By TIOL News Service

MUMBAI, NOV 16, 2015: THE Tribunal vide order dated 4.12.2013 directed the appellant to make pre-deposit of 10% of the amount of penalty imposed.

Against this order, the appellant had preferred Customs Appeal No. 39-43 of 2014.

By an order dated 17.4.2014, the High Court viewed that no substantial question of law arises from the interim order of the Tribunal directing pre-deposit and accordingly, refused to modify the order of the Tribunal save and except granted further time of 8 weeks for making the pre-deposit from the date of their order.

The time granted by the High Court expired on 12.6.2014 by which date the appellant had not made the pre-deposit and as a consequence, the Tribunal, in view of the non-compliance dismissed the appeals vide order dated 17.7.2014.

Against this order, the applicant has filed miscellaneous applications for restoration of the appeals.

The applicant submitted that he was required to make a pre-deposit for a total sum of Rs.16.5 lakhs as directed by this Tribunal. But the same could not be made due to financial difficulty and the applicant, who is a Chartered Accountant, was unable to practice his profession during period July, 2010 to 9.9.2013 due to suspension of his certificate of practice by the Institute of Chartered Accountant of India (ICAI). That a case of professional misconduct was investigated and the ICAI vide its order dated 9.9.2013 lifted the suspension. It is further stated that the applicant is a resident of Ludhiana (Punjab) and have to regularly travel to Delhi and Mumbai with respect to the pending proceedings. In these circumstances, he could not carry out his profession resulting into very meagre income. The applicant also annexed copy of the Income Tax Returns for the Assessment year 2010-11 to 2013-14, wherein the income is approximately Rs.3 lakhs per annum and as such, after meeting the necessary expenditure the appellant did not have any surplus in hand. That in spite of best efforts of the applicant, he could arrange personal loan from State Bank of Patiala in January, 2015 for Rs.3.74 lakhs and also obtained loan against Equitable Mortgage of Property of Rs.9 lakhs from Oriental Bank of Commerce during December, 2014 and thereafter could manage to make the pre-deposit vide challan dated 29.01.2015.

Inasmuch as the appellant deposited the amount of Rs.16,50,000/- on 29.01.2015, i.e. approx. after six months from the date of dismissal of the appeal by the Tribunal for non-compliance of the order of pre-deposit and the time extended by the Hon'ble High Court.

The Member (Judicial) while allowing the applications for Restoration of appeals observed -

"4. …, we are of the view that doctrine of merger is not hit in the facts and circumstances of the case. Firstly, the Tribunal had only passed an interim order for pre-deposit, the time of which was extended by the Hon'ble High Court and upon violation of such pre-deposit condition, the appeal was dismissed by the Tribunal. As such, there is no consideration of merits either by this Tribunal or by the Hon'ble High Court. We agree with the observation of the Hon'ble Bombay High Court and the Hon'ble Gujarat High Court that the right to appeal is sacrosanct and where the delayed compliance of pre-deposit/interim order is explained sufficiently, the appeals needs to be restored in the interest of justice for a decision on merits of the case. Time and again the Hon'ble Apex Court has observed that the Courts/Tribunals are respected for the cause of justice and or for rendering justice and not for perpetuating injustice for the sake of procedural reasons. Accordingly, we allow the applications for restoration of appeals and direct the Registry that the appeals be restored to their original file. As the appellant has made the pre-deposit, the evidence of which has been placed on record, the compliance in terms of pre-deposit order dated 4.12.2013 is noted."

The Member (Technical) had a differing view.

The Member (T) inter alia observed -

" In the present case the Order of pre-deposit by 12.6.2014 was violated by the appellant and therefore only the High Court can restore the appeal . Ld. Brother has also referred to the Hon'ble Gujarat High Court judgment in the case of Hussein Haji Harun vs.Union of India (supra) in which it was observed that "when the appeal is dismissed for non-compliance of the condition of pre-deposit, the appellate authority would have power to consider the restoration of appeal. Mere absence of a specific provisions permitting such restoration would not be a bar."In my considered view all that this judgement is stating is that the appeal may be restored on compliance of the condition of pre-deposit. But the case at hand is that the Hon'ble High Court of Bombay had ordered pre-deposit to be made by 12.6.2014. And the appellant did not fulfil the condition laid down by the High Court. In these circumstances it is beyond the tribunal's jurisdiction to restore the appeal in view of clear date given by the High Court. The Tribunal cannot go beyond the directions of the Hon'ble High Court and restore the appeal. It may be emphasized that the Tribunal is not taking away the assessee's right of appeal. But the Tribunal ought to respect the time limit given by the High Court for pre-deposit. If Tribunal ignores the directions of the High Court it may not only lead to chaos but would also amount to judicial indiscipline. This is the clear understanding from the judgment in the case of Lindt Exports wherein the High Court held that "Doctrine of merger, therefore, shall clearly apply and once the order of the Tribunal has attained finality and had been merged in the order of this Court, the Tribunal had become functus officio and had no jurisdiction to entertain the applications preferred for restoration of appeals."

