OFFICE OF THE CHIEF COMMISSIONER
CUSTOMS, CENTRAL EXCISE & SERVICE TAX
7-A, ASHOK MARG, LUCKNOW - 226001

Dated : May 4, 2010

C.No. V(30)/LKO/Rev/legal/45/2010/2319

Subject : With reference to the new item dated 12.04.2010 under Heading "Cestat has power to grant stay beyond 180 days" and further new item under Heading "C.Ex., Asstt. Commissioner asked to pay cost of Rs. 1 lac"

With reference to above news items/articles posted on your well read website, I would like to submit full facts of the case for keeping the record straight. Therefore, in larger public interest a rejoinder is enclosed herewith which is written by Chief Commissioner, Customs, Central Excise & Service Tax, Lucknow Zone with a request to give wide coverage and publication through your esteem website.

I do take full responsibility about what had been written herein by me.

(B R Tripathi)
Chief Commissioner Customs, Central Excise & Service Tax
Lucknow Zone, Lucknow.

A rejoinder in public interest

In view of the judgment and order dated 12th March, 2010. rendered in CMWP No. 122/2010 in case of M/s Galaxy Indofab Limited Vs Union of India by the Division Bench consisting of Mr. Justice Rajes Kumar and Mr. Justice S.J. Nigam. [2010 (252)ELT 3 (ALL)] and in view of the wide circulation of the aforesaid judgment through TIOL news service under Heading "CESTAT has power to grant stay beyond 180 days - Assistant Commissioner rules that CESTAT has erred and High Court has no jurisdiction - cost of Rs. One lakh imposed on the officer - High Court" and further news item under TIOL publication dated 12th April 2010 under heading "Central Excise Assistant Commissioner asked to pay cost of Rs. One lakh for disobey of CESTAT and contempt of High Court - wherein from the desk of TIOL reporter it was written and published ".....any way judiciary does not support such adverse discipline by IRS officer, Hon'ble High Court was not impressed by the ....... by the higher judicial offices by an overzealous Assistant Commissioner and imposed on him cost of Rs. 1 lakh - instead of initiating contempt proceedings. Now the Assistant Commissioner should find one lakh of rupees of white money..." and when the said judgment of the Allahabad High Court was also published in TIOL news service on 13 April, 2010 and the judgment as such was reported in full, under 2010-TIOL-234-HC-ALL-CX, for keeping the record straight and, in the larger public interest and in interest of maintaining judicial discipline by all concerned (i.e. not only by revenue authority), it had become now imperative that a re-joinders should be issued for wider coverage & publication, so that real crux comes out.

2. The brief facts of the case leading to imposition of so called exemplary cost of Rs One lakh on the Asstt. Commissioner, Raibareli Division could be briefly stated as under:

(i) On a specific intelligence that M/s Galaxy Indofab Ltd. ('Galaxy' for brevity) are engaged in suppression of production of excisable goods and in surreptitious removal, then-factory, office-cum-residence and godown premises alongwith their some of the transporters, simultaneously were raided on 18th November, 1998. After due investigation and issuance of SCN, the case was adjudged by Commissioner, Lucknow who vide his order dated 18.03.2005 confirmed the demand of Rs. 2.96 crores, imposed equivalent amount of penalty and a personal penalty of Rs. 50 lakhs on Mr. P.K. Agarwal, Director and Rs. 10 lakhs on Mr. M.P. Agarwal, Managing Director, was also imposed. Thus a liability of Rs. 6.52 crores was fastened on Galaxy, who had indulged in down right duty evasion. On appeal and on application of waiver of pre-deposit, the Hon'ble Tribunal ordered on 17.08.05 in its 8 page judgment & order for the deposit of Rs. 1 crore under provisions of Section 35 F within 08 weeks. But instead of honouring the Hon'ble Tribunal's pre-deposit order, the petitioner found it convenient to move the Hon'ble Allahabad High Court by CMWP 1296 of 2005. Within 33 days the Hon'ble Judge Sri Rajes Kumar of the Hon'ble Allahabad High Court i.e. on 20th September, 2005, in one & half page, ordered for reduction of the deposit only for Rs. 20 lakhs, instead of Rs. 1 crore as was ordered by the Tribunal [See 2006(193) ELT-413(ALL)]. The said money of Rs. 20 lakhs was deposited beyond stipulated period of 8 weeks but that was also condoned by Mr. Justice Rajes Kumar vide his order dated 3.1.2006 in a CMP filed by M/s Galaxy. This order of 20th September, 2005 was passed by the Hon'ble single judge without having a counter reply of the department. The operative portion of the order reads - "Having regard to the submissions made by learned counsel for the petitioners and the facts and circumstances of the case in my view order of Tribunal requires modification and it would be more appropriate and reasonable to substitute the amount by Rs. 20 lacs. Petitioner is directed to deposit a sum of Rs. 20 lacs within a period of six weeks from today. On the deposit of Rs. 20 lacs, Tribunal may consider the appeal and may dispose of the appeal expeditiously as early as possible. With the aforesaid observation, writ petition is disposed of".

