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Delhi High Court

Judgment Date:   20-07-2015

Case No. :   CEAC 61/2014

Parties:

Commissioner of Service Tax ...Petitioner Vs  Japan Airlines International Co. Ltd. ...Respondent

Coram :-

Hon’ble Mr. Justice S. Ravindra Bhat ; Hon’ble Mr. Justice Sanjiv Khanna ; Hon'ble Mr. Justice Rajiv Shakdher

 

Question of Law:

(1) Whether the Custom, Excise and Service Tax Appellate Tribunal (CESTAT) in an appeal under Sub-Section (2) and (2A) of Section 86 of the Finance Act, 1994 read with applicable provisions of the Central Excise Act, 1944, can examine and go into the question of application of mind on merits by the Committee of Chief Commissioners or Commissioners?

(2) In case the aforesaid question is answered in affirmative, i.e., against the Revenue and in favour of the assessee, then, whether the decision of the Committee of the Chief Commissioners or Commissioners should be treated as null and void if they have appended signatures to the elaborated notes and objections prepared by the subordinate officers, before the file is put to the Chief Commissioners or Commissioners for examination?

 

Facts of the case:

The respondent/assessee, was issued a demand-cum-show cause notice dated 16.04.2010, pursuant to a service tax audit conducted between 08.09.2009 to 10.09.2009 in which various allegations were leveled.

The said show cause notice was adjudicated upon by Commissioner of Service Tax, Delhi vide order dated 28.12.2012. The adjudication order was reviewed by the Committee of Chief Commissioners, as mandated under the provisions of Section 86(2) of the Finance Act, 1994. Post, the review, a decision was taken to file an appeal before the Tribunal. However the Tribunal rejected the appeal on the ground of maintainability. The Tribunal, took the view 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...”

 

Contentions of the Respondent:

The Contentions of the respondent were that the two Chief Commissioners, who formed the Committee had never met. It was also argued that both the Chief Commisssioners merely appended their signature on the note sheet prepared by the juniors and that two on different dates making it decision taken independently. It was 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 and a mere exercise of signing the note sheet would not be in line with the provisions of Section 86(2) of the Finance Act.

 

Judgment:

However the Delhi High Court disagreed with the respondent and answered the questions of law in favour of revenue.

 

Excerpts from the Judgment

….. that the Committee of Commissioners should not only meet and consult but should also give reasons for the decision arrived at by them, independently of what is already placed on record before them, loses a sight of the fact as to how the Revenue functions when it is tasked with administrative duties.

 

….. the instruction dated 23.11.2012, issued by the Board, is reflective of the fact that the duty discharged by the Committee of Commissioners under Section 86(2) of the Finance Act is a quasi-judicial function. We have read the instructions. The instructions merely highlight the manner in which decisions were being taken in the past by the Committee of Commissioners, it does not in any way convey that the function discharged by the Committee of Commissioners is imbued with attributes of a quasi-judicial process

 

In our view, 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 is impregnated with aspects which go against the interest of the Revenue, and if so, whether or not they are already covered by decisions rendered by superior courts. The decision rendered by the Committee of Commissioners, in our view, does not have the attributes of a quasi-judicial function

 

In our view, a meeting and / 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. It may be a wholesome circumstance to have a meeting and consultation between the members of the Committee but, the absence of the same, cannot render a decision taken by them open to challenge as long as they concur with each other and, there is, material placed before them for reaching such a conclusion.

 

In our opinion, though, no inter se meeting, in the physical sense, was held by the two Chief Commissioners, there is sufficient material, on record, to establish, that there was, a convergence of views.

 

Therefore, while one cannot but agree with the proposition that there should be material on record which reflects the reasons as to why the Revenue wishes to prefer an appeal, what does not flow from that, is that, the Committee of Commissioners should necessarily give their own reasons if they otherwise agree with the reasons already on record. In the facts of the case, the record itself shows, to which, we have made a reference above, as to why the Revenue was desirous of preferring an appeal. The reasons set out were cogent and substantial. As to whether the reasons recorded would finally persuade the Tribunal to hold in favour of the Revenue is not what concerns the Committee of Commissioners. This is so as it is an unilateral administrative decision of an aggrieved party i.e., the Revenue.

 

Therefore, having regard to the nature of the administrative functions discharged by the Committee of Commissioners, in our view, 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.

 

In our view, the limited scrutiny that the Tribunal may conduct when there is an objection raised as regards the maintainability of the appeal is, to examine, as to whether, a decision has been taken by the officers, who ought to form part of the Committee of Commissioners. Once, the record shows that a decision has been taken to file an appeal then, in our opinion, it is beyond the remit of the Tribunal to either examine the sufficiency of the material or the “appropriateness / desirability of instituting the appeal”; as these are aspects with respect of which, responsibility has been placed on the Committee of Commissioners.

 

The Tribunal, while acting as an appellate authority, in our view, has no jurisdiction whatsoever to strike down a decision taken by the Committee of Commissioners on the administrative side. As indicated above, the only aspect that the Tribunal can examine is, as to whether or not there is on record a decision of the Committee of Commissioners to institute an appeal. Once, such a decision is shown to have been taken then, the Tribunal, will entertain the appeal and adjudicate upon the same on merits; albeit in accordance with law.

 

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Delhi HC-No Requirement U/s 86(2) of Finance Act to require Chief Commissioners Committee give Independent Reasons for Appeal to Service Tax Tribunal