M/S KUNDLI SPONGE IRON LIMITED V. THE UNION OF INIDA

WP/109506/2017

AI Insights

The case involves M/s Kundli Sponge Iron Limited, which filed a writ petition against the orders of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), South Zonal Bench, Bangalore. The petitioner challenged several orders, including an ex-parte stay order and subsequent dismissals of their appeals due to non-compliance with a stay order requiring a 50% deposit of duty and penalty. The petitioner argued that they were not given an opportunity to cross-examine witnesses during the original proceedings, which affected their ability to comply with the CESTAT's orders. The High Court found that the CESTAT erred in dismissing the appeal without considering it on merits, as mandated by Section 129-B of the Customs Act, 1962, and the principles laid down by the Supreme Court in similar cases.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 740808 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 16-03-2020
• Assessment Year: misc
• Other Referred Cases: Balaji Steel Re-rolling Mills Vs. Commissioner of Central Excise and Customs, Commissioner of Income Tax Vs. S. Chenniappa Mudaliar, Madurai
• Laws Referred To: Article 226 & 227 of the Constitution of India, Customs Act, 1962
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S N RAJENDRA
• Assessee Lawyers: ANIRUDH NAYAK; SANTOSH PUJARI; NAVEEN MELINAMANI
• Keywords: CESTAT; Cross Examination; Cross-examination; Non compliance; Search and seizure; Stay order; Writ petition
• Section: 129 B

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 16TH DAY OF MARCH 2020 BEFORE THE HON’BLE MR. JUSTICE B.M. SHYAM PRASAD WRIT PETITION NO.109506 OF 2017 (T-RES) BETWEEN M/S KUNDLI SPONGE IRON LIMITED LONDA, KHANAPUR TALUKA BELAGAVI DISTRICT REPRESENTED BY ITS DIRECTOR SURAJIT CHANDRA BARUAH AGE:54. ... PETITIONER (BY SRI. ANIRUDH R J NAYAK, ADV., SRI. SANTOSH PUJARI, ADV., & SRI. NAVEEN R MELINAMANI, ADV.,) AND 1. THE UNION OF INIDA, REPRESENTED BY ITS SECRETARY MINISTRY OF FINANCE NORTH BLOCK, NEW DELHI 2. THE MINISTRY OF FINANCE GOVERNMENT OF INDIA REP BY ITS SECRETARY MF (DR) NEW DELHI-110011. 3. THE COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX C R BUILDINGS, NO.71, CLUB ROAD, BELGAUM-590005 ... RESPONDENTS (BY SRI. S N RAJENDRA, CGC FOR R1-R3) 2 THIS WRIT PETITION IS FILED UNDER ARTICLE 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDERS IN ORIGINAL NO.S10/2013 DATED 15.04.2013 IN ANNEXURE-E, ORDER NO.20194/2017 DATED 04.05.2017 IN ANNEXURE-M, ORDER IN ANNEXURE-K NO.21086- 21090/2016 DATED 18.10.2016 AND ORDER IN ANNEXURE- G EX-PARTE STAY ORDER DATED 02.02.2016 AS ILLEGAL AND UNTENABLE IN LAW. THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING, THIS DAY, AND THE COURT MADE THE FOLLOWING: ORDER The petitioner, a private limited company, is aggrieved by the dismissal of its Appeal Nos.E/27220/2013-DB, E/27221/2013-DB, E/27222/2013-DB, E/27223/2013-DB, E/27224/ 2013-DB by the Customs, Excise & Service Tax Appellate CESTAT, South Zonal Bench, Bangalore (for short, ‘the CESTAT’), and the impugned order dated 18.10.2016 reads as follows:- 3 “Today the case was fixed for hearing but none is present on behalf of the appellant. A letter has been received from the appellants stating that they had filed an application for recalling the ex parte stay order dated 02.02.2016. In the letter the appellants have also mentioned that his miscellaneous application for setting aside the ex parte order should be taken up for hearing first. 2. On the other hand the learned AR submitted that vide Order dated 02.02.2016, the CESTAT after considering the submissions in the memo of appeal and also going through the impugned order came to the conclusion that there is no prima facie case in favour of the appellants to allow the stay petition unconditionally. The Bench accordingly directed the appellant to deposit 50% of the duty confirmed against them and all other applicants were directed to deposit 50% of the penalty imposed upon them. The appellants were to send the compliance report before 13.04.2016. Perusal of the records shows that they have not complied with the 4 directions of the CESTAT regarding deposit of 50% of the duty confirmed and