(ii). When, the appeal before the Tribunal could not be disposed off within 180 days of its filing, when the High Court order dated 20th September, 2005, was not complied with and when the stay was in operation, Galaxy filed an application before the Tribunal for extension of the interim order. For the pendency period of appeal, the Hon'ble Tribunal extended the validity of its interim order dated 17.08.2005 vide its order on 14th August, 2008. Since the appeal of the party was not disposed of within the 03 years of its filing and the interim stay granted continued beyond 180 days, in terms of the clear-cut provisions of Section 35 C(2A), which was inserted under Central Excise Act, 1944 through well deliberated legislative amendment brought in effect from 11.05.2002 by the Finance Act, 2002, the Assistant Commissioner in charge of the Galaxy factory issued notice dated 11th Jan, 2010 and served on the party on 19th Jan.'2010 threatening to initiate coercive action for recovery of amount of Rs. 6.52 crores by way of attachment and auction as provided under Attachment of Property of Defaulter for Government Dues Rules, 1995. In view of this notice of the Asstt. Commissioner, Mr. P. K. Agarwal, Director of Galaxy filed a misc. application on 20.01.2010 before the Hon'ble Tribunal in their appeal No. E/2170-73/2005, praying to extend the stay order till final disposal of the appeal and to save the applicant from undue harassment and coercive measures that may be taken by the respondent Assistant Commissioner. The applicant, Mr. P. K. Agarwal on 20th January, 2010 while addressing the Asstt. Registrar, CESTAT had very clearly requested that "kindly accept the enclosed misc. application for early hearing enclosing therewith a demand draft of Rs. 500/- of Bank of Baroda being the fee for the misc. application."

(iii) Notwithstanding, moving the Hon'ble Tribunal on 20th January, 2010, they chose also to file a the Writ Petition No. 122/2010 against the same notice of demand dated 11th January, 2010 issued by Asstt. Commissioner, Raibareli. However, they did not disclose in their writ petition before High Court that they have already moved the Tribunal against the said notice of the Asstt. Commissioner, Raibareli who had threatened for coercive measures for recovering the arrears of Rs.6.52 Crores of revenue. The misc. application dated. 20th January, 2010 before the Hon'ble Tribunal was heard on 19th Feb.'2010 before the Hon'ble Bench consisting of Hon'ble President and Member (T). The Bench directed to list the matter on 23.03.2010 subject to the condition that the unconditional apology from the officer who enforced the recovery, despite the direction from the Bench as well as of the Hon'ble High Court. It was also made clear by the Hon'ble Tribunal that the respondent should not take any coercive action against the appellant. The Tribunal's directions of 19th February, 2010 was conveyed to the Commissioner, Central Excise, Lucknow by the departmental representative and his written communication dated 26 February. 2010 to the same effect was received in Lucknow Commissionerate on 18th March, 2010. The unconditional apology of the Asstt. Commissioner was dispatched to the Registrar of the Tribunal by the Commissioner, Lucknow on 17th March, 2010. How and why M/s Galaxy did not disclose on 19th February, before the Hon,ble Tribunal that for same relief they have already filed WP before Allahabad High Court which stands admitted and was listed for 9th February, 2010 ?

(iv) However, the Hon'ble Allahabad High Court disposed of the CWP 122 of 2010 of M/s Galaxy vide its final order dated 12th March, 2010 through a detailed order i.e. within 45 days of filing of said WP without taking the cognizance that the petitioner has already filed a misc. application before the Hon'ble Tribunal on the same matter against interim order of that very Tribunal well before filing the WP before the Hon'ble High Court at Allahabad and which was already heard by the Hon'ble Tribunal on 19/02/2010. Galaxy was hopping & shopping for the forum from where they can get, asked for relief in toto.

