2019 (12) TMI 1093 - HC - Central Excise

Rectification of mistake - error apparent on the face of record - subsequent change in law - Levy of penalty - appellant herein had paid the duty before issuance of SCN - whether a subsequent declaration of law through decision of the apex court can be considered as a mistake apparent on the face of the record, enabling a rectification under Section 35C(2) of the Act? HELD THAT - In a catena of decisions of the Hon ble apex court it is held that, 'a mistake apparent on the 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. The power to rectify a mistake should be exercised when the mistake is a patent one and should be quite obvious. The mistake cannot be such, which can be ascertained by a long drawn process of reasoning. Further, while rectifying a mistake, an erroneous view of law or a debatable point cannot be decided; or an incorrect application of law can also not be corrected. When the appeal was decided by the Tribunal through Annexure A order, the decision was taken based on the law as it stood then. In a subsequent decision of the hon'ble Supreme Court the law was declared as otherwise, based on a change of opinion. Such a change of opinion of law cannot be taken as a 'mistake apparent on the face of the record' which could be rectified by invoking Section 35C(2) of the Central Excise Act. Further, such material cannot be used for unsettling the settled position attained through disposal of the appeal, alleging that there occurred any mistake apparent from the face of the record. It cannot be utilized for reopening a concluded decision, which had attained finality between parties inter se - thus, the above appeal has to succeed. The question of law framed is answered in favour of the appellant and against the Revenue.

Summary

Issues Involved:
1. Legality of reopening a concluded appeal under the guise of rectification of a mistake apparent on the face of the record.
2. Whether a subsequent Supreme Court decision can be considered a mistake apparent on the face of the record.
3. Maintainability of the challenge against the Tribunal's order allowing the rectification of mistake.

Issue-wise Detailed Analysis:

1. Legality of Reopening a Concluded Appeal:
The central issue is whether the Tribunal's reopening of a concluded appeal based on a subsequent Supreme Court decision constitutes a rectifiable mistake under Section 35C(2) of the Central Excise Act. The Tribunal initially decided the appeal on 9th September 2008, setting aside the penalty based on existing legal precedents. However, following a Supreme Court decision in Union of India v. Dharmendra Textile Processors (2008), the Tribunal allowed a rectification application, recalling its earlier order and deciding the appeal afresh, imposing a penalty. The High Court examined whether such reopening was legally sustainable, concluding that a subsequent judicial decision does not constitute a mistake apparent on the face of the record, which is limited to obvious and patent mistakes, not those requiring a long drawn process of reasoning.

2. Subsequent Supreme Court Decision as a Mistake Apparent on the Face of the Record:
The High Court analyzed whether a subsequent Supreme Court decision altering legal interpretation can be treated as a mistake apparent on the face of the record. It referred to various precedents, including The Income Tax Officer v. The Asok Textiles Ltd. (1961) and T.S. Balaram v. Volkart Brothers (1971), which held that a mistake apparent on the record must be obvious and patent, not requiring extensive reasoning. The Court emphasized that an erroneous view of law or a debatable point cannot be corrected under the guise of rectification. Therefore, the subsequent decision in Dharmendra Textiles could not be considered a mistake apparent on the face of the record, as it represented a change of opinion rather than an obvious error.

3. Maintainability of the Challenge:
The respondent argued that the appellant could not challenge the Tribunal's order allowing rectification since it was not appealed earlier. However, the High Court found that the appellant could challenge the final order in the appeal, including the ground that recalling the earlier order was illegal. The Court referred to Section 105(2) of the Code of Civil Procedure, 1908, which governs appeals to the High Court under Section 35G of the Central Excise Act, allowing the appellant to challenge the final order despite not appealing the rectification order.

The Court concluded that the Tribunal's action of reopening the appeal based on a subsequent Supreme Court decision was not legally sustainable, as it did not constitute a mistake apparent on the face of the record. The appeal was allowed, setting aside the impugned order and reinstating the Tribunal's original order dated 9th September 2008.