Proposed for inclusion in Audit Report of the CAG of India (Indirect Taxes) for the year 2001-2002 – Handling of appeal cases in Central Excise Department - Central Excise - 710/26/2003

CIR NO.710/26/2003-CX, DT. 23/04/2003 Proposed for inclusion in Audit Report of the CAG of India (Indirect Taxes) for the year 2001-2002 - Handling of appeal cases in Central Excise Department In the recent months several instances have come to the notice of the Board wherein it has been observed that deficiencies and inadequacies in the manner of filing appeals are repeatedly diluting the department's case before various appellate fora. Your attention is invited in this regard to various circulars issued by the Board pertaining to proper filing and monitoring of appeals, procedure regarding the same, and following judicial discipline above all in matters pertaining to law. Particular attention is invited to the following circulars/instructions issued by the Board for strict compliance by the field formations: i. Circular No. 187/21/96-CX, dated 22.03.96 ii. Circular No. 337/53/97-CX, dated 03.10.97 iii. Circular No. 401/34/98-CX, dated 09.06.98 iv. Circular No. 413/46/98-CX, dated 06.08.98 v. Circular No. 453/19/99-CX, dated 09.04.99 vi. Circular No. 560/56/2000-CX, dated 30.11.00 vii. Circular No. 596/33/01-CX, dated 05.11.01 viii. Circular No.612/3/2002-CX, dated 17.01.02 ix. Instructions dated 22.01.03 issued vide F. NO. 390/R/14/2003-JC x. Instructions dated 28.02.03 issued vide F. NO. 390/18/2003-JC 2. You are also aware that very recently the CAG vide its report "Review on handing of appeal cases in the Central Excise Department" has observed many lacunae on the part of the Department at various stages. The Audit vide para 3.1 has pointed out that the number of cases pending at the Supreme Court level has increased 20% during 2000-01 as compared to the previous year. Vide para 3.2, it has been mentioned that from 1998 to 2001, 71% cases in the Supreme Court, 67% cases in CEGAT and 60% cases in CCE (Appeals) were decided against the Department. The Department's appeals were dismissed by various Appellate Authorities due to: i. delay in filing appeal; ii. application of wrong rules; iii. non observance of principle of natural justice; iv. condonation of delay not prayed for; v. non-observance of legal requirements; vi. non-prosecution; vii. non submission of certificate of clearance from the COD; viii. non-presentation or inadequate presentation; ix. filing of frivolous appeals; x. delayed proposals to file appeals leading to forfeiture of right to appeal; xi. delay in sending proposals to the Board. 3. The CDR, CEGAT has repeatedly pointed out several deficiencies/shortcomings in respect of appeals filed by Revenue which strike at the very root of maintainability of the appeals. He has informed that appeals are filed by the Commissioners in the Tribunal in routine manner without proper scrutiny and many times even apparently strong cases in favour of Revenue on merits are lost on technical grounds such as non filing of requisite number of appeals; or even on preliminary consideration as such appeals are not being properly authorized or worded as required in law. Appeals in such cases are dismissed in limine on the grounds of non-application of mind. 4. Apart from this, many times the appeals filed by the department are not complete in themselves with all enclosures as may be required to dwell into the matter. The CDR has intimated that more often than not the departmental appeal only encloses a copy of the order under challenge apart from the authorization issued by the Commissioner/Board, in utter disregard of appeal procedures. The procedure for filing appeals has been prescribed in CEGAT (Procedure) Rules, 1982. The same is to be strictly adhered to, specially w.r.t. filing of paper book under Rule 16 of the said rules, and CEGAT Public Notice No. 8/99 dated 2.7.99. It has also to be ensured that copy of all relied upon documents and essentially the following documents are invariably appended to the appeal:- a. Show Cause Notice(s); b. Statement(s) recorded; c. Panchanma drawn; d. Copy of invoice/Bill of Entry or any other Central Excise/Customs clearance Document; e. Other relied upon documents, if any, such as, Test Reports, Lorry Receipts; f. Internal Correspondence, relevant extracts of seized documents in support of duty evasion/concealment of production evidence, etc. 5. Commissioners are also not applying their mind to the number of appeals to be filed in a case involving more than one noticee, or the number of appeals to be filed where order-in-appeal is in respect of more than one order in original, as is clearly brought out in Rule 6A of the CEGAT (Procedure) Rules, 1982. 