3(i) It is worth noticing that the interim order of the Hon'ble Tribunal dated 14th August, 2005 against which an amount of Rs. 1 crore was ordered to be deposited was got modified by a single judge order of the Allahabad High Court on 20th September, 2005 which was presided over by none other than Mr. Justice Rajes Kumar whose honour also happened to be the presiding Judge of the Divisional Bench which passed the order on 12th March, 2010 which quashed the notice of the Asstt. Commissioner and imposed a hefty cost of Rs. One lakh on that public servant. It was expected by the leading and renowned Hon'ble High Court of the country that it will address the core issue and will pronounce the landmark judgment (like unseating of the Prime Minister of the country in 1977 from the membership of Lok Sabha of Raebareli constituency) on the provision of Section 35 (2A) of Central Excise Act, 1944. With utmost regard to Higher judiciary of the country, somehow of late it is being perceived by the citizenry & bureaucracy of the country that era of judicial activism or of adventurism is over - now it had entered in the era of judicial terrorism.

(ii) The Hon'ble Division bench, being presided over by Mr. Justice Rajes Kumar once again in the same matter and against an interim order of the Tribunal dated 17.08.2005 on a notice issued by a statutory authority, under the scheme of Central Excise law, passed the order after a . lapse of nearly 4& 1/2 years, wherein the same Hon'ble Judge has directed in its order dated 26.09.2005 that Tribunal may consider the appeal and may dispose of the appeal expeditiously and as early as possible. One fails to understand how and why such observation of the same Hon'ble Judge was not suo moto noticed as to whether its directions had been complied with and if not, why not. The Hon'ble High Court in February, 2010 ought to have issued notice to the Tribunal to know whether the directions of the Hon'ble High Court dated 26.09.2005 had been implemented by the Hon'ble Tribunal. Was a time period 4&1/2 years not enough time for the Tribunal for disposing off the appeal and to comply with as "as early as possible", as directed by the Hon'ble High Court. Tribunal bad no time - that can't be the ground of extending the stay. The rule of granting ad-interim relief are based on principle of "balance of convenience" as stands articulated under Order No. 39 of CPC, 1908.

4. Against the budgeted revenue in scheme of indirect commodity taxation, it is not understood, what warrants drastic modification of an order of the Tribunal based on fact of a case (and not on a question of law) that too without having the say of the revenue department on record. In the order of 20th September, 2005, the Hon'ble Court had not reasoned out at all as how the amount of Rs. 1 Crore ought to have caused undue hardship to Galaxy, why it was reduced drastically to Rs.20lacs ?. When the matter came before the same Court in January, 2010 before the same presiding Hon'ble Judge who had modified the interim order of the Tribunal failed to notice its own directions so issued in the same matter in September, 2005. After all the Government does not work on bond and bank guarantees - see the observation of the Hon'ble Supreme Court in case of M/s Dunlop India Ltd. [1984(11)LCX0003].

5. The exemplary cost of Rs. 1 lakh ought to have been imposed after issuing notice to that effect to Chief Commissioner and Commissioner on whose written directions the Assistant Commissioner had issued the notice for recovery through coercive means as could be seen at Para 12 of his counter affidavit filed on 9th Feb, 2010 in response to Court direction. The vital question was on interpretation of provisions of section 35C(2A) of Central Excise Act, 1944. Imposing a cost of Rs. 1 lakhs on a Government servant who was engaged in discharge of statutory duty ought not have been played like a toy / pistol. It came out to be lethal. When the department is collecting a revenue of Rs. 2 lacs 50 thousands Crores in a year, Rs. 1 lac is a petty amount. Exemplary cost imposed on Asstt. Commissioner ought to have been at least Rs. 10 crores. The revenue collected by Asstt. Commissioner goes to consolidated fund of India, it will be drawn out of that, where is question of black & white ? Why from his pocket. There was no misconduct, no malafide, nothing beyond jurisdiction, nothing unethical, not in defiance of any specific order, direction by name. Why a cost be imposed on him or on department?

6. The provisions of Section 35 C (2A) brought in effect from 11th May, 2002 by amending the provisions through Finance Act of the year 2002 was well conceived, well thought off and it was a deliberated piece of legislation, brought in effect in view of mounting arrears of revenue, as huge pendency of appeals are lying before Hon'ble Tribunal. Till date this economic piece of legislation has not been struck down by any Court of law of Competent Jurisdiction as ultra-vires, unconstitutional, illegal or void. In fact, many departmental appeals, civil-appeal / SLP on this very issue are pending before Hon'ble Supreme Court as could be seen from CBEC Circular No. 797/30/2004-CX dated 06.09.2004 issued from F.No. 387(W)/64/2003-JC. In the said circular and even in the earlier Circular dated 16th October, 2003 [2003(157)ELT T81], the CBEC had taken the cognizance of the larger bench of the Tribunal's decision in case of IPCL Vs. CCE, Vadodara [2004(169) ELT 267(Tri.-LB)]. Against this very IPCL case, the Government had not filed SLP/CA as on that very issue in other cases, many of the SLP / CA are already filed before the Hon'ble Supreme Court and are still pending. Therefore, the provision of Section 35 C (2A) as on date can't be treated as if inoperative or as if not available in the statute book for being invoked in the facts and circumstances of a peculiar case.

