By TIOL News Service

MUMBAI, MAY 02, 2014: AN intelligence was gathered by the officers of DGCEI that M/s Zenith Computers Ltd. and M/s Datamini Technologies (India) Ltd. are engaged in brand promotion of 'INTEL' and 'MICROSOFT' for which commercial considerations were being paid by both the brand owners periodically. Therefore, it appeared that the services provided by the appellants are taxable under 'Business Auxiliary Service' as per Finance Act, 1994 effective from 01.07.2003.

Show-cause notices were issued and in adjudication the CCE, Thane-I confirmed the demands and, therefore, the matter was taken to CESTAT.

While deciding the Stay application of M/s Zenith Computers Ltd., the Member (J) writing for the Bench, adverted to the Tribunal decision in Jetlite (India) Ltd. vs. Commissioner of Central Excise, New Delhi - 2010-TIOL-1715-CESTAT-DEL and observed that the allegation against the applicant is promotion of brand name and not the promotion of branded goods and the said activity had come into the taxable net w.e.f. 01.07.2010. Opining that the applicant had a strong prima facie case in favour, the Bench waived the pre-deposit of the adjudged dues and granted stay. See 2011-TIOL-1112-CESTAT-Mum

When the matter was heard finally, the Division Bench had a new Member (Technical).

The Member (Judicial) retained the stand taken in the Stay proceedings i.e. the services rendered is promotion of 'brand' and concluded that the activity is not covered under 'Business Auxiliary Service'. Inasmuch as he set aside the orders and allowed the appeals.

The Member (Technical) however did not subscribe to the views of the Member (Judicial). In a detailed order spanning fifty pages, the Member (Technical) recorded his verbose findings and concluded that the services rendered by the appellants merit classification as 'Business Auxiliary Services' since it is promotion of 'branded goods' and the appellants are liable to service tax; that the services rendered by the appellants cannot be considered as export of service during the relevant period in the sense that the transaction involved is a domestic transaction and not exports and that the invocation of the extended period was justified.

But naturally, on account of difference in opinion, the matter was referred to the Third Member for a Majority decision. We reported this as 2012-TIOL-1349-CESTAT-MUM.

And the Difference of opinion framed was -

"Whether the Member (Judicial) is correct in holding that the appellants are engaged in the activity of promoting the brand of Intel/Microsoft consequently, the activity of 'promotion or marketing of logo or brand' does not cover under the category of Business Auxiliary Service by relying on the judgment of Jetlite (India) Ltd. (Supra).

Or

Whether the Member (Technical) is correct in holding that the appellants are engaged in the activity of promoting the branded goods of Intel/Microsoft, therefore, the judgment of Jetlite (India) Ltd. (supra) is not applicable to the facts of this case and the demands are rightly confirmed under the category of Business Auxiliary Service and the extended period of limitation has rightly been invoked."

M/s Zenith Computers Ltd. filed an application for Rectification of Mistake in the above order 20.06.2012. In their application, they submitted that the Member (Judicial) had not given his findings on the issue of export of service and limitation and, therefore, there is a mistake apparent on the record; that the facts of the applicant's case are different from the facts of M/s Datamini Technologies (India) Ltd. Reliance was placed on the judgment of the Bombay High Court in the case of Suzlon Infrastructure Ltd. 2009-TIOL-327-HC-MUM-ST.

The Member (J) writing for the Bench distinguished the cited case of Suzlon by observing that in that case both the Members had not given finding on some issues but in the present case Member (Judicial) allowed the appeal on merit and Member (Technical) dealt with all the issues.In fine, the ROM application was dismissed.

While reporting this decision in December, 2012 2012-TIOL-1814-CESTAT-MUM we had predicted a further journey for this case. We said - Next...the Bombay High Court.

How true was our premonition!

The appellant M/s Zenith Computers Ltd. had challenged this order of the CESTAT before the Bombay High Court.

And the High Court held -

++ We clarify that we express no opinion on the rival contentions particularly on the difference of opinion and question formulated for answer by the Third Member. Each of the contentions as raised are open for being raised and at an appropriate stage. We see much substance in the contention of Mr. Jetly that the present appeal does not deserve to be admitted. It is not raising any substantial question of law. As we have noted above, the power of rectification of mistake is not akin to review of the original order. This is not a Review Jurisdiction. This is a power to correct an obvious or apparent mistake on face of the record. No detailed scrutiny or examination of the record again can be permitted. This power, as has been held by the Hon'ble Supreme Court, is extremely limited and restricted in nature. It enables the Tribunal to clear any ambiguity and apparent error in the original order so as not to cause inconvenience or cause prejudice to the parties in any manner. It cannot be equated or termed as substantive proceedings. In the garb of invoking this power the aggrieved party like the appellant cannot seek review of the original order and by calling upon the Tribunal to go behind it in some manner.

++ In the present case, if the appellant is aggrieved by the fact that the original order refers to the case of M/s. Datamani Technologies (India) Ltd. alone and not that of the appellant, then, nothing prevents the appellant from raising this grievance at an appropriate stage and before the appropriate authority and in appropriate proceeding. The matter is still at large before the Third Member on the point/question formulated and noted above. It would be open for the appellant to raise a grievance that the facts pertaining to it should be noted while rendering any opinion and the Third Member should not merely go by the facts noted in the original order. Meaning thereby, the matter need not be decided or opinion need not be rendered only with reference to the facts of M/s. Datamani Technologies (India) Ltd., but also by taking into consideration the appellant's case.

++ In the event, the Third Member does not agree with the appellant, then, the appellant is not remedy-less. The opinion which would be given by the majority would then be the final order of the Tribunal and if it is adverse to the appellant, then, while challenging it the appellant can raise all contentions including the manner in which the appeal is decided originally and by the Third Member.

++ The appellant can point out the errors committed in the course adopted by the Third Member while rendering his opinion or answering the question formulated above. At this stage, we are not inclined to go into the larger issue. We are of the opinion that the present Appeal only challenges the order passed on the Miscellaneous Application. The dismissal of the Application does not raise any substantial question of law. If the Third Member has any difficulty in answering the reference, he can set out the same in his opinion.

The High Court also added -

++ When the appellant pursues such application by going before the same Bench and which it was obliged to consider, then, it cannot make a grievance of the nature noted by us. Further both the members have rightly held that since they have differed and point of difference has been noted and matter at large is before the Third Member, then, it will not be proper to express any opinion and it will not be proper to say anything further.

++ The Members have in their wisdom left the matter for being dealt with by Third Member. To us it is obvious and it will be open for the Third Member to answer the question on which there is a difference of opinion admittedly. As regards other issue or question, if it still arises or is at large, the Third Member is free to express such views as are permissible in law. We are, therefore, of the opinion that the rejection of the rectification of mistake application does not raise any substantial question of law. The appeal is, therefore, dismissed.

Incidentally, the High Court found this appeal as an opportunity to narrate some pearls of wisdom. For more on that, visit 'No member, judicial or technical, is above the law'