QUESTION OF FACT V. QUESTION OF LAW

[Mr. M. GOVINDARAJAN]

APPEAL BEFORE HIGH COURT:

The provisions of tax laws made provisions for filing appeal before the High Court against the order of the Appellate Tribunal.

Provisions under Central Excise Act:

Sec. 35G (1) of the Central Excise Act, 1944 provides that an appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal (not being the order relating among other things to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment), if the High Court is satisfied that the case involves a substantial question of law. Sec. 35G(3) provides that where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate a substantial question of law. Sec. 35G (4) provides that the appeal shall be heard only on the question so formulated and the respondents shall at the hearing of the appeal, be allowed to argue that the case does not involve such question. The Court is having the power to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the cases involvers such question. Sec. 35G(6) provides that the High Court may determine any issue which has not been determined by the Appellate Tribunal or has been wrongly determined by the Appellate Tribunal, by reason of a decision on such questions of law.

Provisions under Income Tax Act:

Sec. 260A of the Income Tax Act, 1961 deals with the appeal to High Court. Sec. 260A(1) provides that an appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal if the High Court is satisfied that the case involves a substantial question of law. Sec. 260A (3) provides that the appeal shall be heard only on the question so formulated and the respondent shall, at the time of the hearing of the appeal, be allowed to argue that the case does not involve such question. Nothing in this section shall be deemed to take away or abridge the powers of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question. Section 260A(5) provides that the High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.

Provisions under Customs Act:

Section 130 of the Customs Act deals with the appeal to High Court. Sec. 130(1) provides that an appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal on or after the 1st day of July, 2003 (not being an order relating, among other things, to the determination of any question having a relation to the rate of customs or to the value of goods for the purpose of assessment), if the High Court is satisfied that the case involves a substantial question of law. Sec. 130(3) provides that where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question. Sec.130(4) provides that the appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question. Nothing in this sub section shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question. Sec. 130(5) provides that the High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit. Sec. 130(6) provides that the High Court may determine any issue which has not been determined by the Appellate Tribunal or has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law.

Issue:

It is clear that the High Court, on appeal, will only entertain only on question of law and not on question of facts. It is difficult to ascertain whether a question framed is a question of law or question of facts. In this article certain cases laws are discussed to sort out the difference between the question of law and the question of fact.

Case laws:

1. Commissioner of Central Excise V. Malwa Fastener Private Limited - 2010 (256) ELT 391 (H.P.)

On the material on record, the Commissioner of Central Excise (Appeals) as well as the Tribunal have come to the conclusion that the assessee has provide beyond reasonable doubt that they have received the inputs in question and the same were used by them in the manufacture of final products. This is a pure finding of fact which cannot be assailed in the appeal under Sec. 35G of the Central Excise Act.

2. Commissioner of Central Excise V. Ashwani Nut Bold Industries - 2010 (256) ELT 72 (P&H)

The Department filed appeal before the High Court against the order of the Tribunal and arised the following substantive questions of law:
* Whether the Hon'ble CESTAT is justified in rejecting the appeal of the Department on false grounds that no show cause notice has been issued to the manufacturer-supplier of the goods when actually it was issued;
 * Whether the Modvat Credit is admissible on invoices issued by a manufacturer by misdeclaring the description of the goods intentionally to skip the assessment of goods i.e., 'non alloy steel' under the 'capacity based assessment scheme' in the garb of products of 'alloy steel'?
The High Court found that the first question whether show cause notice was issued to the supplier respondent is a pure question of fact. It cannot be regarded as a question of law much less a substantive question of law. The second question whether the goods were mis-declared again would be a question of fact. Therefore no question of law much less substantive question of law warranting admission of the appeal would arise. The instant appeal is wholly without merit and does not warrant admission.

3. Commissioner of Income Tax V. Smt. Sita Devi Juneja - (2010) 325 ITR 593 (P&H)

Where the Assessing Officer found that the liability had continued for six years, he felt that it has to be treated as having ceased to exist and therefore applied Sec. 41(1). The Tribunal found that the interference was not justified. In fact, it was found that the liability did not even relate to any amount that had been allowed as a deduction, so that Sec. 41(1) could not otherwise applicable against this finding. It was also noticed that ITAT had based its conclusion on the basis of confirmation from the creditors of the continuing liabilities in their favor. It is not known what had prompted the Commissioner to authorize an appeal merely in general terms that, whether the Tribunal was justified in 'totally disregarding the basic facts of the case'. The High Court held that there was no merit in the appeal, while declaring to admit the appeal on the ground that no question of law arose.

4. A NEW QUESTION OF LAW ORALLY RAISED

Commissioner of Income Tax V. Om Prakash Munjal - (2010) 325 ITR 605 (P&H)
There was an incidental question in this case as to the treatment of bonus share declared arising out of revocable gift during the period. This was the issue sought to be raised orally. All the same, this incidental question ported orally was not admitted. It appears that there should be no hurdle for recognizing an oral question if it legitimately arises out of the order of the Tribunal and it could have been permissible, if raised in writing.

5. Crystal Traders V. Commissioner of Customs, Tuticorin - 2010 -TMI - 77522 - MADRAS HIGH COURT

In this writ petition the challenge was to the show cause notice issue by the respondents. The Court held that when the petitioners straight away approached this Court seeking the challenge the show cause notice itself, the learned Single Judge has rightly held that this court cannot be expected to determine such serious disputable questions of fact merely based on the averments contained in the affidavit and counter affidavits. Therefore there is no flaw in the conclusion of the learned Judge in dismissing the Writ petition and directing the appellants to file its explanation to the show cause notice within four weeks.

6. Commissioner of Central Excise & Customs, Vadodara - II V. Welspun Gujarat Stalil Rohven Limited - 2010 -TMI - 78656 - (GUJARAT HIGH COURT)

If there is an apparent conflict as to a finding of fact between two orders it is for the persons alleging such conflict to seek a clarification from the superior forum. The High Court, in exercise of its jurisdiction to determine whether a substantial question of law arises cannot be called up on to undertake an exercise to find facts and record whether finding of the fact recorded by the Adjudicating Authority is correct and discard the finding recorded by the Tribunal. The only exception being a case where the order of Tribunal is challenged by specifically raising a question as to the order suffering from vice of perversity, urging the same at the time of hearing and establishing perversity by cogent evidence in support, in light of well settled parameters in law as to perversity. The order in original in facts stands merged in the order of the Tribunal and the High Court is only requested to consider whether the order of Tribunal gives rise to a substantial question of law.

7. Eternit Everst Limited V. Commissioner of Central Excise, Bhopal - 2010 (254) ELT 507 (Tri. Del)

Question as to whether the job worker was liable to duty was question of law which could be raised for the first time before Tribunal. It could not rejected on the ground that it was not raised before original or lower appellate authority.

8. Commissioner of Central Excise, Delhi - IV V. Orient Steel Industries - 2010 -TMI - 78927 - (PUNJAB & HARYANA HIGH COURT)

The question of valuation of the goods does not arise, only law points (legal interpretation) are involved in this appeal. Moreover the present appeal was admitted to decide the following substantial question of law-

'Board's circulars being administrative circulars, whether such circulars could take precedence over the Notification and show cause notice issued by virtue of notifications, rendering the show cause notice invalid if not issued as per Board's Circular'

Thus, it would be seen that pure substantial question of law are involved in this appeal. Therefore the appeal is very much maintainable.