IN THE HIGH COURT OF ALLAHABAD
Central Excise Appeal No. 17 & 18 of 2018
M/s MAMTA STEEL INDIA PVT LTD
COMMISSIONER OF CENTRAL EXCISE
CIVIL LINES ALLAHABAD
Devendra Kumar Upadhayaya & Alok Mathur, JJ
Dated: August 01, 2019
Appellant Rep. by: Pradeep Agrawal
Respondent Rep. by: Dipak Seth
CX – The assessee-company manufactures MS Ingots falling under Tariff Heading 72061090 of the CETA 1985 – The other assessee is the director of the first assessee-company – On adjudication for the relevant period, it was observed that upon visiting the assessee’s premises to check available stock of excisable goods, a shortage of some quantity of MS Ingots was recorded – Statements of the assessee-company’s director were recorded, admitting that the assessee received unaccounted raw material and deliberately suppressed production of finished goods by issuing false and forged invoices – Hence duty demand was raised and penalty was imposed, along with personal penalty on the director – Such findings were sustained by the Commr.(A) and by the Tribunal after it – Hence the present appeal.
Held: Perusal of the order in challenge shows that the assessee raised several grounds, such as that the weight of MS Ingots was determined by eye estimation & not actual weighment – It was also stated that the invoice books were compared in a follow-up action and no discrepancy was found – It was also claimed that the assessee-company’s director made no admissions before the authorities – Perusal of the judgment shows that the Tribunal did not consider any of the arguments raised by the assessee & dismissed the appeal based on the SCN issued – It also recorded that the assessee did not put forth a robust defence – An order without valid reasons is unsustainable & to give reasons is engrained in principles of natural justice – Providing of reasons in orders is of essence in judicial proceedings – Every litigant who approaches the Court with a prayer is entitled to know the reasons for acceptance or rejection of such request – The Court cannot lose sight of the fact that a losing litigant has a cause to plead and a right to challenge the order if it is adverse to him – The opinion of the Court alone can explain the cause which led to passing of the final order – Reason is the very life of law. When the reason of a law once ceases, the law itself generally ceases – Such is the significance of reasoning in any rule of law – Hence even if the Tribunal is in agreement with the order passed by the Commr.(A), it is obliged to record own reasons and findings indicating application of mind in respect of the grounds raised – Thus the matter warrants remand to the Tribunal: HC
Case law cited –
The Secretary & Curator, Victoria Memorial v. Howrah Ganatantrik Nagrik Samity and ors., JT 2010 (2) SC 566…..Para 13
Chandna Impex Pvt. Ltd. Vs. Commissioner of Customs, New Delhi – 2011-TIOL-61-SC-CUS…..Para 14
State of Orissa v. Dhaniram Luhar (2004) 5 SCC 568…..Para 15
State of Rajasthan v. Rajendra Prasad Jain, (2008) 15 SSC 711…..Para 16
Alexander Machinery (Dudley) Ltd. v. Crabtree 1974 ICR 120 (NIRC)…..Para 20
Per: Alok Mathur:
1. Heard Sri Pradeep Agarwal, learned counsel for the appellant and Sri Dipak Seth, learned counsel appearing for the respondents.
2. The present Central Excise Appeal has been preferred against the judgment and order passed by Central Excise and Service Tax Appellate Tribunal, Allahabad on 17/10/2017 by which the appeal preferred by the appellant has been dismissed.
3. Sri Pradeep Agrawal, counsel for the appellant in Appeal No. 17 of 2018 has submitted that the appellant is a registered dealer under the Central Excise Act, 1944 and is engaged in manufacture of MS Ingots falling under tariff item number 72061090 of the Central Excise Tariff Act, 1985, while the appellant in Appeal No. 18 of 2018 is the Director of the Company, and both the appeals were decided by the common order by the CESTAT, and therefore have been heard together and are being disposed of by this common order.