6. Cross objections are not being filed to derive the benefit of Section 35B (4), under which parallel appeal can be filed by the Department in the form of a Memorandum of Cross Objection, which is to be disposed off by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3) of the said Section. On receipt of appeal memo filed by the party, simply parawise comments are being filed thereby nullifying the opportunity given to the Department to seek favourable orders on issues conceded (wrongly) by the lower authority. 7. Further, in respect of cases where directions are issued by the Chief Commissioners to Commissioners to file appeals, the appeal authorization as well as the relevant review filed in such cases normally does not indicate the application of mind by the competent statutory authority i.e. Commissioner, Central Excise Customs as it is stated by the Commissioner in the grounds of appeal that the appeal is filed on Chief Commissioner's directions. This is to be avoided. 8. It has further come to the notice of the Board that orders remanded by the Tribunal to the field formations/Commissioner (Appeals) with specific directions remain to be adjudicated de novo for inordinate long period of time. As a result, not only does the revenue remained locked up in such cases but also the issue remains unsettled for inordinate length of time. CAG has also adversely commented on this in his report. Chief Commissioners and Commissioners are advised to devise a control mechanism to monitor the disposal of remanded matters by the adjudicating authority. The CDR's office is circulating a monthly list of all orders passed by the CEGAT in favour/against of revenue as well as matters sent back on remand. This should be used as a check for monitoring pendencies in this regard. 9. Board has also noticed following defects/inadequacies in proposals received from Commissioners for filing of Civil Appeals /SLPs before Hon'ble Supreme Court. (i) Absence of bifurcation of revenue involved in matters which are tagged together in the civil appeal/petition. (ii) Annexures are incomplete or missing (even though mentioned in the body of the petition); (iii) Supporting documents (photocopies) are not legible. (iv) Copies of judgments/procedures cited in the appeal are not attached. (v) Non-availability of correct address of the respondent, leading to non-delivery of notices. 10. In view of the above, it appears that the field formations are not handling their appeal cases adequately and properly. Accordingly, it is desired that a close watch should be maintained in respect of appeals pending before the Appellate Authorities. The appeals filed by the Department should be proper and complete in all respect adhering to the legal provisions in toto. Control Registers in respect of orders in original passed by various Adjudicating Authorities viz AC/DC, Joint/Additional Commissioner and Commissioners and appeals filed before all Appellate Authorities should invariably be maintained by the Commissioners for proper monitoring of the review of all orders. Further, Commissioners may ensure that a senior officer is deputed to monitor the cases of their respective Commissionerates by checking of the Supreme Court / High Court site (www.courtnic.nic.in). Close monitoring of judgments and daily orders (proceedings and instructions of the Hon'ble Judges) on the website will help in preventing delays in implementing the directions of the Hon'ble Supreme Court. It would also help if the daily cause lists are checked up on the internet both with regard to CEGAT (www.taxindiaonline.com) and Supreme Court (www.courtnic.nic.in) so as to monitor the cases of the Commissionerate which are in appeal. 11. The Chief Commissioners are also advised to critically examine the Commissionerates' performance in this area and the monitoring mechanism developed by the field formations in this regard. F. No. 390/198(M-2)/2002-JC (Please refer CIR NO.768/01/2004-CX, DT. 05/01/2004 - Instructions related Effective handling of Central Excise Customs Appeals, Recommendations of the Expert Group) (Please refer Cir. No. 746/62/2003-CE, Dt. 22/09/2003 Effective handling of Central Excise Customs appeals, Recommendations of the Expert Group - instructions)