also 50% of the penalty imposed on the appellant. Instead of complying with the directions of the CESTAT, they have simply moved an application for setting aside the ex parte decision. Today nobody has appeared to argue the case even on miscellaneous applications which are fixed for disposal. In view of these facts we are of the considered opinion that the appellants have not intentionally complied with the Stay Order dated 02.02.2016 passed by the CESTAT. In view of non-compliance of the Stay Order, all the appeals are dismissed.” The CESTAT has dismissed the petitioner’s appeal and thereby the third respondent’s Original Order dated 15.04.2013 in Original Application No.10/2013. 2. The learned counsel explaining the facts and circumstances leading to the appeal before the CESTAT, submits that the original order dated 15.04.2013 is preceded by a show-cause notice to the petitioner/ its 5 Directors and proceedings subsequent to such show- cause notice. The petitioner has filed its interim reply inter alia requesting the third respondent for an opportunity to cross-examine the witnesses who purportedly conducted search and seizure in the petitioner’s premises on 03.04.2007 and 05.04.2007. The third respondent has not accorded any opportunity to the petitioner to cross-examine the officers despite repeated representations and requests made by the petitioner during the pendency of the proceedings. 3. The petitioner therefore, filed the appeal before the CESTAT. One of the chief grounds urged in the appeal is that the third respondent ought to have extended an opportunity to the petitioner to cross- examine the officers who allegedly conducted search and seizure proceedings on the aforesaid two dates, and the third respondent’s failure to extend such 6 opportunity renders the original order dated 15.04.2013 impermissible in law. 4. The petitioner bona fide engaged a learned counsel to prosecute the appeal. The appeal was filed on 15.07.2013. The appeal was listed before the CESTAT on 02.02.2016 for consideration of the interim application for stay of proceedings. The petitioner bona fide believed that the learned counsel on record would appear and argue in support of the application. However, none appeared on behalf of the petitioner and consequentially, the CESTAT passed orders on 02.02.2016 directing the petitioner and its directors to deposit 50% of the demand and penalty respectively within a period of eight weeks with a further direction that the compliance must be reported on 13.04.2016. 5. The petitioner on being informed about the interim order dated 02.02.2016, requested its learned counsel to make necessary application. Accordingly, an 7 application was made on 25.02.2016 before the lapse of the time granted by the CESTAT for deposit of 50% of the demand and penalty. One of the learned counsel on record for the petitioner filed an affidavit in support of such application. The petitioner bona fide believed that the counsel on record would appear before the CESTAT and prosecute the application to espouse the petitioner’s interest with necessary due diligence. Therefore, the petitioner also filed a memo on 17.10.2016. However, to the petitioner’s shock, none appeared on his behalf on 18.10.2016 and consequentially, the CESTAT has disposed of the appeal in terms as aforesaid. 6. The learned counsel for the petitioner canvasses two-fold submissions in support of the petition. Firstly, the CESTAT ought to have extended another opportunity for the petitioner to make submissions in support of the application filed for recall 8 of the order dated 02.02.2016 in the light of the memo filed on 17.10.2016 and the learned counsel’s failure to appear on behalf of the petitioner even on the previous date viz., 02.02.2016. Secondly, it is settled law that the CESTAT could not have disposed of the appeal for default in view of the provisions of Section 129-B of the Customs Act, 1962 (for short, ‘the Customs Act’). 