Secondly, the Tribunal has noted that to adjudicate the issue involved the matter needs to be reconsidered considering not only the position of income tax but also on basis of terms and conditions of the employment of Directors. Also held that the Directors of a company were employees, and remuneration paid to Directors was not chargeable to service tax. In such circumstances, we find that the approach of the Tribunal for remand was not proper.

The Tribunal is a creation of statute. Section 35C(1) of the the Central Excise Act, mandates the Tribunal to dispose of the appeals on merits. It was simply not open for the Tribunal to jettison the litigation in this manner.

Held that in the instant case also, we notice that the approach of the Tribunal is to abdicate its duty of deciding the matter on the merits or to retain the matter till the outcome of the pending matter before the Apex Court. This approach of Tribunal is not proper. We deem it appropriate to direct the Tribunal to decide the matter on merits. We further reserve liberty to the parties to raise all contentions as raised by both the sides before this Court. Let the same be decided without further loss of time.

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

1. Rule returnable forthwith. Learned Central Government Standing Counsel Mr. Nikunt K. Raval waives service of notice of rule for and on behalf of respondents.

2. With consent of learned advocates appearing for the respective parties, this matter is taken up for final hearing in view of the several orders passed by this Court deciding similar issue involved in the present present petition.

3. By way of present petition under Articles 14, 19(1)(g), 265 and 300(A) of the Constitution of India, petitioners have prayed for

following reliefs:

“(A) That Your Lordships may be pleased to issue a Writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate writ, direction or order, quashing and setting aside Order No.A/11891-11892/2021 dated 24.5.2021 (Annexure- “M” hereto) made by the Appellate Tribunal, Ahmedabad, with all consequential reliefs and benefits:

(B) That Your Lordships may be pleased to issue a Writ of Prohibition or any other appropriate writ, order or direction, fully and permanently prohibiting the Respondents herein from taking any action against the Petitioner Company pursuant to order No.A/11891-11892/2021 dated 24.5.2021 (Annexure- “M” hereto) thereby ordering conclusion of the case made out by the Revenue against the Petitioner Company;

(C) Pending hearing and final disposal of the present petition, Your Lordships may be pleased to stay operation, implementation and execution of Order No.A/ 11891-11892/2021 dated 24.5.2021 (Annexure- “M” hereto) passed by the Appellate Tribunal, Ahmedabad on terms and conditions that may be deemed fit by this Hon’ble Court;

(D) An ex-parte ad-interim relief in terms of para 23 (C) above may kindly be granted.

(E) xxx”

4. In response to the notice issued by this Court vide order dated 30.09.2021, respondents have appeared through their learned counsel and affidavit-in-reply has been filed.

5. It is the grievance of the petitioners that the Tribunal instead of deciding the matter has remanded it to the Assessing Officer in view of the fact that the matter being a case of M/s. PCM Cement Concrete Private Limited vs. Commissioner of Central Excise Customs and Service Tax (Civil Appeal Nos.005702-005703/2018) is pending before the Hon’ble Supreme Court.

6. Learned advocate Mr. Paresh Dave appearing for the petitioners has raised specific grievance that the issue involved in the case of M/s. PCM Cement Concrete Private Limited (supra) is not applicable, and therefore, the Tribunal ought to have decided the matter.

6.1 Learned advocate Mr. Paresh Dave appearing for the petitioners has relied upon the oral order dated 07.01.2023 passed by this Court in Special Civil Application No.586 of 2021. Learned advocate Mr. Paresh Dave by taking us through the aforesaid order, more particularly, Paragraph Nos.6 and 7 and direction issued in Paragraph No.8 of the said order, would submit that present petition requires consideration.

7. On the other hand, learned Central Government Standing Counsel Mr. Nikunt Raval has opposed this petition. He has invited our attention to the affidavit-in-reply filed by Commissioner of CGST and Central Excise. He has also placed on record the status of Civil Appeal.

