06.05.2014
Tuesday
CAN an officer be punished for passing an order in favour of the assessee?
Some years ago, I received a call where the caller said, "I am Duli Chand". For me Duli Chand was the respondent in In Union of India and others v. Duli Chand - 2006-TIOL-78-SC-MISC-LB. I never believed that a party in one of the landmark cases that I reported would call me. It was like a character in a story coming to life and talking to me.
Anyway in the Duli Chand case, the Supreme Court had held that while performing judicial or quasi-judicial functions, if the authority acted negligently or omitted essential conditions prescribed for exercise of such power, disciplinary proceedings could be initiated.
This is the sad story of an officer of the Central Excise Department who retired as an Assistant Commissioner twenty years ago in 1994 and committed the crime of passing an order in favour of the assessee - and that too because there was a Tribunal order binding him.
Two years after his retirement in 1996, the Department issued a charge sheet against him for passing an order in favour of an assessee.
It seems the Commissioner called the Assistant Commissioner and asked him to clear all demand cases involving large amounts of duty. In pursuance to the Commissioner's directions, he adjudicated a case involving classification of certain steel products. As per the Department, these products were required to be classified as "flats" under sub-head 7211.19/7211.30 of the Central Excise Tariff, while, on the other hand, as per the assesses, it was required to be classified as "other bars and rods" under subhead 7214.90. This issue had been decided in favour of the assessee by a decision of the Tribunal. The Department had gone in appeal to the Supreme Court against the decision of the Tribunal - which was ultimately dismissed.
Now, the charge-sheet against this retired officer was that
1. he adjudicated the cases transgressing monetary limit fixed for Assistant Collector; and
2. vacated the demands knowing fully well that the department had gone in appeal in the Supreme Court on the same issue which was pending with the Apex Court at that time.
The retired Assistant Commissioner submitted that as per the Board's Circular, there was no monetary limit in cases of classification and valuation matters and that he only followed judicial hierarchy and obeyed the orders of the CESTAT, which in the absence of stay by the Supreme Court was binding on him.
In 2005, 11 years after his retirement the department imposed a penalty of 30 percent cut in his pension. The CAT dismissed his petition in 2007!
The retired Assistant Commissioner is before the High Court.
In the High Court, the Department argued that though there was no financial loss to the Department as the judicial view of the CEGAT was accepted by the Supreme Court, that would not make a difference to the matter in issue because the conduct of the petitioner has to be seen on the date he passed the order.
The High Court observed,
The petitioner performing quasi-judicial functions was bound by the then prevalent legal position as enunciated by the CEGAT, which was, subsequently, affirmed by the Hon'ble Supreme Court. It was not even a case of not safeguarding revenue. It appears that since the orders were passed by the petitioner on the verge of his retirement, the department chose to draw an adverse inference against him qua his conduct only on that account, which would not be permissible or appropriate.
Judicial History: in Zunjarrao Bhikaji Nagarkar v. Union of India and others - 2002-TIOL-130-SC-CX, the Supreme Court opined that an error in interpretation of law cannot be a ground for misconduct unless it is deliberate and actuated by mala fides. If an error of law would constitute misconduct, it would be difficult to independently function for a quasi judicial officer. Such an action could always be corrected in appeal.
In an earlier decision of the Supreme Court in Union of India and others v. Shri K.K. Dhawan - 2002-TIOL-441-SC-MISC-LB, the view expressed was that the disciplinary proceedings could be initiated against a government servant concerned with regard to exercise of quasi judicial powers, if the act or omission is such as to reflect on the reputation of the government servant for his integrity or good faith or devotion to duty; there is a prima facie material manifesting recklessness or misconduct in discharge of the official duty; the officer had failed to act honestly or in good faith or had omitted to observe the prescribed conditions which are essential for the exercise of statutory power.
In Union of India and others v. Duli Chand - 2006-TIOL-78-SC-MISC-LB, the Supreme Court held that while performing judicial or quasi judicial functions, if the authority acted negligently or omitted essential conditions prescribed for exercise of such power, disciplinary proceedings could be initiated.
In Union of India and others v. Kamlakshi Finance Corporation Limited - 2002-TIOL-484-SC-CX-LB, it was held that ignoring the views of appellate authority amounts to harassment to the assessee by failure of the officers to give effect to the orders of the authorities higher to them in appellate hierarchy. In quasi-judicial proceedings, the Revenue officers were held bound by the decisions of the appellate authorities and the principles of judicial discipline require the same to be maintained.
Coming back the present case, the High Court allowed the writ petition of the retired Assistant Commissioner and quashed the punishment and directed the Government to clear the arrears within two months with interest.
The High Court also awarded costs to the retired Assistant Commissioner quantified at Rs. 10,000/-.
The retired Assistant Commissioner is now 80 years old and is exonerated by the High Court 20 years after his retirement (assuming of course, the Government doesn't go to the Supreme Court) and he gets a cost of Rs. 10,000/- from the High Court!
All those who charge-sheeted him, should be put in jail, if we want some semblance of reason in the first adjudication order.
Why should any adjudicating authority stick his neck out and pass an order in favour of an assessee and invite a possible charge-sheet from the bosses rather than pass a mindless order in favour of Revenue and let the assessee fend for himself in the corridors of the Tribunal and High Courts pleading for waiver of pre-deposit of all those capricious crores?
Please see: SC order in Duli Chand case straightens legal position + A student's view of two SC judgements : Z B Nagarkar and Duli Chand
Please see 2014-TIOL-649-HC-P&H-ST
Exemption of excise duty on tow arising during course of manufacture of polyester staple fibre (PSF) or polyester filament yarn (PFY) - CBEC Clarifies
AS per Sl. No. 172A of notification No. 12/2012-Central Excise, dated 17.03.2012 excise duty on polyester staple fibre (PSF) or polyester filament yarn (PSY), manufactured from plastic waste including waste polyethylene terephthalate bottles, is exempted.
