TIOL-DDT 1284 · the untouched capture
Rendered as it looked. Links and images are disabled in this view; the file itself is untouched.
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN"
"http://www.w3.org/TR/html4/loose.dtd">
<html>
<head>
<title>Untitled Document</title>
<meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1">
</head>
<body>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="3">TIOL-DDT 1284 </font><br>
22.01.2010 <br>
Friday </strong></font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Is six months not sufficient for CESTAT to decide ROM applications?</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SECTION</strong> 35C(2) of Central Excise Act, 1944 deals with rectification of any mistakes apparent on record in orders passed by the CESTAT. This provision is <em>pari materia </em>with Section 129B(2) of the Customs Act, 1962. For rectification of orders passed by the CESTAT in Service Tax cases the provisions of Central Excise Act, 1944 are applicable. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These provisions stipulate that CESTAT may at any time within six months from the date of the order amend an order passed by it with a view to rectifying any mistake apparent from the record. By virtue of Finance Act, 2002, the period of ‘four years' was replaced by ‘six months'. The applications filed for this purpose are popularly known as ROM applications. Rule 31A of the CESTAT (Procedure) Rules, 1982 prescribes that ROM applications have to be heard by the same Bench unless otherwise directed by the President (of CESTAT). </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The question is whether this period of ‘six months' stipulated in Sections 35C(2) / 129B(2) is mandatory or directory i.e. whether an Appellate Tribunal has to invariably decide the ROM application within six months or can the Tribunal take its own sweet time in deciding ROM applications. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Recently, we reported a CESTAT order from the Mumbai Bench in <em>Asiatic Gases Ltd vs. CCE, Mumbai-III </em><strong>= <font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2010/2010-TIOL-63-CESTAT-MUM.htm" target="_blank">2010-TIOL-63-CESTAT-MUM</a></font></strong>, wherein the Tribunal held that it is sufficient if the ROM is filed within six months and that the ROM need not be disposed of within six months as stipulated in Section 35C(2) of Central Excise Act, 1944. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Dismissing the Revenue's objection that the ROM application is liable for dismissal at the threshold in as much as the ROM application should have been disposed of within six months from the date of passing the order for which a rectification is sought, CESTAT held that the ROM application need not be disposed of within six months as stipulated in Section 35C(2). The Tribunal relied on the decision of Apex Court in <em>Sree Ayyanar Spinning and Weaving Mills Ltd. vs. Commissioner of Income Tax</em> - <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=37&filename=legal/sc/2008/2008-TIOL-106-SC-IT.htm" target="_blank"><font size="1">2008-TIOL-106-SC-IT</font></a></strong>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> On the contrary, Revenue relied on the decision of Karnataka High Court in <em>Denso Kirloskar Industries vs. CCE - </em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2007/2007-TIOL-806-HC-KAR-CX.htm" target="_blank"><font size="1">2007-TIOL-806-HC-KAR-CX</font></a></strong> wherein the High Court held that the ROM application should be decided by CESTAT within six months of the date of original order passed by it. The High Court agreed with the Revenue Counsel's contention that the word 'may' used in Section 35C(2) should be read as 'shall'; meaning that it is mandatory for CESTAT to pass orders within six months from the date of passing its first/original order. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In fact, in <em>Sree Ayyanar Spinning and Weaving Mills case </em>, the Supreme Court observed as follows: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>“……..Section 254(2) is in two parts. Under the first part, the Appellate Tribunal may, at any time, within four years from the date of the order, rectify any mistake apparent from the record and amend any order passed by it under sub-section (1). Under the second part of Section 254(2) reference is to the amendment of the order passed by the Tribunal under sub-section (1) when the mistake is brought to its notice by the assessee or the Assessing Officer..... In this case we are concerned with the second part of Section 254(2). As stated above, application for rectification was made within four years. Application was well within four years. It is the Tribunal which took its own time to dispose of the application .” (emphasis supplied) </em></font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Apex Court approved the decision of the Rajasthan High Court in <em>Harshavadan Chemicals and Minerals Ltd case – </em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=38&filename=legal/hc/2003/2003-TIOL-351-HC-RAJ-IT.htm" target="_blank"><font size="1">2003-TIOL-351-HC-RAJ-IT</font></a></strong> wherein the High Court held that ITAT ought to decide the ROM application on merits and not reject it on the ground of limitation after a lapse of four years, the time limit prescribed for disposal of ROM applications by ITAT under Section 254(2) of IT Act, 1961. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Apex Court's decision is obviously applicable for cases where the assessee filed a ROM application within a reasonable time but the ROM application was pending in the Tribunal beyond the statutory time period of six months provided to CESTAT to decide such ROM applications. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Andhra Pradesh High Court in <em>Tirumala Seung Han Textiles Ltd vs. CCE, Hyderabad-III - </em><strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=33&filename=legal/hc/2008/2008-TIOL-763-HC-AP-CX.htm" target="_blank"><font size="1">2008-TIOL-763-HC-AP-CX</font></a></strong> also held a similar view relying on the decision of the Apex Court in <em>Sree Ayyanar Spinning and Weaving Mills case </em>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Further in <em>Sunitadevi Singhania Hospital Trust vs. Union of India = </em><strong><font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=26&filename=legal/sc/2008/2008-TIOL-235-SC-CUS.htm" target="_blank">2008-TIOL-235-SC-CUS</a></font></strong> the Apex Court observed as follows: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>“It is true that the period of limitation specified in terms of Sub-Section (2) of Section 129(B) of the Customs Act is required to be observed but the Tribunal failed to notice that it has inherent power of recalling its own order if sufficient cause is shown therefor. The principles of natural justice, which in a case of this nature, in our opinion, envisage that a mistake committed by the Tribunal in not noticing the facts involved in the appeal which would attract the ancillary and/or incidental power of the Tribunal necessary to discharge its functions effectively for the purpose of doing justice between the parties, were required to be complied with.” </em></font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the above case, the Supreme Court enunciated that the interest of justice has to be considered before adhering to the period of limitation of six months stipulated in Sections 35C(2)/129B(2). The above decisions of the Apex Court clearly hold that the assessee or the Revenue should not be penalized for the delay of disposing ROM applications by the CESTAT. