2006 (12) TMI 571 - AT - Central Excise

Commissioner's appeals dismissed for non-compliance with statutory requirements.

CCE, Surat Versus Varun Dyg. And Ptg. Mills And Ors.

The Tribunal dismissed the appeals based on preliminary objections raised by the respondents regarding the applicability of Section 35B(2) and Section ... - ISSUES PRESENTED AND CONSIDERED 1. Whether an appeal under Section 35B(2) can be validly filed by the Commissioner of Central Excise without a prior, distinct, recorded opinion that the order of the Commissioner (Appeals) is 'not legal or proper.' 2. Whether the content of the grounds of appeal and memorandum of appeal can substitute for the specific, prior formation of opinion required by Section 35B(2). 3. Whether the Commissioner of Central Excise may himself file the appeal under Section 35B(2) by relying on powers under Section 12E to exercise the duties of a subordinate officer, or whether the statute requires direction to a distinct 'authorized officer' to appeal. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Requirement of a prior, distinct opinion under Section 35B(2) Legal framework: Section 35B(2) permits the Commissioner of Central Excise, 'if he is of opinion that an order passed by the Commissioner (Appeals) ... is not legal or proper,' to direct any Central Excise officer authorized by him to appeal to the Appellate Tribunal. The provision thus contemplates a two-step process: (a) formation of an opinion by the Commissioner about illegality/impropriety; and (b) direction/authorization to an officer to file the appeal. Precedent Treatment: The Tribunal considered an earlier split decision in which the Judicial member held that formation of the opinion is an independent, antecedent act and cannot be derived from subsequent documents; the Technical member had taken a contrary view. The present Court respectfully followed the majority (Judicial) view. Interpretation and reasoning: The statutory language makes formation of the opinion a prerequisite. The acts of forming the opinion and of instituting an appeal are discrete-one is evaluative/administrative, the other is procedural. Relying on grounds of appeal as evidence that the Commissioner 'is of opinion' conflates these separate statutory acts. The grounds of appeal, being part of the memorandum of appeal, are procedural pleadings and cannot retrospectively create the antecedent statutory opinion required by Section 35B(2). Ratio vs. Obiter: Ratio - Section 35B(2) requires a prior, explicit formation of opinion by the Commissioner that the impugned order is 'not legal or proper'; this opinion cannot be supplied by the content of the grounds of appeal filed later. Obiter - observations on the form or content sufficient to constitute such an opinion beyond the conclusion that the opinion must exist prior to filing. Conclusion: The Court held that absence of a clear, antecedent recorded opinion that the impugned order is not legal or proper renders an appeal under Section 35B(2) infirm; grounds of appeal alone do not satisfy the statutory requirement. Issue 2 - Whether grounds of appeal can substitute for the statutory opinion Legal framework: See Issue 1; grounds of appeal are part of the memorandum submitted when instituting the appeal, whereas Section 35B(2) contemplates an opinion formed 'if he is of opinion' before directing an authorized officer to appeal. Precedent Treatment: The Tribunal majority held that grounds of appeal cannot be equated with the formation of opinion; the Court followed that view. Interpretation and reasoning: The Tribunal's Judicial member reasoned that grounds of appeal merely state facts and alleged errors and are not contemporaneous evidence of a prior internal opinion. The Court agreed that the legislature intended the opinion-forming function to be a conscious antecedent administrative act; permitting the memorandum to substitute for that would defeat the statutory sequencing and checks contemplated by Section 35B(2). Ratio vs. Obiter: Ratio - Grounds of appeal cannot be treated as fulfilment of the statutory requirement that the Commissioner be 'of opinion' that the order is not legal or proper prior to directing an appeal. Obiter - practical suggestions that the opinion/authorization should be recorded if the Commissioner intends later to file the appeal himself. Conclusion: The Court concluded that reliance on grounds of appeal to supply the required opinion is impermissible; such reliance does not cure the statutory defect in appeals filed without a prior, recorded opinion. Issue 3 - Whether the Commissioner may personally file the appeal by invoking Section 12E Legal framework: Section 35B(2) contemplates that the Commissioner 'direct any Central Excise Officer authorized by him in this behalf ... to appeal.' Section 12E permits a higher officer (e.g., Commissioner) to exercise powers and discharge duties conferred on a subordinate officer. Precedent Treatment: The earlier Tribunal decision considered the argument that Section 12E authorizes the Commissioner to perform subordinate functions (including filing appeals) and thus justifies the Commissioner himself filing the appeal; the Judicial member rejected the contention as insufficient to comply with Section 35B(2). The present Court followed that reasoning. Interpretation and reasoning: Sections 12E and 35B serve different purposes and operate in different contexts. Section 12E permits exercise of subordinate powers, but it does not alter the specific procedural requirement in Section 35B(2) that the Commissioner be 'of opinion' about the impugned order and direct an authorized officer to appeal. If the Commissioner intends to exercise subordinate functions and file the appeal himself, he must still record the requisite opinion/authorization consistent with Section 35B(2); mere invocation of Section 12E, without compliance with the separate requirement of Section 35B(2), does not cure non-compliance. Ratio vs. Obiter: Ratio - A Commissioner filing the appeal personally by invoking Section 12E does not satisfy Section 35B(2) unless the Commissioner had, prior to filing, formed and recorded the statutory opinion and authorized the act as contemplated by Section 35B(2). Obiter - administrative practice points that if the Commissioner intends to file personally under Section 12E he should mention such authorization explicitly when forming the opinion. Conclusion: The Court held that the Commissioner cannot validly cure non-compliance with Section 35B(2) merely by filing the appeal himself under Section 12E; the specific requirements of Section 35B(2) must be respected. Disposition and Judicial Conclusion The Court, following the majority view in the prior Tribunal decision, found the preliminary objections well-founded: the appeals were instituted without satisfying the antecedent statutory requirements of Section 35B(2) (formation of opinion and proper authorization). Consequently, the appeals were dismissed on preliminary grounds without deciding the merits; related cross-objections were disposed of accordingly. The ruling on maintainability is treated as the dispositive ratio of the decision.