Writ can be filed if order passed without jurisdiction even after appeal time barred

A. Shankar, Advocate and Smt. Anuparna Bardoloi for the Appellant. Jeevan J. Neeralgi, Standing Counsel for the Respondent.

ORDER

Jayant Patel, J. – Heard. Admit.

2. Mr. Jeevan J. Neeralgi, learned standing counsel appears for respondents and waives notice.

3. With the consent of learned counsel appearing on both sides, appeal is heard finally.

4. The present appeal is directed against order dated 06/08/2013 passed by learned Single Judge of this Court in W.P. No. 35419/2013 whereby, learned Single Judge for the reasons recorded in the order has dismissed the petition.

5. The brief facts of the case are that in the year 2007, the Additional Commissioner of Central Excise, Bangalore, issued show-cause notice to the appellant, proposing to demand an amount of Rs. 31,68,000/-, being an amount equal to cenvat credit availed on two plastic moulding machines, which were leased out to M/s. Reliance Moulded Furniture. Appellant submitted a reply on 24/08/2007 to the show-cause notice and had also tendered written submissions. On 02/04/2012, the Additional Commissioner of Central Excise, Bangalore, passed an Order-in-Original No. 27/2012 whereby, the demand of cenvat credit of Rs. 31,68,000/- was confirmed and the penalty was also imposed on Rs. 31,68,000/-. According to the appellant, it was not aware about the order dated 02/04/2012 until the proprietor of the appellant was informed by the jurisdictional Range Superintendent of Central Excise, in the second week of November, 2012. As per the appellant, immediately after getting to know about the order, the appellant addressed a letter dated 19/11/2012 to the Additional Commissioner of Central Excise, that the order was not received by it. Whereas, as per the respondent the Order-in-Original was dispatched on 02/05/2012 and the acknowledgement was also received. On 10/12/2012, as per the appellant, the copy of the Order-in-Original was received by it. The appellant being aggrieved by the said order carried the matter before the appellate authority and filed the appeal on 31/12/2012. On 28/02/2013, the appellant was communicated by the Superintendent of Central Excise, Appeals, Unit-I, that the appeal was required to be filed within a period of sixty days but the same has not been filed and such period can be extended up to thirty days maximum, but the present appeal is filed after more than five months from the date of the impugned order. Hence, the appeal was returned to the appellant. On 11/03/2013, the appellant was communicated that as the appeal was returned, the demand of the duty with interest and penalty was to be paid by the appellant. On 25/03/2013, the advocate of the appellant resubmitted the appeal along with the application for condonation of delay. On 28/03/2013, the appellate authority communicated to the appellant that the decision has already been taken earlier and communicated vide letter dated 28/02/2013. On 18/04/2013, the appellant being aggrieved by the aforesaid decision, preferred W.P. No.18255/2013 before this Court and prayed for setting aside of the communication dated 28/02/2013 issued by the first respondent and the prayer was made to direct the respondent to consider the appeal filed by the appellant, challenging order dated 02/04/2012 passed vide Order-in-Original. On 25/02/2013, learned Single Judge of this Court directed that the first respondent to pass necessary orders on the application of the appellant for condonation of delay, after giving an opportunity of hearing. On 25/06/2013, the first respondent passed an order holding that as the appeal was presented beyond the period of sixty days plus thirty days i.e., total ninety days, the appeal was not admissible. On 03/08/2013 when the appellant once again filed W.P. No.35419/2013, learned Single Judge of this Court by the impugned order found that the statutory appeal was preferred beyond the outer limit prescribed under the statute and therefore, dismissed, the order calls for no interference. Under the circumstances, the present appeal is filed before this Court.

6. We have heard Mr. A. Shankar, learned counsel appearing for appellant and Mr. Jeevan J. Neeralgi, learned standing counsel appearing for respondents.

7. As such, in our view, the matter may arise for consideration by segregating it into two parts: one is the exercise of power by the statutory authority hearing appeal within the scope and ambit of the statute and the other is the exercise of power by this Court under Article 226 of the Constitution.

