TIOL-DDT 2751
23 12 2015
Wednesday

THE persistent monitoring by the High Court on the establishment of the Allahabad Bench of the CESTAT continues. The CESTAT at Allahabad is temporarily functioning from a heritage building belonging to the Central Excise Department. Last week, the matter again came up before the High Court.

In the previous hearing, the Court had directed the Under Secretary in the Department of Revenue to file an affidavit and be present in the court. The Court found that one Under Secretary filed an affidavit and another attended the court. The High Court observed,

The Court fails to fathom as to how this kind of tactics can be adopted by the Department of Revenue in making perfunctory compliance of the orders of the High Court. The person who has sworn the affidavit should have appeared before the Court but he has not appeared. No reason has been shown as to why Sri S. Bhowmick, Under Secretary, Department of Revenue, Ministry of Finance could not appear before the Court. Non appearance amounts to contempt of the order of the Court. The respondent was required to appear in order to assist the Court since no affidavits were being filed and the Court was not getting any assistance from their Advocates. Earlier the affidavits that were supposed to be filed were defective and were not filed. Such delaying tactics adopted by the Department and not allowing the business of the Court to function in a proper manner is deplorable .

On accommodation for the Tribunal, the Court observed,

This petition was filed in April, 2015. One of the prayers was for establishment of a permanent Bench of the CESTAT at Allahabad. More than 08 months have elapsed and the Ministry of Finance has not even been able to locate a place for establishing a permanent Bench of CESTAT at Allahabad. On the other hand, the Ministry of Finance has the audacity to issue an Office Memorandum on 09.12.2015, allocating the entire red building only for a period of one year on a temporary basis to allow the functioning of the CESTAT at Allahabad. On one hand, the Ministry of Finance has chosen to fix a time period of one year which has started running from 09.12.2015, and on the other hand, they have taken no steps to establish a permanent Bench. Further, they have chosen to ask the Court to give a reasonable time to vacate the premises. The Central Government had taken a decision in the year 2013 for establishing a Bench of CESTAT at Allahabad. More than two years have elapsed and no steps has taken. Even after the filing of the writ petition, the exercise, if any, appears to be a perfunctory exercise .

The High Court directed as:

(1) We direct the Secretary, Department of Revenue, Ministry of Finance, Government of India, New Delhi to appear before the Court along with Sri S.Bhowmick, Under Secretary, Department of Revenue on 05.01.2016 and explain the hurdles, which they are facing in not establishing a permanent Bench of the CESTAT at Allahabad.

(2) The onerous duty of establishing a Bench of CESTAT is upon the CESTAT. They have not done their duty on their part seriously. We, accordingly, direct the Registrar,CESTAT to also appear before the Court and apprise the latest status in this regard as to how they have pursued the matter with the appropriate authorities.

(3) The Commissioner, Central Excise, Allahabad will ensure that the possession of entire red building is handed over to the Tribunal on or before the next date and an affidavit to that extent is filed before the Court.

DDT had extensively covered this issue.

1.  DDT 2596-13 05 2015: The Allahabad High Court directed the Union of India to make the Allahabad Bench of CESTAT functional w.e.f. 21-7-2015 and to list fresh matter before the said Bench.

2. DDT 2601-20 05 2015: The Allahabad High Court gave certain directions regarding accommodation for the Tribunal.

3. DDT 2663-14 08 2015: The High Court gave certain directions to the District Magistrate regarding accommodation for the Tribunal.

4. DDT 2669-24 08 2015: The High Court gave certain directions inter alia that from the month of October, 2015 the Tribunal should function on a regular basis and not one week in a month.

5. DDT 2698-06 10 2015: The CESTAT Bench officially inaugurated at Allahabad on 1st October 2015.

6. DDT 2729-20 11 2015: The High Court gives further directions on accommodation.

7. DDT 2730-23 11 2015 : The High Court observed, "the Ministry of Finance is not doing enough for setting up the permanent establishment of CESTAT. Nothing has been brought on record to indicate what steps they have taken subsequent to our order.

Quality of Adjudication Orders - Imposition of Cost by CESTAT - CBEC Concerned

IN 2015-TIOL-2647-CESTAT-DEL, the CESTAT observed, the impugned order is a product of complete non-application of mind on the part of the adjudicating authority who seems to have passed it in a state of delirium. Such conduct on the part of the adjudicating authority is too irresponsible to be ignored as it makes a mockery of the quasi-judicial process and can shake the faith of the assessees in the adjudication proceedings thereby inter alia adversely impacting the "ease of doing business" environment in the country. Such conduct clearly falls within the unacceptable range of gross adjudicatory indiscipline which is a matter of concern for CESTAT in its official capacity as an appellate body. Imposing of costs is one of the means available to CESTAT to instil a sense of responsibility and discipline in the lower adjudicating authorities with regard to adjudication matters and this is a fit case for CESTAT to exercise the power to do so .