4. The Additional Commissioner (ADJ), Central Excise & Service Tax, Lucknow while passing the order dated 02.01.2015 in original, recorded the fact that a team of officers of the Central Excise, Lucknow visited the manufacturing premises of the factory on 30/11/2011 to check the record in stock of excisable goods available in the factory. After tallying the stock with the records, some shortage of the stock of MS Ingots was discovered. Statement of Sri Lal Padamkar Singh, the Director, was also recorded and on the basis of available material it was found that the appellant company had indulged in receipt of uncounted raw material i.e scrap and deliberately suppressed the production of finished goods by resorting to issuing of false and forged invoices in addition to the originals, and he therefore, confirmed total demand of Rs.2,00,449/- on shortage found in stock of MS ingots, demand of Central Excise Duty (Including Education Cess, Secondary and Higher Education Cess) to the tune of Rs.36,46,346/-, and a penalty of Rs. 38,46,395/-, and imposed a further penalty of Rs. 38,46,395/- on Sri Lal Padamkar Singh, director.
5. The appellant aggrieved by the aforesaid order preferred appeals under section 35 of the Central Excise Act, 1944 before the Commissioner of Appeals which were dismissed by common order dated 14/10/2015 against which a second appeals were preferred before the CESTAT which were also dismissed by a common order impugned before us in the present appeals.
6. The appeals were admitted on 04/07/2019 on the following questions of law, namely:-
“1. Whether the learned Tribunal was justified in not disposing the appeal on merits and not adjudicating the grounds of appeal raised in the memo of appeal despite the fact that the Tribunal being the last fact finding authority under the Act.
2. Whether the learned Tribunal was justified in not adjudicating the issues/submissions and no findings have been recorded for levy of penalty on the Director of the Company in the impugned order.”
7. It has been submitted by the learned counsel of the appellant that the submissions before the CESTAT were duly recorded in the impugned judgment in paragraph 3 which is reproduced here under:-
(i) The weight of MS ingots were determined by eye estimation and not the actual weighment and, therefore the demand of duty of shortage of ingots is not sustainable.
(ii) It is admitted in para 6 of the show cause notice that invoice No. 31 dated 30.11.2011 issued from the forged invoice book was issued to M/s United Steel Industries for removal of 32.860 MT of MS Ingots but in follow-up action conducted on 01.12.2011 no discrepancy was found.
(iii) The Director of the Appellant never admitted removal of MS Ingots without payment of duty and that the Department has not come out with any evidence to prove allegation.
(iv) As reflected in para 6 and 15 of show cause notice both M/s United Steel Industries and M/s Kumar Industries has categorically denied having received any goods other than goods received through the invoice produced by them.
8. The Tribunal in the impugned order has only recorded in paragraph No.5 as under:-
“5. Having considered the rival contentions and on perusal of record it is notice from the show cause notice dated 22.03.2013 that invoices with same numbers such are Invoice No.26 was issued on various dated such as 01.11.2011, 02.11.2011, 03.11.2011, 04.11.2011, 05.11.2011 and 06.05.2011 indicating various quantities of ingots cleared and similar situation was in Invoice No.27 or Invoice No. 28 etc. Further, in the invoice book mentioned at Serial No. 8 of Annexure A, Invoice No.3 was issued several times. No convincing defence was put forth against issue of number of invoices with the same number on various occasion to different purchases containing different information about the quantity of ingots cleared. Therefore, I do not find any infirmity in the order passed by the learned Commissioner (Appeals). I, therefore, decline to interfere with the impugned Order-in-Appeal. Both the present appeals are dismissed.
9. The learned counsel of the petitioner has submitted that it was the duty of the Tribunal to duly consider the issues raised by the appellant as recorded in paragraph 3 of the said order, and deal with all the aspects before deciding the appeals. It was also submitted that CESTAT has decided the appeals in the most cursory and casual manner and without giving any reasons for not accepting the pleas raised by the appellant, and therefore the said judgment suffers from vice of non-application of mind, which is writ large on the impugned order, and therefore the appeal deserves to be allowed on this score alone.