7. The learned counsel submits that the provisions of Section 129-B of the Customs Act enjoins the CESTAT to decide on appeal only on merits for either modification or confirmation or annulling of the impugned order, or for a remand. Though Rule 20 of the CESTAT (Procedure) Rules 1982 stipulates that an appeal could be dismissed for default, the statutory provisions of Section 129-B of the Customs Act would prevail over the aforesaid rule. As such, the CESTAT could not have dismissed the petitioner’s appeal. The learned counsel in support of this proposition relies 9 upon the decision of the Hon’ble Supreme Court in Balaji Steel Re-rolling Mills Vs. Commissioner of Central Excise and Customs1. 8. The learned counsel for the respondents submits that the petitioner is not bona fide in relying upon the counsel’s absence for dismissal of the appeal on merits as well as rejection of the application for recall of the order dated 02.02.2016. The authorities initiated proceedings against the petitioner, and its Directors, way back in the year 2007. The original proceedings before the third respondent were commenced in the year 2011, and such proceedings were pending over a period of two years. The petitioner was not diligent, and the petitioner’s lack of diligence is also seen in the manner in which the proceedings are conducted before the CESTAT. The CESTAT’s dismissal of the petitioner’s application and the appeal would be justified. However, the learned counsel is not in a position to controvert 1 2014 (36) S.T.R. 1201 (SC) 10 that the legal proposition exposited by the Hon’ble Supreme Court in Balaji Steel Re-rolling Mills (supra) would apply to the facts and circumstances of the case. 9. The Hon’ble Supreme Court in the aforesaid decision referring to its earlier decision in the Commissioner of Income Tax, Vs. S. Chenniappa Mudaliar, Madurai2 has declared as follows:- “13. Applying the principles laid down in the aforesaid case to the facts of the present case, as the two provisions are similar, we are of the considered opinion that the CESTAT could not have dismissed the appeal filed by the appellant for want to prosecution and it ought to have decided the appeal on merits even if the appellant or its counsel was not present when the appeal was taken up for hearing. The High Court also erred in law in upholding the order of the CESTAT.” 2 1969(1)SCC PAGE 591 11 Further the Hon’ble Supreme Court has set aside the order of the CESTAT directing the CESTAT to re-decide the appeal on merits. 10. In the present case, the appeal is dismissed on the ground that the petitioner did not deposit 50% of the demand in terms of the order dated 02.02.2016. It must also be mentioned that the directors of the petitioner’s company also did not deposit 50% of the penalty imposed on them, and further it must also be mentioned that there is no dispute that none appeared for the petitioner on 18.10.2016 when the appeal was listed for orders on an application filed for recall of the order dated 02.02.2016. The CESTAT’s order is not an order of modification or confirmation or annulling, or an order of remanding. The CESTAT’s order is not in consonance with the provisions of section 129-B of the Customs Act, and would be impermissible in the light of the decision by the Hon’ble Supreme Court. 12 11. Therefore, the impugned orders will have to be set aside and the appeal restored for fresh disposal as contemplated under Section 129-B of the Customs Act leaving it open to the parties to urge their respective grounds before the CESTAT. Further, given the facts and circumstances of the case, it would also be just and reasonable to restore the petitioner’s application for recall of the interim order dated 02.02.2016. In the light of the submissions of the learned counsel for the parties that the dispute is pending adjudication for over 12 years, it would be appropriate to request the CESTAT to expedite final disposal of the appeal on merits. Hence, the following: ORDER a) The writ petition is partly allowed and the CESTAT’s impugned order of the dated 18.10.2016 in Appeal No. Nos.E/27220/2013-DB, E/27221/ 2013-DB, E/27222/2013-DB, E/27223/2013-DB, 13 E/27224/2013-DB is set-aside and the appeal is restored for reconsideration on merits. b) The application filed by the petitioner under Rule 41 of the CESTAT Rules for recall of the order dated 02.02.2016 is also restored for consideration on merits. c) The CESTAT is requested to expedite the disposal of the appeal on merits Sd/- JUDGE yan "