7. Therefore, the basic plea of the department ought to have been addressed by the Hon'ble High Court in this M/s Galaxy Indo Fab. Ltd. case. However, the Hon'ble bench proceeded to refer and rely on case law such as of IPCL Vs CCE, Vadodara, Kumar Cotton Mills . Ltd. Vs. Commr. of Customs, Ahmedabad etc. as could be seen from the body of the order. After all, the ratio is laid down in every case, in every judgment and in every order. There is no precedence like precedence as each case stands on its own legs. The provisions of Section 35 C(2A) provides that "if such appeal is not disposed of within the period specified in the first proviso, the stay order, shall on the expiry of that period stand vacated". Reading down the particular provision, in the facts and circumstances of the specific case can't create a binding precedence as contemplated under Article 141 of the Constitution of India. Neither in part nor as a whole, the provisions of Section 35C 2(A) of CEA, 1944 had been declared as ultra vires or void and had not been struck down so far. The Revenue could have felt satisfied if after hearing the Attorney General of India, the Hon'ble High Court of Allahabad should have declared it ultra-vires. Therefore, the imposing of a cost of Rs.1 lac was not justified and was not in good taste.

8. Raising a point of jurisdiction in a writ proceeding is a fundamental point. Proper & effective language filed through a duly vetted counter by a learned advocate of Central Government, cannot and ought not have been construed, as offensive or abusive to the extent of annoying the Hon'ble Judge of Allahabad High Court. When a clear, proper and legal route was available to the Galaxy and which was invoked also, then why at same time the platform of the Hon'ble High Court was also taken for a ride. Are there not plethora of judgments of Hon'ble Supreme Court and other honoured High Court of the country, holding that when equally effective i.e. efficacious alternative route is available, the writ jurisdiction of the High Court should not be invoked. But with his deep - pocket, Galaxy was in a position to shop for (appropriate?) jurisdiction. The threatening notice of Asstt. Commissioner at best could be construed violative of Tribunal order and not of any of the Hon'ble Allahabad High Court. The Tribunal was competent to take a cognizance of violations of its order. It did took the cognizance of same, issued notice, called for apology from Asstt. Commissioner, but all in vain because of indecent haste and overzealous action & interference by the Hon'ble High Court. The Hon'ble Tribunal, the creature of the statute, was not vested with power of imposing cost, or of its contempt but had an authority to draw a case of its contempt and refer the same to High Court. Perhaps, then Mr. Babul Nath, Asstt. Commissioner. Raebareli could have been put behind bar on the offence of contempt of Hon'ble Tribunal order, by the Allahabad High Court. Then interested party's cause and the public interest could have been served much better and then much wide publicity could have been given for such order of sentence in a contempt case.

9. A similar provision relating to ousting of jurisdiction of remand of cases from Commissioner (Appeals) was inserted w.e.f. 11.05.2001 by amending the provisions of Section 35 A(3) of the Central Excise Act, 1944. Such divesting of authority of Commissioner (Appeals), was not liked by the Trade & Industry. It was thought that power to remand is an inherent power. Therefore, it was challenged before Hon'ble Gujrat High Court. The Hon'ble High Court at Ahmedabad in Medico Labs Vs. CCE, Ahmedabad held on 21st September, 2004. held that the Commissioner continues to have power of remand (MIL India Ltd. 2007 (210) ELT 188 SC. This judgment of Gujarat High Court was heavily relied on in many of the subsequent cases decided by the Hon'ble Tribunal by holding that the Commissioner (Appeals) had no power of remand.

