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2010 DIGILAW 406 (GAU)

Union of India v. Kothari Products Ltd.

2010-06-04

AMITAVA ROY, UTPALENDU BIKAS SAHA

body2010
JUDGMENT Amitava Roy, J. 1. The subject matter of challenge in the instant appeal is the judgment and order dated 26-9-2008 [2009 (237) E.L.T. 332 (Tribunal)] passed by the learned Customs, Excise and Service Tax Appellate Tribunal (for short hereafter referred to as the Tribunal) in Excise Appeals Nos. 403-407/2008 preferred by the respondents herein. The appeals have been allowed by the decision impugned on the ground that the members of the Committee for review (hereafter referred to as the Committee) contemplated under Section 35B of the Central Excise Act, 1944 (for short hereafter referred to as the Act) had not been validly appointed and that therefore its determinations questioned in the appeals were honest in law. We have heard Mr. B. Sharma, learned Sr. Standing Counsel, Central Excise and Customs, for the appellants and Mr. G.N. Sahewalla, Sr. Advocate assisted by Mr. D. Senapati, Advocate for the respondents. 2. Briefly stated the facts in bare essential necessary for the present adjudication are that the Commissioner of Central Excise, Dibrugarh, had by his order dated 23-4-2008 dropped all the charges brought against M/s. Kothari Products Ltd., in Case No. Ex. App. 403/2008 and consequentially allowed its products to be cleared from the factory along with the free gifts of tobacco (purchased from another unit on payment of duty and was not subject to any charge). 3. The Committee aforementioned in the proceedings undertaken by it, on a consideration of the materials on record, adjudged the said decision of the Commissioner of Central Excise, Dibrugarh, in not imposing penalty on the persons/units named therein as erroneous and directed him (Commissioner of Central Excise, Dibrugarh) to apply to the Tribunal for a correct determination of the points as enumerated in its order dated 24-7-2008. 4. The respondents herein in the aforementioned appeals i.e. Ex. App. 403-407/2008 and 409/2008 preferred against the decision dated 24-7-2008 of the Committee questioned its (Committee) jurisdiction and authority contending that the composition thereof was not in accordance with the mandatory requirements of Section 35(1B) of the Act and the relevant Rules framed thereunder. 4. The respondents herein in the aforementioned appeals i.e. Ex. App. 403-407/2008 and 409/2008 preferred against the decision dated 24-7-2008 of the Committee questioned its (Committee) jurisdiction and authority contending that the composition thereof was not in accordance with the mandatory requirements of Section 35(1B) of the Act and the relevant Rules framed thereunder. According to them, the two members thereof namely Shri Rajendra Prasad who acted as Chief Commissioner of Central Excise, Shillong, and Shri Hrishikesh Sharan who did so as Chief Commissioner of Central Excise, Kolkata, had no locus standi to discharge their said roles as the necessary notification under Rule 3(2) of the Central Excise Rules, 2002 (hereinafter referred to as the Rules) to that effect which is obligatory, had not been issued. 5. The Revenue in controversion of the above urged that no such peremptory requirement could be read in Rule 3 of the Rules, in view of the word "may" therein and that in the face of an existing Office Order entrusting the aforementioned members of the Committee with the duty as envisaged under Section 35B(1B), it was not bereft of jurisdiction. It was contended inter alia that Rule 3 being a subordinate legislation, it by no means could be exalted to override the provisions of the Act and that deficiency in the steps towards the composition of the committee, if any, at the most could be said to be a curable irregularity. 6. The learned Tribunal in deciding the issue, referred in details to its determination made in Commissioner of Central Excise, Kolkata-III and IV v. Naffar Chandra Jute Mills Ltd. and Others, 2008 (230) E.L.T. 244 (Tribunal) = 2010 (18) S.T.R. 99 (Tribunal), and sustained the objection with regard to the constitution of the Committee and therefore, concluded that its order dated 24-7-2008 referred to hereinabove was without jurisdiction. 