MAY 04, 2017

By L S Karthikeyan, Advocate, Lakshmikumaran & Sridharan

THE Larger Bench order - 2017-TIOL-1414-CESTAT-DEL-LB on 'quantum of mandatory deposit' throws a few fundamental questions.

Section 129C(5) of the Customs Act (made applicable to Central Excise cases by Section 35D, and so to Service Tax cases in terms of Section 86(7) of Finance Act, 1994) provides that 'if the members of a Bench differ in opinion on any point' and 'if they are equally divided', the President shall either hear the point or points himself or refer the case 'for hearing on such point or points by one or more of the other members of the Appellate Tribunal and such point or points shall be decided according to the opinion of the majority of these members of the Appellate Tribunal who have heard the case, including those who first heard it'. (Third Member).

Chapter XVIII of the Judicial Manual (available in the website of CESTAT, Delhi) provides for 'Procedure in respect of reference for Constitution of a Larger Bench'. The contents in the Chapter are as under:

'18.01 Where any bench, by an order, has directed the Registry to place the records before the President for constitution of a Larger Bench for any reason, the Registry shall follow the procedure laid down here-in-blow:

18.02 Upon receiving such order, the bench registry shall, after issue of the order to all concerned, place it before the President, as early as possible. In order to avoid misplacement of the original files, while seeking orders for constitution of the Larger bench, the original file of the case need not be forwarded.

18.03 Upon receiving such a reference, the Registrar or the Deputy Registrar (Judicial) shall place the matter before the President who, on perusing the order may constitute a Larger Bench. In such a case, the Registrar or the Deputy Registrar (Judicial) shall inform the registry, which referred the matter for constitution of a Larger Bench, about the constitution of the bench as ordered by the President in writing.

18.04 On receiving such a communication, the concerned Assistant Registrar shall place the file before the senior most Member of the constituted Larger Bench and obtain a convenient date for listing the matter. He shall then inform the said date to the other Members of the constituted Larger Bench and issue notice of hearing in the prescribed format'.

In the present matter, there seems to be no reference from any of the Benches expressing a difference of opinion (as provided in Section 129C(5) or a request from any of the Benches, by an order, to constitute a Larger Bench, in terms of the Judicial Manual.

The Larger Bench Notice dated 10.02.2017 issued by the Registrar states 'Constitution of Larger Bench for uniformity in decision and resolution of dispute arising out of contrary judgements' and refers to IO No.14/2015 dated 27.03.2015 of Principal Bench at New Delhi, I.O.No.284-300/2015 dated 1.7.2015 and the orders in Hindalco / ASR Multimetals .

As per the LB Order dated 20.04.2017(read with the above notice), the orders of the Delhi Bench have been passed in 2015; the orders do not seem to have been challenged even by the Department. The Hindalco / ASR Multimetals orders , do not even have any reference to the orders of the Delhi Bench, much less record a difference of opinion. In fact, in the former case (the order passed on 31.8.2016 much after the orders dated 27.3.2015 / 01.07.2015 of the Delhi Bench), the DRs are seen to have argued that 'in all other benches of CESTAT, Appellants are paying 10% of deposit in addition to 7.5%'. Therefore, it is very clear that the decision of the Delhi Bench was never in the knowledge of the Single Member.

In such a case, the basis on which the Larger Bench has been constituted itself is not known.

Further, in the Larger Bench Order

- there is no mention of any Appellant or Respondent (i.e. the parties to the proceedings are not known);

- there is no Cause title;

- Under Appearance, names of two DRs (for Revenue) and Shri. Joseph K. Antony, Advocate (for Bar Association), Chennai are shown.

- Para 3 of the order states that 'none appeared on behalf of the Bar Associations despite notices. Shri Joseph K. Antony, Advocate from Indirect Taxes Bar Association, Chennai filed a written submission which are considered'.

Some of the questions that come up are -

i) Whether the present order is an order in terms of Section 129B of the Customs Act, 1962 / Section 35C of the Central Excise Act, 1944 or Section 86 of the Finance Act, 1994?

ii) Whether, under these provisions, the Tribunal can pass an order without involvement of any parties?

iii) Whether the 'Bar Association' can be considered as a party to the issue?

iv) Under which provisions, to which forum and in what manner the present order can be challenged?

v) If there is no party to the proceedings, who can challenge the order, and

vi) If there is no challenge to the order for lack of clarity on the above, would the order become final?

The Hon. High Court of Andhra Pradesh, in the case of MaaMahamaya Industries Limited Vs CCE, C & ST, Visakhapatnam by its order dated 13.11.2014in CEA No.119/2014 - 2014-TIOL-2014-HC-AP-CX had observed and held as under:

6. We are unable to accept the contention of the learned counsel for the respondent and we find force in the submission of Sri S. Ravi, learned Senior Counsel appearing for the appellant, that the Tribunal does not have any inherent power like Civil Court to pass appropriate order for the ends of justice. The Tribunal is a creature of a Statute with specific powers mentioned in the Statute itself. From the grounds of the appeal and the Statute, we do not find any provision for depositing Rs. 5 crores for adjudication and the same is without jurisdiction and accordingly the same is deleted.

Can the Tribunal pass an order under any other provisions 'for uniformity in decision and resolution of the dispute arising out of contrary judgments'?

Rule 41 of the CESTAT (Procedure) Rules, 1982 provides that The Tribunal may make such orders or give such directions as may be necessary or expedient to give effect or in relation to its orders or to prevent abuse of its process or to secure the ends of justice.

However these Rules are framed under Section 129(c)(6) of the Customs Act, 1962 which provides that Subject to the provisions of this Act, the Appellate Tribunal shall have power to regulate its own procedure and the procedure of the Benches thereof in all matters arising out of the exercise of its powers or of the discharge of its functions, including the places at which the Benches shall hold their sittings.

Therefore, an order under Rule 41 can only relate to the procedure of the Tribunal and of the Branches or of the discharge of its functions and not on interpretation of a legal provision regulating filing of appeal under enactments of Parliament.

The Hon. High Court of Karnataka in the case of CST, Bangalore Vs Kyocera Wireless (I) Private Limited ( CEA No. 11 of 2015, decided on 25-1-2016) - 2016-TIOL-321-HC-KAR-ST observed as under:

6. Having heard the learned Counsel appearing for the parties and perusing the material on record, it is clear that the Tribunal in all its eagerness to decide the pending cases, in order to reduce the pendency of appeals, has adopted a technique in clubbing nearly 192 cases and passing an interim order on all the issues involved in the batch of cases and the same is applied in the Final Order of the individual cases. We would have appreciated if, the Tribunal had passed the Final Order in one case and the same is adopted in other batch of cases. The scope of Interim Order is very limited. It is temporary and effective only during the pendency of litigation; ceases to exist as soon as the Final Order is passed. No law can be laid down in an interim order. The procedure adopted by the Tribunal is strange and contrary to the settled principles of law. Passing Final Order, referring to the paragraphs in the Interim Order is not a speaking order. As such, the order passed by the Tribunal is not sustainable.

In such circumstances, whether the present order of the Larger Bench is legally binding?

(The views expressed are strictly personal.)