8. At this stage, we may refer to the decision of Full Bench of High Court of Gujarat (wherein, one of us Jayant Patel J., was a member) in the case of Panoli Intermediate (India) (P) Ltd. v. Union of India [2015] 51 GST 720 (Gujarat)(LB). In the said decision, in view of the disagreement expressed by a later Division Bench of the High Court of Gujarat, the matter was referred to the Larger Bench for considering the questions which are reproduced in the beginning of the judgment. For ready reference, the same are reproduced as under:—

2. As such, the background of the matters are that the petitioner of SCA No. 18542/14 had preferred appeal before the Customs, Central Excise & Service Tax Appellate Tribunal (Ahmedabad), against the order passed by the Commissioner of Central Excise (Appeals), which arose from the order passed by the adjudicating authority being Order in Original. In the said appeal there was delay of 118 days in preferring appeal and therefore, the Tribunal dismissed the appeal on the ground of delay since as per the Tribunal, there was no power to condone the delay beyond 30 days. Under the circumstances, the said petition. When the appeal came up for hearing before the Division Bench of this Court, the Division Bench noticed that since as per the provisions of section 35 of the Central Excise Act, 1934 (hereinafter referred to as the “Act”) the delay cannot be condoned beyond the period of 90 days, i.e., 60 days being the prescribed period and further discretion to condone the delay in 30 days. But the learned counsel for the petitioner placed reliance upon the another decision of the Division Bench of this Court in the case of Amitara Industries Ltd. v.Union of India decided on 30.01.2013 passed in SCA No. 6069/11 and contended that as per the view taken in the said decision, the delay can be condoned beyond the period of 90 days provided there is a good case on merits and the learned counsel for the petitioner also relied upon other decisions of this Court including the decision in the case ofD.R. Industries Ltd. v. Union of India 2008 taxmann.com 183. The Division bench hearing SCA No. 18542/14 found that the matter is required to be referred to the Larger Bench for decision. Hence, the aforesaid questions were formulated and the matter has been referred to the Larger Bench.

3. It may be recorded that when SCA No. 13530/14 came up before the another Division Bench of this Court, it was brought to the notice of the said bench that the question involved in the petition for the period of limitation has been referred to the Larger Bench in SCA No. 18542/14. Under the circumstances, the said SCA No. 13530/14 has been listed before the larger bench simultaneously.”

After considering various decisions, the questions have been answered by the Larger Bench of the High Court of Gujarat at Paragraph 31, which reads as under:—

“31. We may now proceed to answer the questions

We may also sum up by saying that the power is there even in aforesaid circumstances, but the exercise is discretionary which will be governed solely by the dictates of the judicial conscience enriched by judicial experience and practical wisdom of the judge.”

9. The aforesaid shows that insofar as exercise of power under Section 35 of the Act is concerned, the delay cannot be condoned beyond the outer limit of thirty days nor the appeal can be filed beyond the period of ninety days. Therefore, if one is to examine the exercise of power by the first appellate authority in the present case within the four corners of the statute, it can be said that statutory authority namely, the first appellate authority committed no wrong in returning the appeal as having been filed beyond the outer limit of ninety days.

10. However, on the second facet, though writ may not lie for condonation of delay in filing the appeal, since in exercise of the power under Article 226 of the Constitution, this Court would not compel the authority to exercise power otherwise than provided under the statute, but the power under Article 226 of the Constitution can be invoked for challenging the order passed by the original authority, under the aforesaid stipulated circumstances namely, as that of the order passed without jurisdiction or by assuming the jurisdiction which is not possessed or the exercise of power in excess of the jurisdiction or by crossing the limits of the jurisdiction or that there is flagrant disregard to the law or the rules of procedure or violation of principles of natural justice or there is failure of justice or the order has resulted into gross injustice. Therefore, while considering the second aspect, the writ power under Article 226 of the Constitution could be exercised subject to the aforesaid self imposed restriction in exercise of the power under Article 226 of the Constitution on a well guided principle.

11. We need to now further consider as to whether the present case would fall in any of the categories, which may call for exercise of power under Article 226 of the Constitution or not. The impugned Order-in-Original lacks consideration on two basic aspects; one, is that as per the provision prevailing prior to 20/11/2012, the language was “goods as such”, whereas, after amendment, the liability with regard to the amount of cenvat credit is considered and reduced to 2.5% for each closure of the year or a part thereof even if the goods are removed after being used. Further, the said aspect has been considered by the Division Bench of this Court in case of CCE v. Solectron Centum Electronics Ltd., [2015] 50 GST 207 (Kar.). We may record that the relevant observations made by this Court in the above referred decision are from Paragraph Nos. 9 to 14, which reads as under:—

‘9. The next question is whether the assessee was not liable to pay any duty when capital goods after it is being used was removed to the EOU unit.

10. Rule 3 sub-rule (4) of Cenvat Credit Rules, 2002 reads as under:

“(4) When inputs or capital goods, on which: CENVAT credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in Rule 7.”

11. The liability to pay duty on capital goods arises after the capital goods have been removed as such. The word “as such” is being the subject matter of interpretation by the various Courts. Punjab and Haryana High Court in the case ofCommissioner of Central Excise, Ludhiana v. Khalsa Cotspin (P) Ltd., reported in 2011 (270) E.L.T. 349 (P & H) has held as under:

“The assessee having validly availed cenvat credit, same is required to be reversed only if goods were cleared in the same position without payment of excise duty. In the present case, it has been held by the Tribunal that goods were not cleared in the same position but after having been used and in such situation Rule 3(5) of the Rules will not apply.”

