By TIOL News Service

MUMBAI, AUG 16, 2018: DEMAND notices were issued for recovery of Service Tax on the activity of "Outbound tours" organized by the appellant and the same were confirmed by the adjudicating authority.

In appeal, the appellant argued that service tax is destination based consumption tax and should be levied at the location where the services are consumed or in other words where the services are used; that no tax liability arises in view of Export of Services Rules, 2005. They rely on the Tribunal, Delhi, decision in their own case -  2013-TIOL-1907-CESTAT-DEL .

The AR submitted that the earlier decision in the appellant's own case (supra) relied upon by the appellant is per incuriam; that the Revenue appeal against this order was dismissed solely on the ground of delay and not on merits; that in view of the decision of the Apex Court in Paras Laminates - 2002-TIOL-48-SC-CUS, it is open to the Tribunal to refer the matter to a Larger Bench when there is a reason to doubt the correctness of the earlier decision.

By concluding that the decision (supra) is sub silentio and, therefore, not a binding precedent, the matter was placed before the President for constitution of a Larger Bench.

We reported this order as 2017-TIOL-1445-CESTAT-MUM .

The Larger Bench heard the matter recently.

When the matter was called, the AR raised a preliminary objection that the Member (Judicial)/HOD is not empowered to constitute a Larger Bench in view of the following provisions of Section 129C(5) of the Customs Act, 1962 -

And further, section 129(5) of the Customs Act, 1962 reads -

It is, therefore, prayed that the matter may be deferred till the time the Larger Bench is constituted by the President of the CESTAT.

The assessee pointed out that the Central Government pursuant to superannuation of the President of the Tribunal, on 23/05/2018 had delegated the powers of the President to the Member (Judicial) (Anil Choudhary), appointing him as HOD, in order to exercise the powers of the President of the Tribunal save and except the power to transfer a Member; that such powers have been exercised under sub-section (3) of the Section 129 of the Customs Act, 1962 .

After considering the submissions, one of the Members constituting the Larger Bench, namely Member (Judicial) Anil Choudhary, extracted the apex Court decision in UOI Vs. Paras Laminates (P) Ltd. - 2002-TIOL-48-SC-CUS and took the following view -

"6. …, we find that this matter was referred to the Larger Bench by the President of the Tribunal (Hon'ble Justice Dr. Satish Chandra) and communicated by the Registrar, vide communication dated 08/05/2017. The present Member (Judicial)/HOD have only reconstituted the Larger Bench, due to superannuation and/transfer of Members at Mumbai Bench in course of the time. Accordingly, we hold that the Larger Bench in this matter has been rightly constituted as permissible under the Act and Rules. Further, we observe that this Tribunal has all the powers expressly and impliedly granted and accordingly, we hold that the preliminary objection raised by the Revenue is frivolous and accordingly, the same is dismissed. This Larger Bench shall proceed with the hearing of the matter on merits on 18.07.18."

The two other Members of the Larger Bench viz. Member (J), S K Mohanty and Member (T), C J Mathew recorded a contrary view.

Following are some of the observations made by them, in this regard -

+ The Central Government has assigned certain specified authority to the specially nominated Member (Judicial) by its order no. A-120126/3/218-Ad.IC (CESTAT) dated 22 nd  May 2018 and the further order no. A-120126/3/218-Ad.IC (CESTAT) Pt.I dated 30 th  May 2018 issued under the authority vested in the President of India. The moot issue, however, is whether these conferments transform the nominated Member into the President for the purposes of section 129 and 129C of Customs Act, 1962.

+ Head of Department has a particular connotation in the administrative structure of the Central Government and is inextricably linked with financial control and supervisory control over subordinate staff. The President and Members of the Tribunal are not in such a superior-subordinate relationship in the discharge of functions under Customs Act, 1962 with the pre-eminence of the President limited to such as has been specifically legislated in section 129 and 129C of Customs Act, 1962. It is amply clear from chapter XV of Customs Act, 1962 that there is no enabling provision that empowers the Central Government to delegate the powers of the President on any of the Members of the Tribunal . More so, as the statutory delegation under the Act is restricted to Vice-President which none of the present Members of the Tribunal is.

+ We would like to highlight that the circumstances in which the Hon'ble Supreme Court inferred so in Union of India v. Paras Laminates (P) Ltd - 2002-TIOL-48-SC-CUS stand substantially altered now with amendments effected therein since.

+ That deliberate and conscious enactment by the sovereign legislative organ cannot be without significance…If any inherent power vests, it does only with the President as the designated head of the Tribunal and not with any Member.

+ In Johnson (India) Ltd v. Union of India - 2005-TIOL-192-SC-AD, the Hon'ble Supreme Court acquiesced with the submission of Revenue that the Senior Vice President was empowered to discharge the powers of the President as section 129(5) expressly provided for it. This clearly excludes any Member who is not the President or Vice-President from exercising powers of the President.

+ In R Veerayya & M Siddalingaiah v. State of Andhra Pradesh & Others [AIR 1967 AP 265], the Hon'ble High Court of Andhra Pradesh has elaborately articulated settled law that the power to delegate should flow from an express provision of the statute.

+ In Customs Act, 1962 while the Central Government is empowered to appoint the President and Vice-President, there is no express empowerment of the Central Government to delegate their functions and powers of these to any other authority.

+ Statutory instruments of the Central Government cannot supplant the legal mandate that devolves express powers on the President under section 129 and section 129C of Customs Act, 1962. This controversy should not be allowed to mar the findings of any Larger Bench constituted to consider the points referred by the division bench. It is, by far, better to await the appointment of President and thus erase any trace, however remote, of any controversy in the provenance of the Larger Bench.

In respect of the mention by the Member (J) P K Choudhary in his order about the fact that the President had approved of a Larger Bench which could not complete its task and that the present bench is only a reconstitution, the Members observed -

"A bench that cannot, owing to circumstances, hear a matter erases to exist and reconstitution is tantamount to a fresh exercise of power to constitute a Larger Bench because the President has the primal right to be in the Larger Bench. In re R Veerayya & M Siddalingaiah v. State of Andhra Pradesh & Others it has been held that a power delegated by law to one authority cannot be further delegated unless the law itself enables such further delegation. The President has withheld such delegation and, even if he had, the want of enabling powers to do so would be restraint on exercise of such delegated authority by any Member."

Accordingly, the Majority order is -

"21. In view of difference and majority opinion on the preliminary objection raised, the hearing is adjourned sine-die. Put up the file before Hon'ble President of CESTAT, as and when he joins."

(See 2018-TIOL-2536-CESTAT-MUM-LB)