Prabhat Zarda Factory (India) Ltd. vs Commissioner of Central Excise

Kalyan Jyoti Sengupta, J.—This matter has been admitted for hearing as an appeal by order dated 23rd May, 2003 on the questions formulated in the said order and the same are set out hereinbelow:

i. "Whether on a proper construction of the provisions of Section 65(10), 65(41), 66(3) and 67(i) of the Finance Act, 1994 and the agreements dated October 25, 1989 and April 01, 1999 M/s. Ratna Zarda Company (in short RZC) was a "Clearing and Forwarding Agent" and the applicant was liable to pay any Service Tax on the services, rendered it by the said RZC during the period from July 16, 1997 to August 31, 1997?"

ii. "Whether the Service Tax authorities could continue with the show cause notice dated February 09, 1999 in view of the judgment dated July 27, 1999 of the Hon''ble Supreme Court in the case of Laghu Udyog Bharati and circular dated August 23, 1999 issued by the Government?"

iii. "Whether any proceeding could be initiated or continued on the basis of the purported validating provisions enacted by the Finance Act, 2000 which merely sought to over rule the law laid down by the Hon''ble Supreme Court?"

iv. "Further and in any event and without prejudice to the contention as to the validity and legality of the supported validating provisions of the Finance Act, 2000 whether it was necessary to issue a fresh show cause notice after such purported validating provisions and subject to the limitation provisions contained in Section 73(b) of the Finance Act, 1994?"

v. "Whether on the facts and in the circumstances of the instant case, any penalty could be imposed upon the applicant under Sections 76 and 77 or it could be required to pay any interest u/s 75 of the Finance Act, 1994?"

When the matter is taken up for hearing finally it is noticed that the Hon''ble Division Bench at the time of admission was not properly assisted, for it was not an appeal sought to be preferred by the assessee. The assessee really made an application in this Court in its special jurisdiction asking the Appellate Tribunal to refer to this Hon''ble Court the questions of law referred to in paragraph 8 of the application. The reference has given rise in connection with the judgment and/or order dated 19th February, 2002 of CEGAT, Kolkata. This application was made u/s 83 of the Finance Act, 1994 read with sub-Section 1 of Section 35H of the Central Excise Act, 1984.

Therefore, there has been apparent inadvertent judicial mistake and it could have been cured by this Court in exercise of inherent power when seriously apparent mistake committed by the court is to be found.

We had in our mind to rectify the same by the following order dated 23rd May, 2003 and directed the Tribunal concerned in exercise of power under the aforesaid section read with 35H of the Central Excise Act.

But as pointed out by Mr. Bose it would be improper for this Court to direct the tribunal though it has got its office and/or place of business within the territorial limit of this Court at Calcutta, since Section 36 of the Central Excise Act provides the definition of the "High Court". The definition of the "High Court" u/s 36 is as follows:

"High Court" means, - (i) in relation to any State, the High Court for that State...

In this context, now it has to be decided whether this High Court is the appropriate High Court as mentioned in Section 36 for the purpose of reference or not. From the records it appears that admittedly the place of business of the assessee is at Patna and the appropriate assessing officer is having office and has dealt with the case of the assessee at Patna. However, fortuitously the situs of the tribunal is in Kolkata. The question is whether this High Court would be the appropriate Court for giving direction upon the tribunal to refer the matter to this Court or not.

In this context, Mr. Bose has referred to a decision of the Hon''ble Supreme Court in the case of Ambica Industries Vs. Commissioner of Central Excise, . The Supreme Court in that case has held that concept of cause of action for preferring appeal against the order of the tribunal will not apply. The situs of the High Court has to be decided and understood in relation to place of business of the assessing officer as well as the assessee. Accordingly, the High Court within whose jurisdiction the original order of assessment was not passed, was held not to be the appropriate High Court.

Mr. Khaitan, learned Senior Advocate, has placed a decision of the Supreme Court of two Judges Bench in the case of Canon Steels P. Ltd. vs. Commissioner of Customs (Export Promotion] reported in 2007 (218) ELT 161 (SC) and submits that it is possible to approach this Court asking for a direction on the tribunal to refer on the point of law to this Court for opinion as the tribunal is having place of business within the territorial limit of this Court applying the principle of cause of action. According to him, when decisions of the equal strength on the same point are conflicting each other then the better course of action would be to follow the later decision of the Supreme Court.

We think Mr. Khaitan is right in his submission on the question of applicability of rule of precedent. But when we notice the latter judgment of two Judges Bench of the Supreme Court in Canon Steels P. Ltd. (supra) was rendered relying on the earlier decision of the Supreme Court in Kusum Ingots & Alloys Ltd. vs. Union of India, reported in [2004] (165) ELT 3 (SC), we think this judgment cannot be a binding precedent on the facts and in the circumstances of this case. The judgment in Kusum Ingots 85 Alloys (supra) was rendered. in connection with the provisions under Article 226 where the accrual of causes of action was taken to be the determinative factor for the forum selection, and the Canon Steels P. Ltd.(supra) was decided relying on such principle solely. Neither of the two decisions has dealt with the question as to what could be the appropriate High Court when any reference is asked to be made by the tribunal.

Therefore, we do not find any clear guidance in this respect.

By virtue of Section 83 of the Finance Act, 1994 the provisions amongst other Sections 35(f) - 35(o) and Section 36 have been adopted. Sequelly, Section 35H and sub-Section 4 have been made applicable in this Finance Act by way of adaptation. At the same time, provision of Section 35 has also been made applicable in the same manner.

According to us, the phraseology as employed in Section 36 clause (b) in relation to any State, the High Court for that State means the High Court having jurisdiction over the subject matter where original causes of action has arisen. Here, cause of action has arisen admittedly in Patna as the assessing officer for the first time has dealt with the matter and which is the root cause of taking action against the revenue before the tribunal albeit the tribunal is having place of business in the city of Kolkata within the territorial jurisdiction of this Court.

Therefore, we are of the opinion the situs of tribunal in Kolkata is not determinative factor in this case to exercise the jurisdiction u/s 35H read with Section 83 of the Finance Act, 1994. We think that the appropriate High Court in relation to this case would be Patna High Court. Accordingly, it would be improper for this Court to pass any order asking the tribunal to refer the case as applied for before this Court.

It appears on earlier occasion the assessee approached the Patna High Court for appropriate relief and the Hon''ble Patna High Court had no occasion to deal with the matter as the same was not pressed because the matter was pending in this Court. As we find this Court has initially entertained the action by the assessee and it was kept pending and it was understood by both the parties that the appeal would be heard out, so it would be unfair for the court if we dismiss the matter on the ground of lack of territorial jurisdiction.

As we have already observed, it was a case of an application for direction upon the tribunal for referring the matter on the point of law, this application was not really examined and entertained by the court at all. In the fitness of the situation, we pass the following orders: 16. Now, this matter should not be treated to be an appeal and should be treated an application for reference as it could be found in the paper book at pages 1 to 5.

We pass an order of return of the original papers along with the application to the applicant and with liberty to present the same before Patna High Court within a period of thirty days from the date of receipt of the papers. Accordingly, we direct the learned Registrar, Original Side of this Court to return all the original papers together with paper book to the applicant.

Department and all parties concerned'' are to act on a signed photostat copy of this order on the usual undertakings.

Urgent xerox certified copy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.