8. We have heard learned advocates appearing for the respective It is true that Civil Appeal Nos.005702-005703/2018 is pending before the Hon’ble Apex Court. We notice that entire basis of remand ordered by the Appellate Tribunal in the present case is on the ground of pending aforesaid Civil Appeal. Secondly, the Tribunal has noted that to adjudicate the issue involved the matter needs to be reconsidered taking into account not only position of income tax but also on basis of terms and conditions of the employment of Directors. The aforesaid aspect as submitted by Mr. Paresh Dave, learned advocate for petitioner is settled by various decisions holding that Directors of a company were employees, and remuneration paid to Directors was not chargeable to service tax. In such circumstances, we find that approach of Tribunal for remand was not proper.

9. At this stage, apt would be to consider the observations made by the Co-ordinate Bench of this Court in Special Civil Application No.586 of 2021 on 07.01.2023. Relevant observations made in Paragraph No.6 and 7 of the said order read as under:

6. We notice that the chief reason for remanding the matter for adjudicating it de novo by the adjudicating authority is the pendency of the matter in case of M/s. M/s.Bombay Dyeing and Manufacturing Company Limited (supra) before the Apex Court. It is a Larger Bench’s judgment of the Bombay High Court challenged before the Apex Court in Special Leave Petition No.007390 of 2020 on 09.06.2020. We are given to understand that the same is still pending before the Apex Court and has not been finally decided. If the matter is still pending before the Apex Court, nobody can make a guess as to in what way it is going to result. The least the Tribunal could have done was of deciding the matter on merit as per the prevalent law or to keep the matter back. However, it has chosen to remand the matter to the adjudicating authority which is impermissible.

7. This Court in case of Commissioner of Central GST vs. Jay Chemical Industries Ltd., reported in 2018 (19) GSTL 459(Guj.) the question which was pending before the Tribunal was at large before the High Court. The Court held that in such a situation, the appeal ought to have been kept pending till the decision of the High Court with a liberty to both the sides to approach the Tribunal after the decision of the High Court. The approach of the Tribunal is held to have harassed both the Assessee and the Department, the matter was remanded with a direction to keep it pending and decide after the decision of the High Court in Tax Appeal pending before it on the same issue.

7.1 Relevant findings and observations of the Court are as follow:

“6.Having heard learned Advocates appearing on behalf of the respective parties and considering the impugned common order passed by the learned Tribunal, we, as such disapprove the manner in which the learned Tribunal has disposed of the appeals. As such, the learned Tribunal ought to have decided the appeals on merits in view of the binding decisions of this Court in the case of Cadila Healthcare Ltd. (supra) and Astik Dyestuff Pvt. Ltd. (supra). However, if the learned Tribunal was of the opinion that in view of subsequent notification No.2/16 dated 03.02.2016, by which explanation has been inserted to the definition of ‘input service’ and the question whether such notification shall be applicable retrospectively or not is at large before this Court in the case of Essar Steel India Ltd., being Tax Appeal No.444 of 2016 and it is not appropriate to decide the appeals on merits, in that case, the learned Tribunal ought to have kept the appeals pending till decision of this Court in the case of Essar Steel India Ltd., being Tax Appeal No.444 of 2016. Instead, the learned Tribunal has disposed of the appeals even without deciding the appeals on merits with liberty to both sides to approach the Tribunal after decision of this Court in the pending appeal in the case of Essar Steel India Ltd., being Tax Appeal No.444 of 2016. Such an order would not help either the Revenue /Department and even the assessee. Such a procedure adopted by the learned Tribunal would cause harassment to the assessee as well as inconvenience to the Department. Therefore, we are of the opinion that the procedure adopted by the learned Tribunal disposing of the appeals without deciding the same on merits with liberty approach the Tribunal after decision of this Court in the pending appeal is neither correct not proper and the same deserves to be quashed and set aside.

7. As recorded hereinabove, even learned Advocate appearing on behalf of the assessee in Tax Appeal Nos.814 and 815 of 2018 has also stated and submitted that the learned Tribunal ought to have kept appeals pending rather than disposing the appeals with above liberty.

8. In view of the above and for the reasons stated hereinabove, all these appeals succeed. The impugned common order passed by the learned Tribunal is hereby quashed and set aside and the appeals are restored to the file of the learned Tribunal and to avoid any further multiplicity of proceedings /appeals before this Court, it is directed that the appeals on remand be kept pending till the decision of this Court in the case of Essar Steel India Ltd., being Tax Appeal No.444 of 2016.

