CUSTOM, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

Can the Tribunal Dismiss Appeal for Non-persecution

RAJESH KUMAR

ADVOCATE.

On numerous occasions the Custom, Excise & Service Tax Appellate Tribunal dismisses and appeal in case when the appellant doesn’t appear when the case is called for hearing. Such dismissal is done in Rule 20 of the CESTAT Procedure Rules. The purpose of this paper is to examine the legality of this rule.

Rule 20 of the CESTAT Procedure Rules reads as,

RULE 20. Action on appeal for appellant’s default.—Where on the day fixed for the hearing of the appeal or on any other day to which such hearing may be adjourned, the appellant doesn’t appear when the appeal is called on for hearing, the Tribunal may, in its discretion, either dismiss the appeal for default or hear and decide on merits.

It is clear from this rule that the Tribunal is empowered to dismiss an appeal in default. However, this is a mere rule, made under delegated rule making power with respect to procedural matters. It has to be seen as to whether this rule is in conformity with the Central Excise Act, 1944 which confers such power to the Tribunal.

Section 35C of the Central Excise Act, 1944 reads as,

SECTION 35C. Orders of Appellate Tribunal. — (1) The Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against or may refer the case back to the authority which passed such decision or order with such directions as the Appellate Tribunal may think fit, for a fresh adjudication or decision, as the case may be, after taking additional evidence, if necessary.

It is obvious from this Section that it is a duty of the Appellate Tribunal is to give the parties an opportunity of being heard, however there is no condition that the party must avail the opportunity of being heard for appeal to be decided on merits. Further the Tribunal can only confirm, modify or annul the order or remand it back. The section doesn’t empower the Tribunal to dismiss the appeal in default, in the sense that it is not empowered to “not to hear the appeal”. Similar provision is there under Section 129B of the Customs Act, 1962.

The CESTAT Procedure Rules has been made under the powers delegated by Section 129C(6) of the Customs Act [made applicable to Central Excise vide Section 35D of the Central Excise Act], which reads as,

SECTION 129C. Procedure of Appellate Tribunal.– 

(6) Subject to the provisions of this Act, the Appellate Tribunal shall have power to regulate its own procedure and the procedure of the Benches thereof in all matters arising out of the exercise of its powers or of the discharge of its functions, including the places at which the Benches shall hold their sittings.

Thus the power delegated under this Section under which the Rules have been framed is subject to the provision of this Act. Thus the CESTAT cannot make a rule which amend or supplant any provision of the Act. From a plain reading of these Sections, it appears that Rule 20 the CESTAT Procedure Rules is substantially ultra vires to the rule making power and hence is illegal.

SUBSTANTIVE ULTRA VIRES:

Ulta vires means beyond powers. Whenever a person or a body of persons, exercising statutory authority, acts beyond the powers conferred upon him or them by statute, such act become ultra vires and accordingly void in the eyes of law. This doctrine has been extended to all administrative authorities empowered by the legislature to make subordinate legislation.

Section 5A(8) of the Income Tax Act, 1922, empowered the Appellate Tribunal to make Rules to regulate its own procedure. In exercise of this power, the Appellate Tribunal made Rule 24 which empowered itself to dismiss an appeal for default in case of non-appearance of the appellant when the appeal is called on for hearing. The Supreme Court held in I.T. Commissioner v. Chenniappa [AIR 1969 SC 1098], that the rule is in repugnance with Section 33(4) of the Act, and the obligation imposed by the said section cannot be short-circuited by the Tribunal by dismissing the appeal in default of appearance.

In Viral Laminates v. UOI [1998 (100) ELT 335 (Guj.)], the Hon’ble Gujrat High Court held that, in para 11,

“That part of Rule 20 of the Customs, Excise and Gold (Control) Appellate Tribunal (Procedure) Rules, 1982 which enables the Appellate Tribunal to dismiss an appeal for default of appearance as well as proviso to Rule 20 is held to be ultra vires the provisions of Section 35C(1) of the Central Excises & Salt Act, 1944 as well as Section 129B(1) of the Customs Act, 1962. It is declared that the Appellate Tribunal has no power to dismiss an appeal for non-appearance of the appellant and the appeal should be decided on merits.”

Hon’ble Delhi High Court held in Prakash Fabricators v. UOI [2001 (130) ELT 433 (Del.)], in para 5,

“On a bare reading of the provisions and having regard to the scheme of the Act as well as of the Customs Act, there can be no manner of doubt that the appeal filed before the Tribunal has to be disposed of on merits and cannot be dismissed for default of appearance of the appellant. Where there is no appearance on behalf of the appellant, the Tribunal has to decide the appeal ex-parte. The use of the expression “thereon” means that the Tribunal has to pass order on the subject matter of the appeal, and on the issues in controversy. As has been observed by the Gujarat High Court in Viral Laminates case (supra), the expression “thereon” does not mean that the Tribunal can pass an order of dismissal for default of appearance, since such an order has no nexus with the matter in controversy.”

Hon’ble Rajsthan High Court in Balar Fabrics v. UOI [2002 (142) ELT 309 (Raj.) held, in para 7,

“Considering the entire scheme of the relevant provisions and particularly the expression “thereon” appearing in Section 33(4) of the Income Tax Act as well as provisions of Section 66 relating to reference to the High Court, the Apex Court held that Tribunal has no power to dismiss an appeal for non-appearance of the appellant and the appeal must be decided on merit. It is, thus, evident that the manner and method in which the appeal filed before the Appellate Tribunal under the provisions of the Income Tax Act, 1922 is required to be disposed of are the same as envisaged under Section 35C(1) of the Excise Act as well as Section 129B(1) of the Customs Act. Therefore, the decision rendered by the Supreme Court in Mudaliar’s case applies to the instant controversy with full force. Thus, there is no manner of doubt that the appeal filed before the Tribunal has to be disposed of on merit and cannot be dismissed for want of appearance of the appellant. A Division Bench of the Delhi High Court in Prakash Fabrics v. Union of India reported in [2001 (130) ELT 433 (Del.) = 2001(44) RLT Page 459] dealing with the identical situation observed:

“Where there is no appearance on behalf of the appellant, the Tribunal has to decide the appeal ex parte. The Court further observed that the use of expression “thereon” means that the Tribunal has to pass order on the subject matter of appeal and on the issue of controversy.”

In view of these binding judgments it is clear that the CESTAT has no power to dismiss an appeal in default. When the appellant doesn’t appear at the time of hearing, the tribunal may decide the appeal ex-parte on merits, but it cannot be dismiss the appeal in default.

This conclusion can be drawn from the basic principles of natural justice. The Act gives statutory right of appeal to the assessee. Further the Act imposes a duty on the Tribunal (Section 129B(1) of the Customs Act, 1962) to extend opportunity of being heard to the assessee. Now, if the assessee couldn’t avail the opportunity of being heard or didn’t avail the opportunity of being heard, it cannot be a ground to deny the statutory right of appeal to the assessee.

Despite these various pronouncements of binding judgments by various High Courts, still we find occasions when the Tribunal dismisses an appeal in default. Such contradictory orders by the Tribunal introduces uncertainty in law and at the same time results in multiplicity of proceedings. Further it doesn’t enhance the prestige of Rule of Law. It is high time the CESTAT should amend Rule 20 and settle the issue forever.

(Views expressed are personal views of the author.)

Rajesh Kumar & Associates

(Advocates & Consultants)

custom.excise@gmail.com

www.rajeshkumar.co.in