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">While this is true, it is also a fact that the Parliament in all its wisdom reduced the time period of four years to six months for deciding ROM applications by CESTAT as there is no justification to keep trivial issues like rectification of mistakes in orders passed by CESTAT hanging fire. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If a ROM application is pending before CESTAT then it naturally follows that the original order passed by CESTAT is not operational and the party in whose favour the order is passed cannot enjoy the fruits of that order till the ROM application is disposed of by CESTAT. Will it not amount to miscarriage of justice? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Maybe the Law should be amended to stipulate that ROM applications have to be filed within six months of the receipt of the order (not the date of the order) and maybe CESTAT should dispose it of within another six months – <strong><em><font color="#FF6633">where it is possible to do so</font></em></strong>. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In the Income Tax Appellate Tribunal, the time limit for rectification of mistake is still four years. Why this difference between the two Tribunals? </font></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Presidential Awards – Posthumous award for slain Assistant Commissioner Narabadeshwar Singh </strong></font></p>
<p align="justify"><font size="1" face="Verdana, Arial, Helvetica, sans-serif"><strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=9556" target="_blank">TIOL-DDT 1181-24.08.2009</a></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> had reported the incident of Assistant Commissioner of Central Excise, <strong>Narabadeshwar </strong> Singh having been shot dead in Varanasi. In</font><font size="1" face="Verdana, Arial, Helvetica, sans-serif"> <strong><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=9996" target="_blank">DDT 1245 26.11.2009</a></strong></font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">,
we reported the rare gesture of the MOS and CBEC Chairman going over to Varanasi
to hand over a cheque for Rs. 10 lakhs from the Customs Welfare Fund. Today
we are happy to report that Mr. Singh has been granted the Presidential Award
posthumously. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">31 other officers of the Customs, Excise, Narcotics and Enforcement figure in this year's Republic Day awards. 55% of the awards go to officers in the “intelligence and investigation' wings. Not a single officer among the CESTAT DRs had been found fit for the award! When DRI books a case and gets wide publicity, it is the DR who has to defend that case without any publicity before the CESTAT. The DR does not get a fraction of the credit that DRI does. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#FF6633">DDT</font> </strong> congratulates all the Presidential award winners. </font></p>
<p><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/award2010.htm" target="_blank"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>MFDR Notification No. 8/2010: Dated January 21 2010 </strong></font></a></p>
<p align="center"><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RELIED ON! </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">If you tell a lie before the court successfully and use the same lie again in another case, it is called: RE-LIED ON </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600">Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600"> – Monday's cases</font></strong></font></strong></font></p>
<p><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left">Central Excise </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Oxygen, acetylene, helium gases used for repair & maintenance of plant & machinery not inputs, credit ineligible – Welding electrodes used along with welding equipment are capital goods, credit eligible: CESTAT </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>RECENTLY</strong> (on November 30, 2009), we carried an analysis on a judgment delivered by the Delhi Bench of CESTAT in <em>Vikram Cement vs. CCE, Indore = </em><strong><font size="1"><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=34&filename=legal/cestat/2009/2009-TIOL-1959-CESTAT-DEL.htm" target="_blank">2009-TIOL-1959-CESTAT-DEL</a></font></strong> where CENVAT Credit was denied on welding electrodes used in maintenance & repair of machinery by declaring that they cannot be regarded as inputs. How about considering them as capital goods? This was precisely the issue before the Delhi Bench of CESTAT in a subsequent case. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Income Tax </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Transfer Pricing - Sec 92 - TPO makes adjustment - assessee alleges hearing not granted before making additions - Dispute Resolution Panel u/s 144C to afford opportunities to assessee to rebut basis of adjustment and pass speaking orders: Delhi HC</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>TO</strong> reduce the growing number of international taxation cases, the Finance Minister last year introduced a new mechanism of notifying Dispute Resolution Panels. A new Section 144C was inserted in the Finance Bill 2009. The TPL in the CBDT took its own time to frame the rules and notify the panels. Only recently the panels have been notified but even before the panels begin their work, the Delhi High Court has come out with the direction that the Dispute Resolution Panel will deal with the objections filed by the assessee along with support evidence to rebut the basis adopted by the Transfer Pricing Officer to arrive at arm's length price (ALP). In other words, the Panel will have to pass speaking orders. </font></p>
<p align="justify"><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Customs </strong></font></p>
<p align="justify"><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Import of electronic goods in commercial quantity and mis-declaration of value evident based on facts - Revisionary authority empowered under s.129DD of Customs Act to modify order of re-export to order for release of goods on payment of appropriate redemption fine and penalty - No illegality or flaw in order: Madras High Court </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A </strong> foreign citizen holding Philippines passport arrived in India and declared before the Customs that the value of the electronic goods carried by him in his baggage was Rs. 50,000/-. On examination by the Customs, it was found that the goods were found in commercial quantity and valued at Rs. 2.12 lakhs. The goods were proposed for confiscation and allowed the passenger to redeem the goods on payment of redemption fine of Rs. 1.06 lakhs. A personal penalty of Rs. 21,000/- was also imposed on the passenger.</font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Monday for the judgements</font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Monday with more <strong>DDT</strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a nice Weekend. </font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com </a></font></p>
</body>
</html>