Obviously, the Board is perturbed with such orders. On examination of such ‘ cost ly' orders, Board found that cost has been imposed on the officers/ department for ignoring;

1. the directions and principles laid down made de novo order while Hon'ble Tribunal directing the original adjudicating authority to re-examine the duty liability only, (See how confused the Board is; what is the meaning of this sentence?)

2. Principles of natural justice,

3. the pleadings and evidences on record before deciding the matter or

4. non-application of mind. (And what does this mean? Ignoring non-application of mind?)

Board has further noticed that the Committee of Commissioners or the Committee of Chief Commissioners is not reviewing the orders in favour of Revenue. So, Board wants the Chief Commissioners and Commissioners to examine orders in favour of revenue also.

Board wants the Principal Chief Commissioners/Chief Commissioners to sensitize the adjudicating authorities about the issue of imposition of costs by the Tribunals due to poor quality of the adjudications.

To address the issue, the Principal Chief Commissioners/ Chief Commissioners (under whose jurisdiction orders imposing costs have been passed by the Tribunal) are to send a report after examining such cases of the last two years regarding the feasibility for challenging before the High Court/Supreme Court by way of Writ Petition or Special Leave Petition.

In a recent case [2015-TIOL-428-CESTAT-DEL], the Tribunal had observed,

It is this type of irresponsible adjudication which is burdening this Tribunal with mounting pendency, besides increasing the cost of compliance with the tax laws for the assessees. Safeguarding the interests of the Revenue does not mean that a duty demand must be confirmed ignoring the facts on record, pleas made by the assessee and the judgments of the Tribunal and the courts. Such irresponsible exercise of adjudication not only represents a cost for the assessee, who has to waste his time and money in pursuing the appeals, but also a cost for the Tribunal being run with tax payer's money, which has to waste its time in deciding appeals against orders which should never have been passed. What we find disturbing is that the tendency to pass such irresponsible adjudication orders is increasing and if unchecked, it would result in collapse of the dispute resolution mechanism and no amount of increase in the number of benches can bring down the increasing pendency of appeals.

And the Tribunal imposed a cost of 10,000 rupees on the Commissioner.

The Revenue took up the matter in appeal before the High Court. The High Court did not find any merit in the Revenue appeal. (2015-TIOL-2145-HC-ALL-CX).

Please also see 2015-TIOL-613-CESTAT-DEL, DDT 2315 , DDT 2608 .

Interestingly, the instruction is captioned - "Imposition of cost by CESTAT on grounds of quality of adjudication order".  Shouldn't it be "poor quality"?

CBEC Instruction in F. No.390/CESTAT/69/2014-JC., Dated: December 22 2015

Works Contract Composition - Elementary Dear Watson?

AN assessee is a manufacturer of MS Pipes in their factory. They are availing the benefit of CENVAT credit of duty paid on MS Plates and other inputs procured by them for use in the manufacture of MS Pipes.

The assessee was also providing services of laying down of pipelines for irrigation, lift irrigation schemes, drinking water supply schemes for various State, Central and Government undertakings as also were executing similar works contracts awarded to them by various commercial undertakings. The assessee opted for payment of Service Tax under Composition Scheme.

Rule 3 of the Works contract (Composition Scheme for payment of Service Tax) Rules 2007 requires an assessee to pay service tax as per the composition scheme subject to the condition that the Service provider shall not avail CENVAT Credit on inputs used for execution of the contract. It is the case of revenue that as the assessee had availed CENVAT Credit on inputs, i.e., Steel Plates used for manufacture of pipes which were used for execution of the Works Contracts, they are not eligible for composition benefit.

The CESTAT observed,

If the service provider was at liberty to procure the pipes from another manufacturer who could have availed the credit on the inputs used for the manufacture of pipes, the appellants as a service provider would have been entitled to the composition scheme inasmuch as admittedly they have not availed credit of duty paid on the MS pipes. Merely because the appellant is performing two separate roles, as a manufacturer and also as a service provider under two different registrations, the denial of the credit to the appellant is neither justified nor warranted. As a manufacturer of the goods, the appellant is entitled to avail the credit.

Strange that bright people who cleared toughest UPSC exam could not understand this elementary principle. - Seems to be a fit case of "ignoring non-application of mind"

We bring you this case today. Please see Breaking News

Rs 329 cr in 1 month - SBC collection

"THE provisional figures of Swachh Bharat cess collected till December 16, 2015, is about Rs 329.6 crore," MoS Finance Jayant Sinha said in a written reply to the Rajya Sabha.

Between November 15 and March 31, 2016, the revenue estimated to be collected is about Rs 3,750 crore, Sinha said.

Tomorrow is a holiday - Milad-un-Nabi and day after is Christmas. Government of India offices are closed for four days.

Until Monday with more DDT

Have a nice weekend.

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