7. Mr. Sharma with reference to Section 2(b), 35B(1B) and 35E of the Act has urged that as by the Notification No. 24/2005-C.E. (N.T.), dated 13-5-2005, a Committee for review as envisaged in the aforementioned legal provisions amongst others for the area of Dibrugarh and Shillong had been constituted by including the Chief Commissioner of Central Excise, Shillong and Chief Commissioner of Central Excise, Kolkata, there was no necessity of any further notification under Rule 3(2) of the Rules to authorise it to act as such. This is more so, as according to him, by Notification No. 23/2005-Central Excise (N.T.) of the even date the Chief Commissioners of Customs had been appointed to act as the Chief Commissioners of Central Excise for the purpose of the Committees under sub-section (1B) of Section 35B of the Act, to substantiate this contention, the learned Central Government Counsel has drawn our attention to the Office Order No. 186/2007 dated 26-7-2007 whereby Shri Rajendra Prasad and Hrishikesh Sharan had been promoted as Chief Commissioner of Customs, Kolkata and Chief Commissioner of Central Excise, Kolkata. As by an Office Order No. 146/2008 dated 23-6-2008, the Chief Commissioner of Customs, Kolkata, had been assigned the additional charge of Chief Commissioner of Central Excise, Shillong, according to Mr. Sharma, the Committee of these two persons was not only validly constituted but had the required jurisdiction and authority under the Act, and the Rules to discharge its functions as contemplated under Section 35E of the Act. 8. In the above premise, Mr. Sharma has reiterated that a separate notification under Rule 3(2) of the Rules was uncalled for more particularly in view of the use of the word "may" which left the concerned authority at its discretion to decide in this regard. The learned Standing counsel has contended that in the framework of the notifications constituting the Committee and the orders of promotion of the members thereof assigning to them the status of the Chief Commissioner of Customs/Central Excise, the Office order dated 23-6-2008 was adequate enough as thereby vide an executive action additional charge of the office of the Chief Commissioner Central Excise, Shillong, was entrusted to Shri Rajendra Prasad. He has maintained that if a notification under Rule 3(2) to effect this administrative change is still insisted, it would have the effect overreaching the requirements of Section 35B(1B) which is legally impermissible. In support of his contention, Mr. Sharma placed reliance on the decision of the Apex Court in Bachahan Devi v. Nagar Nigam Gorakhpur, 2008 (12) SCC 372 . 9. In reply, Mr. In support of his contention, Mr. Sharma placed reliance on the decision of the Apex Court in Bachahan Devi v. Nagar Nigam Gorakhpur, 2008 (12) SCC 372 . 9. In reply, Mr. Sahewala while endorsing the view taken by the learned Tribunal has persuasively argued that having regard to the constitution of the Committee notified by the Notification No. 24/2005-C.E. (N.T.), dated 13-5-2005 and the unambiguous mandate of Rule 3(2) by the Office Order No. 146/2008 dated 23-6-2008, Shri Rajendra Prasad who at all relevant times was the Chief Commissioner of Customs, Kolkata, could not have been assigned the duties of the Chief Commissioner of Central Excise, Shillong in the manner done. The learned Sr. Counsel has apprised this Court that as at that point of time there was no regular incumbent in the post of Chief Commissioner of Central Excise, Shillong, this arrangement by no means could have been effected by such an administrative order. In that view of the matter as well, Mr. Sahewalla has urged that both on facts as well as in law, the Committee constituted by the notification dated 13-5-2005 was legally not in existence and that therefore the learned Tribunal was fully justified in construing its order dated 24-7-2008 to be non-existent, null and void. The learned Senior counsel has pleaded that having regard to the prescriptions of Section 35B(1B) and Section 35E of the Act, a notification under Rule 3(2) of the Rules for the purpose of specifying the jurisdiction of the members of the Committee is an indispensable statutory enjoinment which could not have been disregarded or avoided by the office order dated 23-6-2008. 10. We have carefully considered the materials on record and the rival contentions made. At the outset it is considered essential to set out herein below for ready reference the relevant legal provisions involved. 10. We have carefully considered the materials on record and the rival contentions made. At the outset it is considered essential to set out herein below for ready reference the relevant legal provisions involved. CENTRAL EXCISE ACT, 1944 Section 2(b) :- Central Excise Officer means the Chief Commissioner of Central Excise, Commissioner of Central Excise, Commissioner of Central Excise (Appeals), Additional Commissioner of Central Excise, Joint Commissioner of Central Excise, Deputy Commissioner of Central Excise, Assistant Commissioner of Central Excise or any other officer of the Central Excise Department, or any person (including an officer of the State Government) invested by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963, with any of the powers of a Central Excise Officer under this Act." Section 35B(1B)(i) :- ... The Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963, may, by notification in the Official Gazette, constitute such Committees as may be necessary for the purposes of this Act. (ii) Every Committee constituted under clause (i) shall consist of two Chief Commissioners of Central Excise or two Commissioners of Central Excise, as the case may. CENTRAL EXCISE RULES Rule 3. - Appointment and jurisdiction of Central Excise Officers- (1) The Board may, by notification appoint such person as it thinks fit to be Central Excise Officer to exercise all or any of the powers conferred by or under the Act and these Rules. (2) The Board may, by notification, specify the jurisdiction of a Chief Commissioner of Central Excise, Commissioner of Central Excise or Commissioner of Central Excise (Appeals) for the purposes of the Act and the rules made thereunder. 