10. Sri Dipak Seth, learned counsel for the revenue, on this count did not oppose the arguments raised by the counsel for the appellant, but submitted that the matter deserves to be remanded to the Tribunal for reconsideration in accordance with law.
11. We have heard the counsel of the parties and perused the record. A perusal of the impugned order clearly indicates that the appellants had raised several grounds challenging the order of Commissioner of appeals including the ground that the weight of MS ingots had been determined by eye estimation and not by actual weightment and therefore there could not have been any addition on this score. It was also pleaded that invoice books were also compared in a follow-up action but no discrepancy was found and also that the Director of the applicant had never made admission before the authorities on the basis of which the additions have been made in the order in original.
12. A bare perusal of the impugned judgment clearly shows that the Tribunal has not considered any of the arguments and submissions raised by the appellant but has only dismissed the appeal relying on the show cause notice dated 22/03/13 wherein it has been mentioned that invoices with the same numbers were issued on various dates and certain invoice were issued several times. The Tribunal has concluded by holding that no convincing defence was put forth by the appellant and therefore proceeded to confirm the order passed by the Commissioner (Appeals) I.
13. An order without valid reasons cannot be sustained. To give reasons is engrained in the rule of natural justice. Highlighting this rule, Hon’ble Supreme Court held in the case of The Secretary & Curator, Victoria Memorial v. Howrah Ganatantrik Nagrik Samity and ors., JT 2010 (2) SC 566 para 31 to 33 as under :
“31. It is a settled legal proposition that not only administrative but also judicial order must be supported by reasons, recorded in it. Thus, while deciding an issue, the Court is bound to give reasons for its conclusion. It is the duty and obligation on the part of the Court to record reasons while disposing of the case. The hallmark of an order and exercise of judicial power by a judicial forum is to disclose its reasons by itself and giving of reasons has always been insisted upon as one of the fundamentals of sound administration justice – delivery system, to make known that there had been proper and due application of mind to the issue before the Court and also as an essential requisite of principles of natural justice. The giving of reasons for a decision is an essential attribute of judicial and judicious disposal of a matter before Courts, and which is the only indication to know about the manner and quality of exercise undertaken, as also the fact that the Court concerned had really applied its mind. ” [Vide State of Orissa Vs. Dhaniram Luhar (JT 2004(2) SC 172 and State of Rajasthan Vs. Sohan Lal & Ors. JT 2004 (5) SCC 338:2004 (5) SCC 573].
32. Reason is the heartbeat of every conclusion. It introduces clarity in an order and without the same, it becomes lifeless. Reasons substitute subjectivity by objectivity. Absence of reasons renders the order indefensible/unsustainable particularly when the order is subject to further challenge before a higher forum. [Vide Raj Kishore Jha Vs. State of Bihar & Ors. AIR 2003 SC 4664; Vishnu Dev Sharma Vs. State of Uttar Pradesh & Ors. (2008) 3 SCC 172; Steel Authority of India Ltd. Vs. Sales Tax Officer, Rourkela I Circle & Ors. (2008) 9 SCC 407 = 2008-TIOL-133-SC-CT; State of Uttaranchal & Anr. Vs. Sunil Kumar Singh Negi AIR 2008 SC 2026; U.P.S.R.T.C. Vs. Jagdish Prasad Gupta AIR 2009 SC 2328; Ram Phal Vs. State of Haryana & Ors. (2009) 3 SCC 258; Mohammed Yusuf Vs. Faij Mohammad & Ors. (2009) 3 SCC 513; and State of Himachal Pradesh Vs. Sada Ram & Anr. (2009) 4 SCC 422].