9. The appeals are partly allowed to the aforesaid extent.”

7. In Tax Appeal No.1043 of 2018 decided in case of Commissioner, Central GST and Central Excise Vadodara-II vs. M/s.Meghmani Finchem Ltd., this very issue was decided by this Court by strongly disapproving this approach on the part of the Tribunal. One particular appeal was pending before this Court and the large number of appeals came up for consideration before the Tribunal on the very issue, the Department had placed heavy reliance on the judgment of the High Court and the Assessee relied on the amendment to the definition of the “input credit service” and argued that in all pending cases irrespective of the date of amendment, the same would apply. The Tribunal had option to wait for the outcome of Department’s appeal in case of the pending appeal of the Essar Steel if, the decision in such appeal was likely to be rendered in a foreseeable future. However, if it was of the opinion that the judgment would not be available in the near future, it could have awaited till the outcome. The approach of the Tribunal was not at all approved by the Court in the following words:

“4. In view of such facts, the options before the Tribunal were either to await the outcome of the department’s appeal in case of Essar Steel India Ltd (supra) if the decision in such appeal was likely to be rendered in near foreseeable future which would in addition to reducing the effort of both sides would also in many cases eliminate one stage of litigation. However, if the Tribunal was of the opinion that the judgement of the High Court may not be available in near future or for any such other good reason, it would not possible or advisable to await the outcome, the option with the Tribunal was to decide the appeals on merits after hearing both sides and as may be advised. Strangely, the Tribunal adopted the third mode. The Tribunal disposed of all appeals “with liberty to both sides to approach the Tribunal soon after the verdict of the Hon’ble High Court in the pending appeal against the Division Bench judgement of this Tribunal in case of Essar Steel India Limited (supra) filed by the Revenue”. While doing so, the Tribunal also added “needless to mention no recovery nor refund would be processed during the period”.

5. For multiple reasons, we do not approve the approach adopted by the Tribunal. Dispensation of justice is not number games and should not be brought down to mere statistics. Through the mode adopted by the Tribunal all that has been achieved is to show disposal of large number of appeals and crossobjections without resolution of the disputes between the parties. This disposal is also not final and is open to reopening of all the issues. This would lead to multiplicity of proceedings. The parties, i.e. the department or the assessee, as the case may be, would have to file fresh proceedings once the High Court disposes of the appeal in case of Essar Steel India Ltd. In the mechanism provided, the Tribunal has also left many gaps. For example, there is no clarity as to what time limit within which the parties would have to file fresh proceedings. The Tribunal merely stated that soon after the verdict either side can approach. This term “soon after the verdict” is not possible of any clear application. Further, we wonder what would happen if no appeal is filed as per the liberty granted by the Tribunal. Whether the decision against the losing party would achieve finality; in which case what would happen to the tax or the refund is not clear. At which point of time such finality would be presumed is not specified. All in all, this is the most unsatisfactory manner in which, such large number of proceedings should have been eliminated from the record of the Tribunal which can achieve only statistical purpose. The order passed by the Tribunal serves no other purpose.

6. The Tribunal is a creation of statute. Section 35C(1) of the the Central Excise Act, mandates the Tribunal to dispose of the appeals on merits. It was simply not open for the Tribunal to jettison the litigation in this manner.”

10. In view of the above facts, we are of the opinion that petition requires consideration. Present petition stands disposed of with following direction:

“In the instant case also, we notice that the approach of the Tribunal is to abdicate its duty of deciding the matter on the merits or to retain the matter till the outcome of the pending matter before the Apex Court. This approach of Tribunal is not proper. We deem it appropriate to direct the Tribunal to decide the matter on merits. We further reserve liberty to the parties to raise all contentions as raised by both the sides before this Court. Let the same be decided without further loss of time.”

11. With the above observation and direction, present petition stands disposed of, Rule is made absolute to the aforesaid extent.

12. It is hereby made clear that this Court has not examined the merits of the case.