Case Law Details
CST Vs. Maa Communications Bozell Ltd. (Karnataka High Court), CEA No. 7 of 2007, Dated- June 3, 2010
Brief of the Case- The approach of the Tribunal in this particular case has been very cursory. In fact, in a matter the like this, if the facts are involved pertaining to suppression of material and second show cause notice has been issued, the entire factual matrix had to be considered in order to give a finding with regard to validity of the second show cause notice issued by the Assistant Commissioner. In the absence of there being any application of mind on this issue, the Tribunal could not have allowed the appeal of the assessee by merely relying on the Apex Court’s decision. The Tribunal could not have passed such an order by merely referring to a precedent and dispose of the matter without laying any foundation for the same in the form of narrating the facts and giving reasons and only by relying on the basis of the facts narrated and the contentions urged by the counsel.
Facts of the Case- The facts leading to filing of this appeal are that initially, a show-cause notice dated 4-7-2001 was issued by the Assistant-Commissioner of Central Excise to the respondent-assessee which was adjudicated upon and an order came to be passed on 6-5-2002, by which the demand made in the show cause notice for a sum of Rs.5,43,092/was confirmed with regard to the service tax for the period October 1998 to March 2001 and interest of Rs.2,26,689/-was also confirmed by virtue of section 75 of the Finance Act (for short ‘the Act) 1994 and for the delayed payment of service tax. However, imposition of penalty under sections 76-77 of the said Act was dropped. Subsequently, another show cause notice was issued on 3-4-2003 by the Assistant Commissioner of Central Excise, Bangalore, on the ground that there had been suppression of value of taxable service with an intention to escape payment of Service Tax amounting to Rs.34,78,209/- and in respect of the total taxable service rendered and therefore, it was stated that the assessee was liable for penal action under sections 75, 76 and 78 of the said Act. In the said show cause notice, demand was made for payment of service tax amounting to Rs.34,78,209/- as well as questioning as to why interest and penalty should not be imposed for the failure of payment of service tax. In response to the said show cause notice, a reply was given by the respondent- assessee and thereafter the said notice was also adjudicated upon and an Order-in-Original dated 14-11-2005 came to be passed by the Commissioner of Central Excise, by which the demand made was confirmed under section 73 of the Act and it was also directed that interest to be paid under section 75 of the Act and as well as penalty under Section 76 of the Act. Being aggrieved by the said order, the respondent herein preferred an appeal before the CESTAT (for short ‘the Tribunal’). The Tribunal by its order dated 26-6-2006 allowed the appeal of the respondent- assessee by placing reliance on a decision of the Apex Court in the case of NIZAM SUGAR FACTORY -vs-CCE reported in 2008 (197) ETL 465 (SC). The said order of the Tribunal is challenged in this appeal by the Revenue.
Held by Karnataka High Court
In fact, it is only in a reasoned order that the application of mind of a judicial or a quasi judicial authority would become apparent.
The mandate of giving reasons or passing a reasoned order or giving a reasoned decision is not only a part of natural justice but it is a safeguard against arbitrariness. When an adjudicator is obliged to give his reasons for conclusions, it will make it necessary for him to consider the matter carefully. The compulsion to give reasons introduces clarity in the order and minimizes chances of irrelevant considerations from entering a decisional process. In fact, recording of reasons ensures that the authority has applied its mind to the case and the reasons that compelled the authority to take a decision in question are germane to the contents and scope of power vested in-the-authority. Therefore, in the absence of a speaking order, Courts would not be able to understand the application of mind to the facts and issues raised in the case.
In this context, it is also relevant to note that the appellate authority must give reasons where it is reversing. The order of the lower authority. In the ease of ClT. – VS. WALCHAND & Co. (AIR 1967 SC 1435). The Income-tax Appellate Authority did not agree with the view of the income tax officer, but without assigning any reasons the Tribunal allowed the claims of the assessee partially. It was held that, the Tribunal must record its reasons in support of its claims. In fact, even when the appellate authority affirmed a decision of a lower body, ;’t should give its own reason and at least, it. should be indicated clearly by the appellate authority that it is accepting the reasons given by the lower authority. In the case of TRAVANCORE RAYONS -Vs.-INDIA (AIR 1971 SC 862). Which is a case regarding assessment of Excise Duty when the Central Government in exercise of its revisional powers had affirmed the collectors decision by a non-speaking order, the Apex Court stressed that the appellate body should give its own reasons even when it was affirming the order of a lower body. In fact, in a hierarchical order, as in the case of assessment of customs duty, each authority should pass a speaking order. Therefore, giving of reasons by an adjudicating body goes to the very root of the process of decision-making or adjudication and therefore, it is not just a formal requirement but indicates that the adjudicatory body has applied its own mind to the merits of the case and also to avoid any doubt as to any perfunctory approach.