33. Thus, it is evident that the recording of reasons is principle of natural justice and every judicial order must be supported by reasons recorded in writing. It ensures transparency and fairness in decision making. The person who is adversely affected may know, as why his application has been rejected.”
14. Non recording of reasons, non consideration of admissible evidence or consideration of inadmissible evidence renders the order to be unsustainable. Hon’ble Supreme Court in the case of Chandna Impex Pvt. Ltd. Vs. Commissioner of Customs, New Delhi, 2011 (269) E.L.T. 433 (S.C.) = 2011-TIOL-61-SC-CUS, held as under :
“8. ….It needs to be emphasised that every litigant, who approaches the court for relief is entitled to know the reason for acceptance or rejection of his prayer, particularly when either of the parties to the lis has a right of further appeal. Unless the litigant is made aware of the reasons which weighed with the court in denying him the relief prayed for, the remedy of appeal will not be meaningful. It is that reasoning, which can be subjected to examination at the higher forums. In State of Orissa Vs. Dhaniram Luhar this Court, while reiterating that reason is the heart beat of every conclusion and without the same, it becomes lifeless, observed thus :
“8…….Right to reason is an indispensable part of a sound judicial system; reasons at least sufficient to indicate an application of mind to the matter before court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made;…….”
15. The Supreme Court in State of Orissa v. Dhaniram Luhar (2004) 5 SCC 568 while dealing with the criminal appeal, insisted that the reasons in support of the decision was a cardinal principle and the High Court should record its reasons while disposing of the matter. The Court held as under:
“8. Even in respect of administrative orders Lord Denning, M.R. In Breen v. Amalgamated Engg. Union, (1971)2 QB 175, observed:(QB p.191 C) “The giving of reasons is one of the fundamentals of good administration.” In Alexander Machinery (Dudley) Ltd. v. Crabtree it was observed: “Failure to give reasons amounts to denial of justice.” “Reasons are live links between the mind of the decision-taker to the controversy in question and the decision or conclusion arrived at.” Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the “inscrutable face of the sphinx”, it can, by its silence, render it virtually impossible for the Courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system; reasons at least sufficient to indicate an application of mind to the matter before Court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made; in other words, a speaking-out. The “inscrutable face of the sphinx” is ordinarily incongruous with a judicial or quasi-judicial performance.”
16. Following this very view, the Supreme Court in another judgment in State of Rajasthan v. Rajendra Prasad Jain, (2008) 15 SSC 711 stated that ‘reason is the heartbeat of every conclusion, and without the same it becomes lifeless.
17. Providing of reasons in orders is of essence in judicial proceedings. Every litigant who approaches the Court with a prayer is entitled to know the reasons for acceptance or rejection of such request. Either of the parties to the lis has a right of appeal and, therefore, it is essential for them to know the considered opinion of the Court or the Tribunal to make the remedy of appeal meaningful. It is the reasoning which ultimately culminates into final decision which may be subject to examination of the Appellate or other higher Courts. It is not only desirable but, in view of the consistent position of law, mandatory for the Court to pass orders while recording reasons in support thereof, however, brief they may be. Brevity in reasoning cannot be understood in legal parlance as absence of reasons. While no reasoning in support of judicial orders is impermissible, the brief reasoning would suffice to meet the ends of justice at least at the interlocutory stages and would render the remedy of appeal purposeful and meaningful. It is a settled canon of legal jurisprudence that the Courts are vested with discretionary powers but such powers are to be exercised judiciously, equitably and in consonance with the settled principles of law. Whether or not, such judicial discretion has been exercised in accordance with the accepted norms, can only be reflected by the reasons recorded in the order impugned before the higher Court. Often it is said that absence of reasoning may ipso facto indicate whimsical exercise of judicial discretion. Patricia Wald, Chief Justice of the D.C. Circuit Court of Appeals in the Article, “The problem with the Courts: Black-robed Bureaucracy Or Collegiality Under Challenge” 42 Md.L. Rev. 766, 782 (1983), observed as under:-
‘My own guiding principle is that virtually every appellate decision requires some statement of reasons. The discipline of writing even a few sentences or paragraphs explaining the basis for the judgment insures a level of thought and scrutiny by the Court that a bare signal of affirmance, dismissal, or reversal does not.’
