2015 (7) TMI 824 - HC - Service Tax

Whether the Custom, Excise and Service Tax Appellate Tribunal (CESTAT) in an appeal under Sub-Section (2) and (2A) of Section 86 of the Finance Act, 1994 read with applicable provisions of the Central Excise Act, 1944, can examine and go into the question of application of mind on merits by the Committee of Chief Commissioners or Commissioners - Held that - There is no gainsaying that, as in the case, of quasi-judicial function carried out by statutory authorities, even in respect of administrative decision, reasons ought to be given. The purpose behind seeking reasons is not only to do away with the allegation that the conclusion reached is arbitrary and / or unfair but, is also insisted upon, to enable the aggrieved party, as also, a superior authority (which could be a statutory authority or court or Tribunal) to ascertain as to what weighed with a decision making authority in reaching its conclusion. The principle has been summed up in the case of Alexander Machinery (Dudley) Ltd. Vs. Crabtree, 1974 LCR 120 that the decision of an administrative, quasi- judicial or even a judicial authority should not represent an inscrutable face of a sphinx . Therefore, while one cannot but agree with the proposition that there should be material on record which reflects the reasons as to why the Revenue wishes to prefer an appeal, what does not flow from that, is that, the Committee of Commissioners should necessarily give their own reasons if they otherwise agree with the reasons already on record. In the facts of the case, the record itself shows, to which, we have made a reference above, as to why the Revenue was desirous of preferring an appeal. The reasons set out were cogent and substantial. As to whether the reasons recorded would finally persuade the Tribunal to hold in favour of the Revenue is not what concerns the Committee of Commissioners. This is so as it is an unilateral administrative decision of an aggrieved party i.e., the Revenue. As the administrative decision of the kind involved, as indicated above, requires the Committee of Commissioners to look at errors of fact and / or law in the order passed by the adjudicating authority only from the point of view of the Revenue i.e. as to whether the revenue should prefer an appeal. At this stage, the Committee of Commissioners is, neither addressing nor adjudicating upon the stand taken by the respondent/assessee. While, the decision of the Committee of Commissioners has consequences, in as much as, the adjudicating authority s order is put in jeopardy by institution of the appeal, it has no civil consequences which, if at all, arise only when, the appeal is entertained and adjudicated upon by the Tribunal. This was a decision rendered in a writ petition by a Division Bench. By this decision, which is really in the nature of an order, the assessee had questioned the maintainability of the appeal pending before the Tribunal on the ground that a review of the order of the Committee of Commissioners did not validly take place (by which we would understand that a meeting was not convened) in terms of Section 86(2) of the Finance Act. The Division Bench by a short order permitted the petitioner / assessee to raise the said objection by way of a preliminary issue before the Tribunal. - this approach is inconsistent with the purpose and the object for which Section 86(2) has been incorporated in the Finance Act. As articulated hereinabove, the role of the Tribunal is, limited to only ascertaining as to whether or not the Committee of Commissioners (comprising of duly authorised officers) has taken a decision to institute the appeal. Once, such satisfaction is reached in this behalf, the Tribunal cannot render the appeal incompetent, in particular, on the ground that no meeting took place, or that, there were no independent reasons recorded by the Committee of Commissioners. - Decided in favour of Revenue.

Issues Involved:
1. Whether the Custom, Excise and Service Tax Appellate Tribunal (CESTAT) can examine the application of mind on merits by the Committee of Chief Commissioners or Commissioners in an appeal under Section 86 of the Finance Act, 1994.
2. If the first question is answered affirmatively, whether the decision of the Committee should be treated as null and void if they have appended signatures to notes prepared by subordinate officers.

Detailed Analysis:

Issue 1: Examination by CESTAT of Application of Mind by Committee of Commissioners
The court addressed whether CESTAT could scrutinize the application of mind by the Committee of Chief Commissioners or Commissioners in appeals under Section 86 of the Finance Act, 1994. The Tribunal had previously rejected the Revenue's appeal on the grounds of maintainability, arguing that the Committee's decision to appeal lacked due application of mind. The Tribunal cited that the decision-making process did not meet the "twin requirements" of due consideration of material and the appropriateness of preferring an appeal.

The court clarified that the decision-making process of the Committee of Commissioners under Section 86(2) is an administrative function, not a quasi-judicial one. The court emphasized that the role of the Committee is to ascertain whether the adjudication order contains errors against the Revenue's interest and whether these errors warrant an appeal. The court concluded that the Tribunal's jurisdiction is limited to verifying whether a decision was taken by the Committee to file an appeal, not to scrutinize the sufficiency or appropriateness of the material considered by the Committee.

Issue 2: Validity of Committee's Decision Based on Subordinate Officers' Notes
The court examined whether the Committee's decision could be invalidated if the Chief Commissioners merely appended their signatures to notes prepared by subordinate officers. The Tribunal had accepted the respondent's objection that the Committee's decision lacked independent application of mind since the Chief Commissioners did not meet or consult each other but simply signed off on the notes prepared by their subordinates.

The court held that a physical meeting or face-to-face consultation between the Committee members is not mandatory as long as each member has the requisite material before them and concurs with the decision. The court noted that the Committee's function is administrative and does not require independent reasons if the members agree with the reasons already on record. The court emphasized that requiring independent reasons for each decision would make the process cumbersome and impractical.

The court also referenced the Supreme Court's decision in Berger Paints, which supported the view that as long as there was an application of mind and due authorization, the appeal was competent. The court disagreed with the decision in Kundalia Industries, which required independent reasons from the Committee members, finding it inconsistent with the Supreme Court's ruling.

Conclusion:
1. Question 1: The Tribunal cannot examine beyond verifying whether a decision to file an appeal was taken by the Committee of Commissioners.
2. Question 2: The act of appending signatures by the Committee members suffices as long as the record contains necessary material and reasons for the decision.

The court concluded that the reference is answered in favor of the Revenue and directed the matter to be placed before the Roster Bench for a decision in the appeal.

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