2(f) "Notification" means notification published in the official gazette. 11. A plain reading of the above provisions evinces that the Chief Commissioner of Central Excise, Commissioner of Central Excise, Commissioner of Central Excise (Appeals), Additional Commissioner of Central Excise, Joint Commissioner of Central Excise, Deputy Commissioner of Central Excise, Assistant Commissioner of Central Excise or any other officer of the Central Excise Department, or any person (including an officer of the State Government) invested by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963, with any of the powers of a Central Excise Officer under the Act, would be a Central Excise Officer for the purposes of the Act. 12. 12. Under Rule 3(1) the Board may by notification appoint such person as it thinks fit to be a Central Excise Officer to exercise all or any of the powers conferred by or under the Act and the Rules. Rule 3(2) requires that the Board may by notification specify the jurisdiction of a Chief Commissioner of Central Excise, Commissioner of Central Excise or Commissioner of Central Excise (Appeals) for the purposes of the Act and the Rules. 13. Whereas Section 35B(1B)(ii) envisages a Committee consisting of two Chief Commissioners of Central Excise or two Commissioners of Central Excise as the case may be for the purpose of the Act, the powers thereof (Committee) and the duties to be performed by it under the Act have been outlined in Section 35E. This involves inter alia the power of review of an order/decision of a Commissioner of Central Excise, which it may invoke on its own motion. The order dated 24-7-2008 by the Committee involved in the instant proceedings is in exercise of such power of review which the respondents have contended to be purported, unreal and lacking in jurisdiction. 14. Certain basic facts ought to be noticed. By the Notification No. 23/2005-C.E. (N.T.), dated 13-5-2005 issued by the joint Secretary to the Government of India, Finance Department, the appointment of Chief Commissioners of Customs to act as the Chief Commissioners of Central Excise for the purpose of constitution of committees under Section 35B(1B) of the Act was notified. The constitution of such committees was similarly notified by the Notification No. 24/2005-C.E. (N.T.) of the even date. At Sl. No. 21 of the said notification the composition of the committee for the area of jurisdiction (Dibrugarh/Shillong) has been indicated as hereunder : 1. Chief Commissioner of Central Excise, Shillong. 2. Chief Commissioner of Central Excise, Kolkata. 15. As referred to hereinabove, by Office Order No. 186/2007, dated 26-7-2007 of the Department of Revenue, Ministry of Finance, Central Board of Excise and Customs, whereas amongst others Shri Rajendra Prasad was promoted as Chief Commissioner of Customs, Kolkata, Shri Hrishikesh Sharan was elevated as the Chief Commissioner of Central Excise, Kolkata. Admittedly there was no notification under Rule 3(2) of the Rules to confer on Shri Rajendra Prasad the jurisdiction to function as the Chief Commissioner of Central Excise, Shillong. Admittedly there was no notification under Rule 3(2) of the Rules to confer on Shri Rajendra Prasad the jurisdiction to function as the Chief Commissioner of Central Excise, Shillong. Be that as it may, the debate centres around the omission on the part of the Department to issue a notification under Rule 3(2) identifying the jurisdiction of Shri Rajendra Prasad the then Chief Commissioner of Customs, Kolkata, to discharge the duties of the Chief Commissioner of Central Excise, Shillong Zone. 16. A cursory reading of sub-rule (1) and sub-rule (2) of Rule 3 of the Rules brings out the difference in the areas of operation thereof. Whereas the facet covered by sub-rule (1) pertains to appointment of persons considered fit to be a Central Excise Officer so as to exercise all or any of the powers conferred by or under the Act, sub-rule (2) dwells in unequivocal terms on the aspect of jurisdiction of the Chief Commissioner of Central Excise, Commissioner of Central Excise or Commissioner of Central Excise (Appeals) for the same purpose. The Board to effectuate the objective of sub-rule (2) has been authorised to do so by a notification. Considering the language of sub-rule (2), we are of the view that though thereby the Board is empowered to specify the jurisdiction of a Chief Commissioner of Central Excise, Commissioner of Central Excise or Commissioner of Central Excise (Appeals), it has to essentially do so by means of a notification. Rule 3(2) only enables the Board to confer the jurisdiction of the Officers mentioned therein if it so chooses but once it decides to do so it has to cause the same to be effected only by a notification and not otherwise. 