18. The Court cannot lose sight of the fact that a losing litigant has a cause to plead and a right to challenge the order if it is adverse to him. Opinion of the Court alone can explain the cause which led to passing of the final order. Whether an argument was rejected validly or otherwise, reasoning of the order alone can show. To evaluate the submissions is obligation of the Court and to know the reasons for rejection of its contention is a legitimate expectation on the part of the litigant.
19. It will be useful to refer to the words of Justice Roslyn Atkinson, Supreme Court of Queensland, at AIJA Conference at Brisbane on 13-9-2002 in relation to Judgment Writing. Describing that some judgments could be complex, in distinction to routine judgments, where one requires deeper thoughts, and the other could be disposed of easily but in either cases, reasons they must have. While speaking about purpose of a judgment, she said, ‘The first matter to consider is the purpose of the judgment. To my mind there are four purposes for any judgment that is written:-
(1) to clarify your own thoughts;
(2) to explain your decision to the parties;
(3) to communicate the reasons for the decision to the public; and (4) to provide reasons for an Appellate Court to consider.
20. Clarity of thought leads to proper reasoning and proper reasoning is the foundation of a just and fair decision. In Alexander Machinery (Dudley) Ltd. v. Crabtree 1974 ICR 120 (NIRC), the Court went to the extent of observing that ‘Failure to give reasons amounts to denial of justice’. Reasons are really linchpin to administration of justice. They are the link between the mind of the decision-taker and the controversy in question. To justify our conclusion, reasons are essential. Absence of reasoning would render the judicial order liable to interference by the higher court. Reasons are the soul of the decision and its absence would render the order open to judicial chastism. The consistent judicial opinion is that every order determining rights of the parties in a Court of law ought not to be recorded without supportive reasons. Issuing reasoned order is not only beneficial to the higher courts but is even of great utility for providing public understanding of law and imposing self- discipline in the Judge as their discretion is controlled by well- established norms. Absence of reasoning is impermissible in judicial pronouncement.
21. The contention raised before us that absence of reasoning in the impugned order would render the order liable to be set aside, particularly, in face of the fact that the Tribunal found merit and allowed the appeal.
22. Reason is the very life of law. When the reason of a law once ceases, the law itself generally ceases (Wharton’s Law Lexicon). Such is the significance of reasoning in any rule of law. Giving reasons furthers the cause of justice as well as avoids uncertainty. As a matter of fact it helps in the observance of law of precedent. Absence of reasons on the contrary essentially introduces an element of uncertainty, dissatisfaction and give entirely different dimensions to the questions of law raised before the higher/appellate courts. In our view, the court should provide its own grounds and reasons for rejecting claim/prayer of a party whether at the very threshold i.e. at admission stage or after regular hearing, howsoever concise they may be.
23. It is the duty cast upon the Appellate Authority that even if it is in agreement with the view taken by the first Appellate Authority, it should give its own reasons/findings which may indicate that there has been application of mind and also the consideration of grounds raised in the appeal by the revisionist. In absence of reasons it is difficult to come to a conclusion that there has been any application of mind by the Tribunal and such an order in the opinion of the Court cannot be sustained and deserves to be set aside.
24. Accordingly, the appeals are allowed. Judgment and order dated 17.10.2017 passed by the Central Excise and Service Tax Appellate Tribunal, Allahabad is hereby set-aside.
25. The matter is remanded to the Customs Excise and Service Tax Appellate Tribunal (in short CESTAT) for redetermination, in terms of the discussion made above, after affording opportunity to the parties expeditiously, say within a period of three months from the date of production of a certified copy of this order in accordance with law.