As per Board's Circular No. 19/MMSF/88-CX.1 dated 26.5.1998, tow arising during the course of manufacture of such PSF/PSY is chargeable to excise duty since the final product is exempt. Tow arising during the manufacture of such PSF/PFY contributes to 90% of the value of such PSF/PSY defeats the purpose of granting exemption from excise duty to such PSF/PSY.
Representations have been received requesting for granting exemption from excise duty on tow arising during the manufacture of such PSF/PFY.
The Board informs the Chief Commissioners that the matter is under consideration in the Ministry and the field formations are requested to keep the show cause-cum-demand notices on the above issue, if any, in the Call Book pending further instructions from the Ministry.
CBEC Letter in F.No. 345/2/2013-TRU, Dated: March 14, 2014
Outgoing FM in hurry to complete transfers in Revenue Boards
IT is learnt that the FM has directed both the Boards - CBEC and CBDT - to finalise the Annual General Transfers 2014 immediately. He wants the final lists on his table by tomorrow.
The President of the IRS Association, Metta Rama Rao has written a letter to the FM requesting him not to issue transfers as per the existing transfer policy as the association has been requesting for a new transfer policy. The Association has also requested the FM to clear the cadre review file immediately.
Is it fair for a Finance Minister who will be out of office the next fortnight to order transfer of all cadres in the Revenue Boards? And a man like Chidambaram trying to do it is surprising to say the least. Is this to be a parting gift to his friends and followers?. If the FM really wants to help the staff who worked for him, he should immediately clear that cadre review file and all the employees will bless him!
Economics of Politics - The Crorepati Club
IN another ten days, curtains will come down on the world's largest democratic exercise. It seems each major candidate in a Lok Sabha constituency spends about Rs. 100 Crores. That is to form the next Lok Sabha, people must have spent over a lakh crores of rupees, making it the richest club in the world. Can these multi millionaires be called the representatives of the poor people of India who earn less than thirty rupees a day, which according to our wise Montek is good enough for a day?
How do you really spend 100 Crores in less than a month? It seems getting a party ticket costs about 20 Crores and starting from there every step is based on money. Mind boggling! Do we need such an expensive exclusive debating club, where hardly any debating takes place? Can't we think of a less expensive exploitation of the people - like a Presidential form of Government?
Jurisprudentiol –Wednesday's cases
 Service Tax
Refund - if services have not been received and the payment made for said services had been adjusted between Indian and Amsterdam Company, said corresponding value of services would not be liable to Service Tax - matter remanded: CESTAT
THE appellant is registered with service tax Department for providing Convention Services, Computer Network Services, Business Auxiliary Services, Commercial Training or Coaching Service, Sponsorship Services and Management or Business Consultant services. They filed a refund claim of Service Tax for the period October 2009 to March 2010 on 18/03/2011.
The ground of refund claim is that the party has entered into an agreement with M/s. Wolters Kluwer NV, Amsterdam, Netherlands for providing service of Management or Business Consultant from abroad in respect of management of their on-going office in India and also to provide service related to Mergers and Acquisitions deals on behalf the party. The assessee, as mentioned, got registered in the category of Management or Business Consultant service since they were liable for service tax under reverse charge.
Income Tax
Whether in absence of satisfaction note recorded by AO of searched person, proceedings initiated u/s 153C is without justification - YES: HC
THE AO issued a notice u/s 153C and wrapped up the assessment. The CIT (A) deleted the additions observing that though in the assessment order, AO had specifically stated that satisfaction for issuing notice u/s 153C was recorded, however on examination of record no such satisfaction was recorded. It was thus held that AO could not have assumed jurisdiction u/s 153C. Thus, all the proceedings undertaken u/s 153C were to be declared as invalid, being annulled for want of jurisdiction. The ITAT also confirmed the order of CIT (A) stating that in the absence of such satisfaction having been recorded by the Assessing Officer of the searched person, the present proceedings initiated by the present Assessing Officer against the present assessee u/s 153C was without jurisdiction and the same had been rightly quashed by the CIT (A) by following the judgment of Apex Court rendered in the case of Manish Maheshwari.
The issues before the Bench are - Whether in the absence of the satisfaction note recorded by AO of the searched person, the proceedings initiated u/s 153C is without justification and thus, the entire proceedings are illegal and whether the provisions of Sec 153C are only procedural in nature. And the verdict goes against the Revenue.
Customs
DEPB scheme - FOB value on invoices shown as 400-500 percent of ARE-1 value - Normally, proforma invoice will indicate higher value and after negotiation final price would be less than proforma invoice - Appeals rejected: CESTAT
THE appellants are exporting Porcelain Mugs to M/s Ransat Services Ltd. UK after procuring these from various manufacturers in India mainly M/s. JCPL, Mudrika Ceramic, Oasis Ceramics.
The dispute in the case is relating to the valuation of Porcelain Mugs. Appellants were exporting the said mugs under DEPB scheme which entitles them to claim DEPB benefit at the specified rates which are related to the FOB value of the goods exported.
While processing the shipping bills, it was realized that there was huge difference between the ARE-1 value (i.e. ex-factory value) declared by the manufacturers of Porcelain Mugs and FOB value (i.e. export price) declared by the appellants. The FOB value was to 4 to 5 times the ARE-1 value. In view of such huge difference, investigations were taken up.
See our Columns Tomorrow for the judgements
Until Tomorrow with more DDT
Have a nice day.
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