2021 (11) TMI 302 - HC - Central Excise

Rejection of rectification petition filed by the petitioner - process amounting to manufacture or not - processing of raw fish, manufacture of frozen fish and its export - HELD THAT - It is noticed that Ext.P1 is an order of the jurisdictional Tribunal relating to the petitioner on an identical issue for an earlier assessment year. When identical issues are raised, that too by the same assessee for a subsequent year, the order of the jurisdictional Tribunal, which has become final too, is bound to be adhered to by the authorities subordinate to the Tribunal. Judgments or orders inter parties cannot be ignored. Viewed in that perspective, Ext.P1 can primarily be seen as a binding decision for the third respondent. When binding decisions are pointed out and the same are not relied upon by the authority to render its decision, it will tantamount to an error apparent on the face of the record, as held in HONDA SIEL POWER PRODUCTS LTD VERSUS COMMISSIONER OF INCOME TAX, DELHI 2007 (11) TMI 8 - SUPREME COURT - Hon'ble Supreme Court had observed in the said judgment that the Tribunal in that case was justified in exercising the power under section 254(2) of the Income Tax Act, 1961, when it was pointed out to the Tribunal that the judgment of the coordinate bench was mistakenly omitted to be considered when the material was available on record. Acknowledging the said mistake it was held that the omission amounts to an error apparent on the face of the record enabling rectification. Similar orders have been passed by other High Courts as well and the aforesaid proposition holds the field even now. The observation of the 3rd respondent in Ext.P9 that if the contention of the petitioner is accepted it will amount to a revision and not a rectification, is incorrect - Omitting to consider the order of a jurisdictional Tribunal by the subordinate authorities, when the same was brought to the notice of the authority, is certainly a ground for rectification. Therefore, refusal of the 3rd respondent to consider the petition for rectification filed as Ext.P8 and Ext.P8(a) is wrong in law. The 3rd respondent is directed to reconsider Ext.P8 and Ext.P8(a) petitions for rectification and pass fresh orders thereon after affording an opportunity of being heard to the petitioner - petition allowed.

Summary

Issues:
Challenge to Ext.P7 order and Ext.P9 communication rejecting rectification petition.

Analysis:
The petitioner, engaged in processing raw fish and exporting frozen fish, challenged Ext.P7 order and Ext.P9 communication rejecting their rectification petition. The petitioner claimed their activity did not attract service tax as it amounted to manufacturing. The adjudicating authorities issued a show-cause notice proposing to treat the activity as a service, which the Tribunal later found to be manufacturing, excluding it from service tax. However, for subsequent periods, the authorities confirmed demands of service tax, leading to appeals by the petitioner. Despite the Tribunal's previous order, the 3rd respondent assessed the petitioner for service tax, prompting the petitioner to file rectification petitions (Ext.P8 and Ext.P8(a)).

The High Court noted that the Tribunal's order (Ext.P1) on an identical issue for an earlier assessment year should be adhered to by authorities subordinate to the Tribunal when raised by the same assessee for a subsequent year. Failure to consider binding decisions would amount to an error apparent on the face of the record. Citing the case of Honda Siel Power Products Ltd. v. Commissioner of Income Tax, Delhi, the Court emphasized that omission to consider a relevant judgment when brought to the authority's notice justifies rectification.

The Court highlighted that the 3rd respondent's assertion that accepting the petitioner's contention would amount to revision, not rectification, was incorrect. Bringing the Tribunal's order to the appellate authority's notice, which was then disregarded, constituted grounds for rectification. Refusal to consider the rectification petitions (Ext.P8 and Ext.P8(a)) by the 3rd respondent was deemed legally incorrect. Consequently, the Court set aside Ext.P9 and directed the 3rd respondent to reconsider the rectification petitions and pass fresh orders after providing the petitioner with an opportunity to be heard. Ultimately, the writ petition was allowed, granting relief to the petitioner.