10. However, in case of CCE, Amritsar Vs. Enkay (India) Rubber Co. Pvt. Ltd.; the Hon'ble Punjab & Haryana High Court, in its order dated 08.03.2007 and again in case of CCE, Jallandhar Vs. B.C. Katariya reported in 2008 (221) ELT 508 P&H dated 6th September, 2008 had held that the Hon'ble Gujrat High Court in Medico Lab case had not correctly interpreted the judgment of Umesh Dhaimondia case as reported in 1998(98) ELT 584 SC. Thus, the Hon'ble Chandigarh High Court held that, in view of expressed provisions for causing inquiry for deciding the appeal in terms of provisions of Section 35A(3), the Commissioner(Appeals) has no power of remand. Taking a leaf from such Court order, the CBEC in its Circular issued under F.No. 275/34/2006-CX dated 18/02/2010 had clarified that the interpretation of the Punjab & Haryana High Court should be implemented by the field formations. In other words, the expressed provisions of the Act cannot be read down by the Hon'ble High Court in taxation matters. Therefore, the view prevailing, that Commissioner (Appeal) are having power of remand for the last 6 years had been got reversed. The clearly legislated provisions have been given effect to. Same is likely to be fate of the provisions of Section 35C (2A) in near future to the effect that there is no inherent power available to the Tribunal, to extend the period of stay till the disposal of appeal or for any unlimited period. The Hon'ble Tribunal is a deemed Civil Court for certain purposes and for certain power which could be exercised, as are available under provisions of Civil Procedure Code. But that could be relating to the procedure, but not to the derogation of specific provisions of CEA and the rules made there under. The provisions of the act and rules cannot be indirectly struck down by the Hon'ble CESTAT, defeating the very intent and the purpose of the provisions of the act and rules. What is not permissible from doors should not be allowed from windows.

11. In Galaxy Indofab Ltd. case, the Superintendent in its communication dated 31st December, 2009 in so many words had recorded that under the provisions of taxation 35C (2A), the time period of stay granted by the Hon'ble Tribunal vide its order dated 17th August, 2005 had expired The Hon'ble Allahabad High Court ought to have addressed the question whether provision of section 35C(2A) could be read down in every case. This letter of 31.12.2009 of the Superintendent had been annexed as Annexure '5' to WP of Glaxay Indofab Ltd. filed before the Hon'ble High Court in their WP No. 122/2010. When the department has taken a clear position that under specific provisions of the Section 35 C(2A), the Tribunal has no power, then that very specific question ought to have been addressed and answered by the Hon'ble High Court instead of feeling offended, on a clear but strong and well formulated stand and language employed accordingly that Hon'ble High Court had no, expressed or implied jurisdiction, in entertaining such matters. On one hand the defaulter filed the petition before the CESTAT on 20.01.2010 and at the same time they also invoked the writ jurisdiction of the Hon'ble High Court. Riding on two boats at same time. There is no point in repeating as what is the jurisdiction and power under article 226 of the Constitution of India available to the Hon'ble High Court in matter wherein an interim order had been passed by the Hon'ble Tribunal. In the process of filing the WP, the platform of High Court was abused by the defaulter. Immediately after filing WP the notice of the Assistant Commissioner was stayed by the order of the Hon'ble High Court dated 28/1/2010 and the WP was ordered to be listed for 9th February, 2010. The Hon'ble High Court recorded in its order dated 28th January, 2010 that the personal affidavit of the authority issuing notice should be filed as under what authority or law he had issued the impugned notice dated 11.01.2010. It was not that the WP was the only remedy before the Hon'ble High Court. The petitioner was aware about the right course of action and hence had moved the Tribunal. When the alternative remedy was available, it was unwarranted on part of the Hon'ble High Court to entertain such WP and on raising the issues of jurisdiction and authority, got annoyed and hence imposed a cost of Rs. 1 lakh on the respondent. Infact entertaining the WP, modification of interim order of the Tribunal dated 17th August, 2005, adversely affecting the revenue interest by the Hon'ble High Court, Allahabad, within a span of one month itself was less than proper.

12. In his counter affidavit dated 09.02.2010, the Asstt. Commissioner, Raebareli had very clearly mentioned in Para 12 that he has issued the notice for threatening attachment in view of the written orders of the Chief Commissioner and Commissioner. In fitness of the things, the Hon'ble High Court ought to have issued notice to Attorney General of India and ought to have decided the constitutional validity of Section 35 C (2A). Instead of relying on case laws having no relevance to the facts and circumstances of the case and having regard to the fact, that the matter was already lying before the Hon'ble Tribunal and when that fact was deliberately not disclosed by the petitioner in their WP before Hon'ble High Court, the High Court ought to have punished Galaxy for non-disclosure of material facts and not to the Asstt. Commissioner or the Revenue department.

(B R Tripathi)
Chief Commissioner
Customs, Central Excise & Service Tax
Lucknow Zone, Lucknow,