Cce, Mumbai vs Rdc Concrete (India) Private Limited

EXCISE, BELAPUR, MUMBAI .....APPELLANT.

VERSUS

RDC CONCRETE (INDIA) P. LTD. .....RESPONDENT.

J U D G M E N T

ANIL R. DAVE, J.

1. Being aggrieved by the Order dated 23rd November, 2009, passed in

Appeal No.E/2032/06-Mum. by the Customs, Excise & Service Tax

Appellate Tribunal (CESTAT), West Zonal Bench at Mumbai, this appeal

has been filed by the Revenue - Commissioner of Central Excise, Belapur,

Mumbai.

2 2. By virtue of the impugned order, the CESTAT has rectified its Order

dated 4th November, 2008 passed in Appeal No.E-2032-2033/06 in

pursuance of an application for rectification filed by the present respondent-

assessee under Section 35C(2) of the Central Excise Act, 1944 (hereinafter

referred to as `the Act').

It is the case of the appellant that the aforestated final order dated 4th

November, 2008 passed by the CESTAT has been rectified in pursuance of

the application filed by the respondent herein. The case of the appellant, in

this appeal, is that under the garb of rectification, the CESTAT has modified

its order dated 4th November, 2008 in such a way as if the respondent

asessee had filed an appeal against the said order and the CESTAT has

virtually allowed the appeal against its own order.

3. Mr. B. Bhattacharya, learned Additional Solicitor General, appearing

for the Revenue submitted that the CESTAT has limited power to rectify its

mistake under the provision of Section 35C(2) of the Act. The relevant

portion of the said section reads as under:

"35C(2) - The Appellate Tribunal may, at any time within six

months from the date of the order, with a view to rectifying any

mistake apparent from the record, amend any order passed by it

under sub-section (1) and shall make such amendments if the

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mistake is brought to its notice by the Commissioner of Central

Excise or the other party to the appeal........."

The learned counsel submitted that as per the language of the aforestated

sub-section, it is clear that the Appellate Tribunal, i.e. the CESTAT has

power to rectify any mistake which is apparent from the record of any order

passed by it under Section 35C(1) of the Act. The learned counsel submitted

that the CESTAT had passed final order dated 4th November, 2008 in an

appeal filed before it by the respondent. By virtue of the final order passed

in the said appeal filed by the respondent, the CESTAT had upheld the

demand of duty of Rs.90,89,480.56 together with interest and equivalent

penalty of Rs.90,89,480.56 but the order imposing penalty of

Rs.25,00,000/- had been set aside. Moreover, the penalty imposed upon

Shri Sanjay Bahadur had been reduced to Rs.1,00,000/-.

4. In pursuance of the application submitted by the respondent for

rectification, the CESTAT modified the original final order to such an extent

that the entire demand of duty has been quashed and set aside and as a

consequence thereof the penalty imposed upon the respondent company and

upon the Directors of the company has also been set aside.

4 5. The learned counsel appearing for the Revenue submitted that in

pursuance of the rectification application, the CESTAT has not only

substantially changed its order but has also changed its legal view on the

subject. According to him, while rectifying any order, the CESTAT can

rectify any mistake which is apparent from the record. Under the guise of

rectification, the CESTAT cannot altogether take a different view in law and

it cannot reappreciate evidence which had been led before it.

6. He further submitted that the CESTAT has practically reviewed its

order though it has no power to review its order and, therefore, it was not

open to the CESTAT to review the decision rendered by it on 4th November,

2008. He further submitted that no judicial or quasi judicial authority has

power to review its order unless the statute gives such a power.

7. Coming to details, as to how the CESTAT exceeded its jurisdiction,

the learned counsel narrated the facts in a nutshell. He submitted that the

respondent-company is a manufacturer of `Unipaved Interlocking Concrete

Blocks' (pavers), being excisable goods falling under chapter 68 of the

First Schedule to the Central Excise Tariff Act, 1985. In pursuance of

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specific information received by the Department of Central Excise with

regard to evasion of duty by the respondent, officers of the Head Quarters

(Preventive) Wing had given a surprise visit to the factory premises of the

respondent on 13th February, 2002 and had checked the company's record

and recorded statements of its officers. In pursuance of investigation, it was

found that the pavers manufactured by the respondent were valued by the

respondent at Rs.250/- per sq. mtr. and accordingly excise duty was paid

thereon. The said pavers were sold by the respondent to a related person or

its inter-connected company - M/s. Unitech Ltd. (UTL) for Rs.531/- per sq.

mtr. and thereafter UTL was selling the same for Rs.826.50 per sq. mtr. to

Senorita Builders Pvt. Ltd. Thus, according to the learned counsel, the

goods manufactured by the respondent were shown at a substantially low

value only for the purpose of evasion of excise duty.

