Landmark judgement from Chennai CESTAT - Departmental Appeal to the Tribunal – Committee of Commissioners – Board circular invalid
The Finance Act 2005 amended the Central Excise Act and Customs Act to provide for a review of orders by Commissioners by a Committee and this Committee is to take a decision whether to file an appeal with the Tribunal or not. The orders of Commissioners are to be reviewed by a Committee of two Chief Commissioners and the orders of Commissioner (Appeals), are to be reviewed by a Committee of two Commissioners. What happens if there is a difference of opinion between the two Commissioners? DDT asked this question in - 2 3 2005. After nearly a year, Board gave a clarification in Circular No. 824/2006 dated 6.2.2006. To start with, we had pointed out that there was already another circular with the same number. So this circular number was changed to 825/2006 by Circular No. 826/2006. Coming back to the Circular, Board clarified that appeal has to be filed even if one of the two commissioners had decided not file the appeal.
DDT 300 on 10.2.2006 said,
Board’s clarification is a master piece.
1. Board says that it has decided, “When two members take a common view to file an appeal or not to file an appeal, there would be no difference of opinion and the same would be followed.” What a brilliant discovery, decision and conclusion!
2. “In a rare case when two member take different views that is one member takes a view to file an appeal and the other member opposes it the decision should be to file an appeal.” Why should this be a rare case? Does the Board believe that no Commissioner has the guts to take a decision not to file an appeal and it is only in a rare case that such a decision would be taken? And when one member has taken a decision not to file an appeal how can it be held that the decision is to file an appeal?
Is the Board trying to influence the Committee of Commissioners? Is the Commissioner who has taken a decision not to appeal required to pass an order that on going through the order he has come to the conclusion that the order is not proper and legal and so the department must file the appeal, because the Board has directed him to pass such an order?.
The more important legal question is “Is the Board’s circular legally valid?” Section 35B(2) stipulates that the committee of Commissioners if it is of the opinion that an order passed by the Commissioner (Appeals) is not legal and proper, direct and authorise a Central Excise Officer to appeal against the order. So it is very clear from the Section that it is the committee of Commissioners who should form the opinion and not one member of the committee. If the Board wants appeal to be filed even without the approval of both the members, it should get the law amended and not issue a Circular. Board certainly cannot usurp the powers of the Parliament and amend the Act by a circular.
DDT is happy to report that the Chennai bench of the CESTAT, in a classic landmark order, has virtually struck down the Board Circular. The Tribunal in no uncertain terms held that the Board had no power to issue such a circular.
Unanimity in the Committee: The Tribunal held that Parliament did not contemplate any difference of opinion amongst the Commissioners in the Review Committee and hence did not make provision for resolving such differences. Nor did the law-makers authorize the Board to make any such provision.
No casting Vote for the Board: This situation is somewhat analogous to the presiding officer of a legislative assembly casting his own vote when the pro-Government and Opposition votes are equal in number. But the Board has no 'casting vote' in relation to proceedings of a Review Committee inasmuch as it is not a part of the said Committee and has no power to review orders of appellate Commissioners.
Circular is without legal basis:- The Board's circular was issued without legal sanction and militates against Section 35B(2)/129A (2) and cannot be given effect to.
See our Breaking News and the full text of this remarkable judgement in 2007-TIOL-143-CESTAT-MAD.