12. Bombay High Court in the case of Cummins India Ltd. v. Commissioner of Central Excise, Pune-III reported in 2007 (219) E.L.T. 911 (Tri-Mumbai) confirmed the order of the Appellate Tribunal which has held as under:

“The plain and simple meaning of expression “as such” would be that capital goods are removed without putting them to use. Admittedly, in the present case capital goods have been used for a period of more than 7 to 8 years. As such, interpretation given by the authorities below would lead to absurd results if an assessee is required to reverse the credit originally availed by them at the time of receipt of the capital goods, when the said capital goods are subsequently removed as old, damaged and unserviceable capital goods. This would defeat the very purpose of grant of facility of Modvat credit in respect of capital goods and would not be in accordance with the legislative intent.”

13. The Delhi High Court in the matter of Harsh International (Khaini) Pvt. Ltd., v. Commissioner of Central Excisereported in 2012 (281) E.L.T. 714 (Del.), after referring to the various judgments held as under:

“In the present case the appellant purchased the capital goods in the period between 2003 and 2005 and used them in its factory till they were sold to M/s. Harsha International (Khaini) Pvt. Ltd., in June and July, 2007. Thus the capital goods were used for a period of 2 to 4 years. They cannot, therefore, be stated to be sold “as such” capital goods. They were sold as used capital goods.”

14. Therefore, it is clear, till the law was amended as on 13.11.2007 in respect of used capital goods, there was no liability to pay duty. In fact, this is evident from the fact that in Cenvat Credit Rules, 2004, the proviso was added making the position clear which was not there in the earlier orders. The proviso reads thus:

“If the capital goods, on which CENVAT Credit has been taken, are removed after being used, the manufacturer or provider of output service shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by 2.5 per cent for each quarter of a year or part thereof from the date of taking the Cenvat Credit.”

This proviso was added by a Notification No. 39/2007 dated 13.11.2007. Therefore, prior to 13.11.2007, there was no duty payable in respect of capital goods which was used before it is removed. In that view of the matter, second question of law is answered in favour of the assessee and against the Revenue.’

12. In our view, if the aforesaid two aspects, one, regarding the case law prevailing earlier and two, interpretation of the word “as such” and thereafter, the amendment and the decision of this Court, in case of Solectron Centum Electronics Ltd.,(supra), would go to show that there was a substantial question to be considered even by the first authority. We do not propose to make any final observations on the ultimate merit of the demand, since we find that it might prejudice the case of either side. But in our considered view, if the aforesaid vital defence is not to be considered by the first appellate authority, the resultant effect would be gross miscarriage of justice. Under these circumstances, we find that it would be an appropriate case to exercise power under Article 226 of the Constitution to interfere with the order of the first appellate authority and to direct the first appellate authority to consider the matter in light of the observations made by this Court in the present order as well as after giving opportunity of hearing the appellant herein.

13. In our considered view, as observed by us hereinabove, the absence of consideration of the case of the appellant by the first appellate authority has resulted in a failure of justice or gross miscarriage of justice, as per the view taken by the Full Bench of High Court of Gujarat in case of Panoli Intermediate (India) (P.) Ltd. (supra). Hence, the petition under Article 226 of the Constitution could be maintained and it was a fit case to exercise power under Article 226 of the Constitution to interfere with the order of the first appellate authority and the interference not being made, has resulted in failure of justice. But at the same time, even if it becomes a case for exercise of the power under Article 226 of the Constitution, the Court may ensure that no litigant or the assessee takes any undue benefit of the power under Article 226 of the Constitution. If the case is considered in favour of invoking the appellate power, the requisite condition would be to deposit 7.5% of the duty demanded. Further, it cannot be said that the appellant was vigilant about its right to pursue the matter in time and there is delay also in filing this appeal. If the appellant has not pursued the remedy well in time, though we may keep in mind the real merits of the matter, the appellant cannot get away from paying appropriate cost, by way of compensation, by the delay caused in pursuing the litigation up to this Court. Hence, we find that even if the order of the first appellate authority is to be interfered with, it should be on a condition that the appellant deposits 7.5% of the demand of duty, plus pay the cost of Rs. 25,000/- to the respondent.

14. In view of the aforesaid observations and discussions, the following direction are issued:—

15. The writ appeal is allowed to the aforesaid extent.

16. It is observed that all rights and contentions on both sides shall remain open.