ST - Reference to Five Member Bench - Misc applications by Revenue are defended with more heat than light - more dogma than logic or law - Applications dismissed with costs: CESTAT
By TIOL News Service
NEW DELHI, SEPT 18, 2014: NETIZENS may recall the order of Tribunal referring the issue of whether the composite contracts could be vivisected and taxed prior to 01.06.2007 in 2013-TIOL-1458-CESTAT-DEL.
The Commissioner (Service Tax), Delhi filed Misc applications pointing out certain mistakes in the above referral order and subsequent Misc order dated 05.05.2014. The Applications were filed inter-alia on the following grounds:
The CESTAT erred in concluding the matter of the appellant L&T on the issue of vivisection of composite contracts involving transfer of goods and provision of services prior to 01.06.2007 under pre-existing taxable service categories such as "Commercial or Industrial Construction" or "Consulting Engineering" services and had referred the matter to the Larger Bench; that this amounts "virtually to an administrative decision" by the President, CESTAT while sitting in a Division Bench and hearing an application for stay filed by L&T. The application also avers that this order is in error since it does not "express any doubt alongwith reasons" regarding the correctness or otherwise of the Larger Bench decision of the Tribunal in BSBK Pvt. Limited - 2010-TIOL-646-CESTAT-DEL-LB and in failing to spell out reasons why the Bench found it difficult to follow the Larger Bench decision in BSBK (P) Ltd., "even if the Division bench were headed by the President, CESTAT", The application further alleges that the Supreme Court decision in Larsen & Toubro Limited vs. State of Karnataka - 2013-TIOL-46-SC-CT-LB and of the Delhi High Court in G.D. Builders vs. Union of India - 2013-TIOL-908-HC-DEL-ST had decided the issue regarding vivisection of composite contracts and in line with the Larger Bench decision in BSBK Pvt. Limited; nevertheless, the Division bench "headed by the President" failed to make out any case for disagreement with the operative ratio of the decision in BSBK Pvt. Limited. It is also pleaded that the 09.09.2013 order fails to adequately explain the grounds for reconsideration of the decision in BSBK Pvt. Limited and (the order) has "arbitrarily" referred the matter to a 5 Member Bench, "to unsettle the law settled by the BSBK Pvt. Limited ".
During the hearing, it was argued that:
As per the provisions of Section 129C( 5) of the Customs Act, 19622, the decision of the three Member Larger Bench in BSBK Pvt. Limited must be construed as a decision by five Members, by adding numbers of the two minority members who recorded the minority opinion in the earlier Larger Bench decisions in Jyoti Limited vs. CCE, Vadodara - 2007 -TIOL-2337-CESTAT-AHM and in CCE, Raigad vs. Indian Oil Tanking Ltd. - 2010-TIOL-1015-CESTAT-MUM. These minority opinions were in conformity with the BSBK Pvt. Limited en banc conclusion. On this premise, the law on the issue referred to the five Members Larger Bench stands concluded by the judgment of the Larger Bench in BSBK Pvt. Limited.
After considering the submissions, the Tribunal dismissed the applications by holding as under:
++ We are of the considered view that Misc. application Nos.51246 and 53283 of 2014 proceed on a fundamental misconception of facts and law, catalyzed by uninformed assumptions of the relevant and settled principles of law and procedure. These applications have led to a wholly avoidable waste of valuable judicial time of this Tribunal and in fact have resulted in procrastatination of hearing of the issues referred to the Larger Bench of five members. It is regrettable that the applicant - Mr. Anil Kumar Jain, the CST, New Delhi has failed to comprehend the unambiguous and clear trajectory and purport of the order dated 09.09.2013 .