8. In the aforestated circumstances, a Cost Accountant was appointed to

ascertain value of the goods manufactured by the respondent. The Assistant

Director (Cost) of the Excise Department, who was a Cost Accountant, was

appointed, though he was in service of the Department. An objection was

raised by the respondent before the CESTAT at the time of hearing of the

appeal referred to hereinabove that an employee of the Department, who

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was not in practice as a Cost Accountant, could not have been appointed to

ascertain value of the goods manufactured by the respondent.

9. The aforestated objection raised by the respondent was duly

considered by the CESTAT and was rejected for the reason that the Act or

Rules made thereunder nowhere provides that only a Cost Accountant, who

is in practice should be appointed to ascertain value of the goods, when the

Revenue feels that the value of the goods shown by the concerned

manufacturer is required to be ascertained. In pursuance of the rectification

application, the CESTAT had heard the matter again and a similar objection

was raised by the respondent in the rectification application. Once again it

was submitted before the CESTAT that an officer of the department,

though a Member of the Institute of Cost and Works Accountants of India,

could not have been entrusted with the work of ascertaining the value of the

goods because the person so appointed was in service of the department and

was not in practice. The learned counsel submitted that after hearing the

rectification application, the CESTAT accepted the aforesaid submission

(which had not been accepted by the CESTAT earlier) and the valuation

arrived at by the Cost Accountant was not accepted by the CESTAT and

accordingly the order was modified.

7 10. The learned counsel for the Revenue submitted that the CESTAT

could not have changed its view as stated above because what was

permissible to the CESTAT was only rectification of a mistake, if found

apparent from the record. The interpretation with regard to the provision

relating to the appointment of the Cost Accountant, which the CESTAT had

accepted at an earlier point of time could not have been changed by the

CESTAT while deciding the rectification application because by changing

the legal view, the CESTAT was not rectifying any mistake apparent from

the record but the CESTAT was changing its view altogether, which is not

permissible under the provision of Section 35C (2) of the Act.

11. Similarly, the learned counsel further submitted that the CESTAT had

earlier arrived at a finding that the respondent company had sold its

excisable goods to a related person or an inter-connected undertaking at a

particular price and immediately thereafter the inter-connected company had

sold the very same goods at much higher price to another company. The

CESTAT had earlier come to a conclusion that it was nothing but an attempt

to evade duty and subsequently, in pursuance of the rectification application,

the CESTAT took altogether a different view whereby it came to the

conclusion that the company with which the respondent-assessee had

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dealings, was in no way inter-connected. Thus, the facts which had been

ascertained at an earlier point of time were found to be incorrect or the

CESTAT had reappreciated evidence while deciding the rectifying

application.

12. According to the learned counsel, the CESTAT should not have re-

appreciated the evidence so as to come to a different conclusion while

exercising its power under Section 35C(2) of the Act.

13. The learned counsel relied upon judgments of this Court in

Commissioner of Central Excise, Calcutta v. Ascu Ltd., Calcutta

2003(9) SCC 230, Commissioner of Central Excise, Vadodara v. Steelco

Gujarat Ltd. 2003(12) SCC 731, Deva Metal Powders Pvt. Ltd. v.

Commissioner, Trade Tax, U.P. 2008(221) E.L.T 16 and Mepco

Industries Limited, Madurai v. Commissioner of Income Tax and

Another 2010(1) SCC 434.

14. On the other hand, the learned counsel for the respondent-assessee

submitted that it was open to the CESTAT to change its view because it

apparently noted its mistakes which had been committed while passing its

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earlier order dated 4th November, 2008. The counsel further submitted that

the view expressed by this Court in the judgments referred to by the learned

counsel appearing for the appellant had been subsequently changed in the

judgments delivered in cases of Commissioner of Central Excise,

Mumbai v. Bharat Bijlee Limited, 2006 (198) ELT 489, Honda Siel

Power Products Ltd. vs. Commissioner of Income Tax, Delhi , 2008(221)

ELT 11 and of Saci Allied Products Ltd. v. Commissioner of C. Ex.,

Meerut, 2005 (183) ELT 225. Thus, the learned counsel submitted that the

CESTAT did not exceed its power and rightly rectified the mistakes which

were apparent on the record while deciding the rectification application.

15. We heard the learned counsel at length and also considered the

judgments cited by them and the orders passed by the CESTAT.

16. Upon perusal of both the orders viz. earlier order dated 4th November,

2008 and order dated 23rd November, 2009 passed in pursuance of the

rectification application, we are of the view that the CESTAT exceeded its

powers given to it under the provisions of Section 35C(2) of the Act. This

Court has already laid down law in the case of T.S. Balram v. M/s.Volkart

Brothers, 82 ITR 50 to the effect that a "mistake apparent from the record"

10 cannot be something which can be established by a long drawn process of

reasoning on points on which there may conceivably be two opinions. It has

been also held that a decision on a debatable point of law cannot be a

mistake apparent from the record. If one looks at the subsequent order

passed by the CESTAT in pursuance of the rectification application, it is

very clear that the CESTAT re-appreciated the evidence and came to a

different conclusion than the earlier one.