17. In view of the definition of "notification" provided in Rule 2(f) of the Rules, the same would clearly signify that the same has to be published in the official gazette. Such is the peremptory mandate of the above legal provision that any omission in that regard has to be assuredly viewed to vitiate the resultant act. 18. On a comparative reading of Section 2(b), 35B(1B), 35E and Rule 3 of the Rules, we cannot persuade ourselves to hold that the insistence for a notification as contemplated under Rule 3(2) can be viewed to be either repugnant to or in supersession of the provisions of the Act. 18. On a comparative reading of Section 2(b), 35B(1B), 35E and Rule 3 of the Rules, we cannot persuade ourselves to hold that the insistence for a notification as contemplated under Rule 3(2) can be viewed to be either repugnant to or in supersession of the provisions of the Act. The role of the Rules being to supplement and consolidate the parent enactment for effective implementation thereof we are not inclined to sustain the plea of optional compliance of Rules 3(2) as asserted on behalf of the appellants. 19. The Apex Court in Bachahan Devi, supra, while dilating on the scope and purport of the expression, "may" and "shall" observed that the word may in a statutory provision would not per se indicate that the provision is directory in nature and that in some cases the legislature may use the expression as a matter of pure courtesy and yet mandate a statutory force, Their Lordships reiterated the oft quoted proposition that when the word "may" involves a discretion coupled with an obligation or where it confers a positive benefit to a general class of subjects in a utility Act, or where the Court advances a remedy and suppresses the mischief, or where giving the words a directory significance would defeat the very object of the Act, the word "may" should be interpreted to convey a mandatory force. 20. In view of the authoritative pronouncement as above and having regard to the scheme of the Act and the underlying purpose of the notification to acquaint all concerned about the composition of the Review Committee for the sake of transparency, fairness and predictability of its decisions we are of the un-hesitant opinion that the word "may" used in Rule 3(2) of the Rules is of mandatory connotation leaving the Department with no discretion what so ever but to notify the jurisdiction of the Officers as and when sought to be conferred. This applies per force in the matter of constitution of the Review Committee as contemplated under Section 35B(1B) of the Act. 21. The admitted fact is that on the date on which the Committee involved herein had rendered its decision i.e. 24-7-2008, there was no notification conferring jurisdiction on Shri Rajendra Prasad to function as the Chief Commissioner of Central Excise, Shillong. 21. The admitted fact is that on the date on which the Committee involved herein had rendered its decision i.e. 24-7-2008, there was no notification conferring jurisdiction on Shri Rajendra Prasad to function as the Chief Commissioner of Central Excise, Shillong. Moreover as is affirmed by the learned Standing counsel in course of the arguments, there was no regular incumbent in the office of the Central Excise, Shillong Zone. The Office Order No. 146/2008 dated 23-6-2008 whereby the Chief Commissioner of Customs, Kolkata, had been assigned the additional charge of the Chief Commissioner of Central Excise, Shillong, for the limited purpose of reviewing the orders passed by the Commissioners of Dibrugarh and Shillong until further orders not only on the face of it was a make shift arrangement, but also not at all in conformity with the peremptory prescription of Rule 3(2) of the Rules. As by the said order the Chief Commissioner Customs was being endowed with the jurisdiction to act as the Chief Commissioner of Central Excise, the same could not have been effected without a notification ordained by Rule 3(2), This coupled with the admitted absence of regular incumbent in the office of the Chief Commissioner of Central Excise, Shillong, in our opinion, has rendered the proceedings before the Committee comprised of Shri Rajendra Prasad and Shri Hrishikesh Sharan a nulity. 22. We have perused the impugned judgment and order and are of the view that the same is a self-contained one so much so that reiteration of the reasons recorded in it is uncalled for. This is more so as we record our concurrence with the determination made therein. It is however made clear that alike the Tribunal this Court has not expressed any opinion on the merits of the case and this determination is limited to the jurisdictional issue pertaining to the Committee. On a totality of the consideration as above, we find no merit in the appeal, which is accordingly dismissed. No costs.