++ The order directed that the papers be placed before the President, CESTAT, for appropriate orders; after clearly recording the issue on which conflict of opinion existed. It is clear that the 09.09.2013 order expressly and clearly identified the specific issue presenting the conflict and had referred the matter to the President, CESTAT, after recommending that an appropriate case is made out for reference to a Larger Bench. Misc. order dated 05.05.2014 reframed the issues to be considered the larger bench of five Members. The core issue to be considered for resolution by the five Members Larger Bench was already identified and specified in Misc. order dated 09.09.2013. The order dated 05.05.2014 merely annotated integers of the issue referred for resolution by the Larger Bench while indicating the probable date for consideration of the Larger Bench i.e. around 09.06.2014; and directed that notices be put up on notice boards of advocates associations at all Regional Benches, so as to afford opportunity to other Members of the Bar, to assist the Larger Bench in answering the identified conflict.
++ This assumption is as demonstrably erroneous as the earlier two assumptions. The Division Bench which passed the misc. order dated 09.09.2013 merely noticed the conflict among coordinate (three member) Benches and recommended that resolution of such conflict is appropriately by a Larger Bench of five Members and ordered the papers to be placed before the President, CESTAT, for an appropriate (administrative) decision. The contention (urged by Shri Amresh Jain) on the basis of written submissions, that Section 129C(5) of the Customs Act leads to the position that the BSBK Pvt. Limited decision of a three Member Bench should be considered as a decision of a five Member Bench, by adding to it two Members who recorded the minority opinion in the earlier (three member) Larger Benches in Jyoti Limited and Indian Oil Tanking Limited is a contention that is stated to be rejected, a contention that could perhaps be advanced only by one not having a nodding acquaintance with the theory of precedents.
++ At the hearing today we are informed by ld. AR. Shri Amresh Jain that there is no extent procedure of vetting or approval of misc. applications filed by Revenue officers / Commissioners, in pending matters. While substantive appeals by Revenue are vetted by a Committee of Commissioners or Chief Commissioners, as the case may be, misc. applications including for review of orders could be filed by a party Commissioner, without verification or vetting either by a superior administrative authority or even by ARs who are authorized to appear in the Tribunal and presumed to have knowledge of the appropriate legal principles procedural principles prescriptions. Consequently applications as the present ones come to be filed on the basis of unfounded fears and on misconceived notions of law and facts.
++ As a result of this regressive practice, the CST, New Delhi Shri Anil Kumar Jain has filed the two misc. applications seeking review of the misc. orders dated 09.09.2013 and 05.05.2014, without a basic understanding of the nature, scope and content of these orders nor a modicum of comprehension of the relevant and settled principles in the area . The problem is compounded by a vigorous and strenuous prosecution of these indefensible and fundamentally misconceived misc. applications by learned AR's, who have defended these misc. applications with more heat than light'; more dogma than logic or law; and substituting the need for subtrating a case with settled precedential authority and forensic skills, with a vigour expressed in higher decibels sans legal analyses.
++ We are therefore constrained to record our observation that interests of the State and of Revenue are inadequately served by (such) wholly deficient comprehension spelt out in executive processed and presented appeals / applications, of the applicable principles of law and procedure; and unproductively drain scarce time and resources of CESTAT.
++ We hope and trust that administration will take due note of such litigative pathologies and usher in appropriate measures to augment the quality of Revenue representation before CESTAT.
++ We direct a copy of this order be communicated to the Secretary, Revenue, Ministry of Finance, Government of India and to the Chairperson, Central Board of Excise and Customs. The issues referred to the larger Bench (of five members) essentially involve critical analyses of several precedents, deep principles of constitutional law, elucidation of allocation of legislative powers in our federal context, interpretation of statutes and unraveling of the meaning of evolving statutory prescriptions in an acutely dynamic legislation - The Finance Act, 1994.
++ In our considered view, such issues are better handled by professional counsel, than AR's. The CBEC / Finance Ministry may consider this aspect, as well. On the analyses above, ST/Misc. applications Nos.51246 and 53283 of 2014 are dismissed with costs of Rs.2500/-, to be remitted to the credit of the Prime Minister's National Relief fund, within four weeks. Misc. application No. 53282 is dismissed as infructuous and 53284 of 2014 is ordered, respectively.
(See 2014-TIOL-1782-CESTAT-DEL)