At an earlier point of time, the CESTAT came to a conclusion that the

company to which the respondent-assessee sold its goods was an inter-

connected company. In the circumstances, according to the CESTAT, the

decision of the department to appoint a Cost Accountant to ascertain value

of the goods manufactured by the asessee was considered to be just and

proper. However, after considering the submissions made in pursuance of

the rectification application, the CESTAT came to a different conclusion to

the effect that the asessee company and the buyer of the goods were not

inter-connected companies. Different conclusions were arrived at by the

CESTAT because it reappreciated the evidence in relation to common

directors among the companies and inter se holding of shares by the

companies. Re-appreciation of evidence on a debatable point cannot be said

to be rectification of mistake apparent on record.

11 17. Similarly, in pursuance of the rectifying application, the CESTAT

came to the conclusion that an officer of the department, who was working

as Assistant Director (Cost) and who was also a Member of an Institute of

Cost and Works Accountants was not competent as a Cost Accountant to

ascertain value of the goods. It is strange as to why the CESTAT came to

the conclusion that it was necessary that the person appointed as a Cost

Accountant should be in practice. We do not see any reason as to how the

CESTAT came to the conclusion that the Cost Accountant, whose services

were availed by the department should not have been engaged because he

was an employee of the department and he was not in practice. The

aforestated facts clearly show that the CESTAT took a different view in

pursuance of the rectification application. The submissions which were

made before the CESTAT by the respondent-assessee while arguing the

rectification application were also advanced before the CESTAT when the

appeal was heard at an earlier stage. The arguments not accepted at an

earlier point of time were accepted by the CESTAT after hearing the

rectification application. It is strange as to how a particular decision taken

by the CESTAT after considering all the relevant facts and submissions

made on behalf of the parties was changed by the CESTAT. There was no

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mistake apparent on record when the CESTAT did not accept a submission

of the respondent-assessee to the effect that the officer appointed to value

the goods manufactured by asessee should not have been engaged as a cost

accountant.

18. We are not impressed by the judgments cited by the learned counsel

for the respondent. So far as the judgment delivered in the matter of Saci

Allied Products Ltd. v. Commissioner of C. Ex., Meerut, 2005(183)

E.L.T 225 (S.C.) is concerned, it pertains to sale of goods by an asessee to

an independent and unrelated dealers and its effect on valuation. The said

judgment pertains to a transaction with a related person in the State of U.P.,

at lower price and as such deals with the facts of that particular case. In our

opinion, the said judgment would not help the respondent so far as the

matter pertaining to rectification is concerned.

19. So far as the judgment delivered in Commissioner of Central Excise,

Mumbai v. Bharat Bijlee Limited, (supra) is concerned, this

Court held therein that when the Tribunal had totally failed to take into

consideration something which was on record, the Tribunal had committed a

mistake apparent on the face of the record. In the instant case, the evidence

which was on record was duly appreciated by the Tribunal at the first

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instance but the Tribunal made an effort to re-appreciate the evidence and

re-appreciation can never be considered as rectification of a mistake. We

are, therefore, of the view that the aforementioned judgment would not help

the respondent-assessee.

20. So far as judgment delivered in the case of Honda Siel Power

Products Ltd. v. Commissioner of Income Tax, Delhi, 2008(221) E.L.T

11 (S.C.), is concerned, there also the Tribunal had not considered certain

material which was very much on record and thereby it committed a mistake

which was subsequently rectified by considering and appreciating the

evidence which had not been considered earlier. As stated hereinabove, in

the instant case, the position is absolutely different.

21. This Court has decided in several cases that a mistake apparent on

record must be an obvious and patent mistake and the mistake should not be

such which can be established by a long drawn process of reasoning. In the

case of T.S. Balram v. M/s. Volkart Brothers (supra), this Court has

already decided that power to rectify a mistake should be exercised when the

mistake is a patent one and should be quite obvious. As stated hereinabove,

the mistake cannot be such which can be ascertained by a long drawn

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process of reasoning. Similarly, this Court has decided in ITO v. Ashok

Textiles, 41 ITR 732 that while rectifying a mistake, an erroneous view of

law or a debatable point cannot be decided. Moreover, incorrect application

of law can also not be corrected.

22. For the aforestated reasons, we are of the view that the CESTAT

exceeded its powers and it tried to re-appreciate the evidence and it

reconsidered its legal view taken earlier in pursuance of a rectification

application. In our opinion, the CESTAT could not have done so while

exercising its powers under Section 35C(2) of the Act, and, therefore, the

impugned order passed in pursuance of the rectification application is bad in

law and, therefore, the said order is hereby quashed and set aside. The

appeal is allowed with no order as to costs.

................................................J.

(Dr. MUKUNDAKAM SHARMA)

......

..............................................J.

(ANIL R. DAVE)

New Delhi

August 9, 2011.