Brief of the case
In the present case a question of law was referred by a Larger Bench in order to resolve the conflict between the views taken by two separate Division Benches of this court in Commissioner of Service Tax Vs. L.R. Sharma, 2014 (4) AD (Delhi) 733 (hereinafter referred to as LR Sharma-I) and Commissioner of Central Excise, Delhi-1 Vs. Kundalia Industries, 2012 (279) E.L.T. 351 (Del). Accordingly, a Larger Banch was constituted in which it was held that the act of appending of signatures by the members of the Committee of Commissioners, would suffice, as long as, the record placed before them, contains the necessary material and the reasons for approving the action to institute the appeal. Also, no meeting or consultation of Commissioners is required u/s 86(2) of Finance Act, 1994.
Facts of the Case
The assessee, was issued a show cause notice dated 16.04.2010 in which, allegations levelled were of the following nature : (i). that it had not complied with the provisions of Rule 6(3) of CENVAT Credit Rules, 2004 during the period 2008-2009; (ii). that it had wrongly availed CENVAT Credit on services which were not used for providing taxable output services; (iii). there was non-payment of service tax on excess baggage; and (iv). lastly, it had failed to provide information and data with respect to value of air tickets purchased prior to 01.05.2006 which, in fact, were used on or after 01.05.2006. The adjudication order dated was reviewed u/s Section 86(2) of the Finance Act, 1994. The review decision was taken to file an appeal before the Tribunal. In the first instance, the Inspector (Review) in the concerned department of the Revenue prepared a note on 11.03.2013, which was, put up before the Superintendent (Review) on the same date. The said note articulated, in detail, the grounds for challenging the order of the adjudicating authority. The Superintendent (Review), appears to have seen and appended his signatures to the said note, as indicated above on 11.03.2013, itself. The said note was put up before the Deputy Chief Commissioner in the Chief Commissioner’s unit. This note was put up before the Additional Deputy Commissioner on 11.04.2013 who, independently, came to a similar view, which is, that the adjudication order had to be reviewed for reasons stated therein. It is on record that a Review Order no.24/2013 dated 26.04.2013 which is a typed note, which bears, the signatures of both Chief commissioner of Central Excise (Delhi Zone) and Chief Commissioner of Central Excise (Chandigarh Zone). A preliminary objection was taken by the assessee that it was not maintainable, as there was no application of mind by the Committee of Chief Commissioners in considering the draft review order, which recommended, institution of the appeal against the adjudication order.
Contention of the Revenue
The ld. Counsel for the Revenue submitted that the committee while taking a decision in the matter of filing the appeal before it had the benefit of the material placed before them, which included, the observations of all subordinate officers at various levels, who had diligently applied their mind to the errors which had crept in the adjudication order. The fact that the Committee of Commissioners appended their signatures to the note was sufficient compliance of the provisions of Section 86(2) of the Finance Act.
Contention of the Assessee
The Ld. Counsel for the Assessee sunbmitted that the reference had to be answered against the Revenue. It was the submission of the learned counsel that, as rightly found by the Tribunal, the two Chief Commissioners, who formed the Committee have never met. According to the learned counsel, the first review order culminated with the signatures of the Chief Commissioner of Central Excise (Delhi Zone), who appended his signature on the note sheet on 15.04.2013. Similarly, the second review order, the learned counsel stated, culminated with the signatures of Chief Commissioner, Central Excise (Chandigarh Zone); who appended his signatures on 26.04.2013. It was further submitted that the function discharged by the Committee of Commissioners being a quasi-judicial function, it had to necessarily meet, consult and give reasons, as to why a decision had been taken to institute an appeal before the Tribunal against the subject adjudication order.
Held by the Hon’ble Tribunal
The Hon’ble Tribunal held that the decision taken to institute the appeal before it, by the Committee of commissioners, was taken, without due application of mind. While coming to this conclusion, the Tribunal noted that the “twin requirements of the decision making process, namely the due consideration of material pertaining to the adjudication / the appellate order and the appropriateness / desirability of preferring an appeal were not met”.
Held by the Hon’ble High Court
The Hon’ble High Court held that the Section 86(2) does not state as to the manner in which Committee of Commissioners have to arrive at a decision as to whether an appeal should be preferred against the order of Commissioner of Central Excise. The provision for constitution of Committee of Commissioners appears to have been incorporated in the Finance Act to exclude the possibility of institution of frivolous or futile appeals. The duty discharged by the Committee of Commissioners is purely administrative and, cannot be, categorized as a quasi-judicial function since, it does not decide the lis between the parties, that is, the Revenue and the Assessee. There is neither a de novo investigation of facts nor is a hearing required to be given by the committee. All that the Committee of Commissioners does is to ascertain as to whether or not the adjudication order go against the interest of the Revenue. The decision rendered by the Committee of Commissioners, does not have the attributes of a quasi-judicial function. Also, a meeting or consultation is not mandatory so long as each member of the Committee has the requisite material placed before him prior to a decision being taken as to whether or not an appeal is to be preferred. In the facts of the case, the record itself shows, as to why the Revenue was desirous of preferring an appeal. The reasons set out were cogent and substantial. Further, it was held there is no requirement whatsoever under the provisions of Section 86(2) of the Finance Act to give independent reasons for coming to a conclusion, which is, in consonance, with a view already on record that an appeal should be filed. The language used in Section 35B(2) of the Central Excise Act though not identical, is broadly, similar to the language used in Section 86(2) of the Finance Act. Further the Hon’ble High Court held that the role of the Tribunal is, limited to only ascertaining as to whether or not the Committee of Commissioners (comprising of duly authorised officers) has taken a decision to institute the appeal. Once, such satisfaction is reached in this behalf, the Tribunal cannot render the appeal incompetent, in particular, on the ground that no meeting took place, or that, there were no independent reasons recorded by the Committee of Commissioners. It was also mentioned that the act of appending of signatures by the members of the Committee of Commissioners, would suffice, as long as, the record placed before them, contains the necessary material and the reasons for approving the action to institute the appeal. Accordingly, the answer to the Reference was given in the favour of Revenue.