Holding that in view of the various judicial pronouncements the unambiguous interpretation is that the Tribunal has become functus officio and has no jurisdiction to entertain the application for restoration of appeal in view of the clear violation of the High Court order to make the pre-deposit by 12.6.2014, the Member (T) rejected the applications for restoration of appeals with a liberty to approach the High Court.

On account of the divergent views, the following difference of opinion was referred to the third Member -

Whether the Tribunal has jurisdiction to restore the appeal of the appellant despite the violation of High Court's order to make pre-deposit before 12.6.2014 as held by Hon'ble Member (Judicial).

OR

Whether the Doctrine of merger applies, the Tribunal has become functus officio and has no jurisdiction to entertain the application for restoration of appeal when the condition of pre-deposit by 12.6.2014 is violated by the appellant.

We reported this order as 2015-TIOL-1711-CESTAT-MUM.

The third Member on reference has passed an order recently.

The Member (J) extracted the order of the Hon'ble High Court and which reads:-

"After hearing both sides and balancing equities, the Tribunal has made the interim order. The Tribunal has also refused to modify that order on the application for rectification. In these circumstances the findings of fact do not raise substantial question of law. The appeals are dismissed. No costs.

At the request of Mr. Tejveer Singh, time to comply with the orders passed by the Tribunal is extended by eight weeks."

The portion underlined was emphasizedby the third Member on reference.

The Member (J) further observed -

"8. It can be seen from the above reproduced order, that their Lordship have dismissed the appeal on merits coming to a finding that the appeal does not raise any substantial question of law. In my considered view, once an appeal has been dismissed by the Hon'ble High Court holding that it does not raise any substantial question of law, the stay order passed by the Tribunal gets merged with the order of the Hon'ble High Court; the argument put forth by the ld. counsel proposing that the doctrine of merger will not apply in this case as Lordships had only extended the time; is incorrect as it can be seen that the appeal filed by the appellant against the stay order has been dismissed. Any order of dismissal of the higher court either summarily or by speaking order is an order in which the order appealed against is merged and the Doctrine of merger applies emphatically.

9. Considering the entire issue from another angle, if the Tribunal accepts the amount deposited by the appellant after the extended period, as granted by the Hon'ble High Court, and restores the appeal, it would be viewed by Hon'ble High Court and the same can be called in question by Hon'ble High Court, as contempt of the direction given by them. In my view, the superior court has after dismissing the appeal in interest of justice, extended the period for pre-deposit ordered by Tribunal, having not been complied, by the appellant, the Tribunal has no powers to extend the period and accept the amount deposited as substantial compliance of the stay order. It was for the appellant to approach the Hon'ble High Court and get appropriate directions, having not done so the appellant cannot expect the condonation of delay in making pre-deposit, from Tribunal."

Observing that this view is fortified by the judgement of Bombay High Court in the case of Sarda Agro Oils Ltd. 2015-TIOL-1575-HC-MUM-CUS where in paragraph 3 it isnoted that if any difficulty arises in following and abiding by the schedule prescribed by the Court, an appropriate application has be to be made to that court, the Third Member on reference concluded that the order passed by the Member (T) is correct and that the Tribunal becomes a functus officio as the Doctrine of merger applies in this case.

And, therefore, the Majority opinion is -

"The Tribunal has become functus officio as the Doctrine of merger applies in the present case. The Tribunal has no jurisdiction to entertain the application for restoration of appeal when the condition of pre-deposit by 12.6.2014 as ordered by the Hon'ble High Court is violated by the appellant.

ROA dismissed."

(See 2015-TIOL-2428-CESTAT-MUM)