Review of its own Order by the Tribunal in ROM application

Case: Commissioner of Central Excise, Belapur, Mumbai Vs. RDC Concrete India Pvt. Ltd.

Citation: 2011(270) E.L.T. 625 (S.C.)

Issue:- Rectification of Mistake Application – Tribunal cannot review its own order under the garb of Rectification.

Brief Facts:- 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 specific information received by the Department 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 and had checked the company's record and recorded statements of its officers. In pursuance of investigation, it was found that respondent was shown at a substantially low value only for the purpose of evasion of excise duty.

The objection raised by the respondent was duly considered by the Tribunal 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 Tribunal had heard the matter again and a similar objection was raised by the respondent in the rectification application 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. After hearing the rectification application, the Tribunal accepted the aforesaid submission and the valuation arrived at by the Cost Accountant was not accepted by the Tribunal and accordingly the order was modified.

The Tribunal has rectified its Order dated 04.11.2008 in pursuance of an application for rectification filed by the respondent-assessee under Section 35C (2) of the Central Excise Act, 1944.

Revenue is in appeal before the Supreme Court against the order of the Tribunal.

Appellant’s Contention:- Revenue submitted that under the garb of rectification the Tribunal has modified its order in such a way as if the respondent-asessee had filed an appeal against the said order and the Tribunal has virtually allowed the appeal against its own order.

Revenue submitted that the Tribunal has limited power to rectify its mistake under the provision of Section 35C (2) of the Act. It was submitted that as per the language of the said 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 Tribunal had passed final order in an appeal filed before it by the respondent in which the Tribunal upheld the demand of duty together with interest and equivalent penalty, but the order imposing penalty was set aside. Moreover, the penalty imposed upon Director had been reduced.

Revenue also submitted that in pursuance of the application submitted by the respondent for rectification, the Tribunal 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 its Directors has also been set aside.

Revenue further submitted that in pursuance of the rectification application, the Tribunal has not only substantially changed its order but has also changed its legal view on the subject. While rectifying any order, the Tribunal can rectify any mistake which is apparent from the record. Under the guise of rectification, the Tribunal cannot altogether take a different view in law and it cannot re-appreciate evidence which had been led before it.

Revenue submitted that the Tribunal has practically reviewed its order though it has no power to review its order and, therefore, it was not open to the Tribunal to review the decision rendered by it. No judicial or quasi judicial authority has power to review its order unless the statute gives such a power.

Revenue submitted that the Tribunal could not have changed its view as stated above because what was permissible to the Tribunal 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 Tribunal had accepted at an earlier point of time could not have been changed by the Tribunal while deciding the rectification application because by changing the legal view, the Tribunal was not rectifying any mistake apparent from the record but it was changing its view altogether, which is not permissible under the provision of Section 35C (2) of the Act.

Revenue further submitted that the Tribunal 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 Tribunal 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 Tribunal took altogether a different view whereby it came to the conclusion that the company with which the respondent-assessee had 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 Tribunal had re-appreciated evidence while deciding the rectifying application.

Respondent’s Contention:- Respondent submitted that it was open to the Tribunal to change its view because it apparently noted its mistakes which had been committed while passing its earlier order. It was submitted that the view expressed by this Court in the judgments referred to by the respondent 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 respondent submitted that the Tribunal did not exceed its power and rightly rectified the mistakes which were apparent on the record while deciding the rectification application.

Reasoning of Judgment:- The Supreme Court perused both the orders passed in pursuance of the rectification application. The Supreme Court was of the view that the Tribunal 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" 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.

The Supreme Court observed that subsequent order passed by the Tribunal in pursuance of the rectification application makes it very clear that the Tribunal re-appreciated the evidence and came to a different conclusion than the earlier one. At an earlier point of time, the Tribunal 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 Tribunal, 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 Tribunal 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 Tribunal because it re-appreciated 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.

The Supreme Court further held that in pursuance of the rectifying application, the Tribunal 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 Tribunal came to the conclusion that it was necessary that the person appointed as a Cost Accountant should be in practice. The Supreme Court saw no reason as to how the Tribunal 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.

It was held that the afore-stated facts clearly show that the Tribunal took a different view in pursuance of the rectification application. The submissions which were made before the Tribunal by the respondent-assessee while arguing the rectification application were also advanced before the Tribunal when the appeal was heard at an earlier stage. The arguments not accepted at an earlier point of time were accepted by the Tribunal after hearing the rectification application.

The Supreme Court found it strange as to how a particular decision taken by the Tribunal after considering all the relevant facts and submissions made on behalf of the parties was changed by the Tribunal. There was no mistake apparent on record when the Tribunal 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.

The Supreme Court was not impressed by the judgments cited by the respondent. It was held that 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, 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. A mistake cannot be such which can be ascertained by a long drawn 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.

The Supreme Court was of the view that the Tribunal 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 Court’s opinion, the Tribunal 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. Order is hereby quashed and set aside.

Decision:- Appeal allowed.

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PJ/Case Laws/2012-12/1012

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