2020 (12) TMI 635 - HC - Central Excise

Appeal Dismissal Overturned: COD Permission Not Essential per ECIL; CESTAT to Reconsider Appeal and Applications.

The Court determined that CESTAT's dismissal of the appeal due to the absence of COD permission was legally flawed. The appeal was initially filed to ... Maintainability of appeal - appeal dismissed only on the ground that Committee on Disputes (COD) permission has not been taken at the time of filing of the appeal and till its disposal - HELD THAT:- The requirement of obtaining COD permission within 30 days was also not sacrosanct, but the institution of the suit was not prohibited, as the litigant was entitled to institute the proceeding to save limitation. The only rider was that the concerned Tribunal or Court could not proceed with the suit so long the COD permission was not taken. This prohibition or rider in proceeding with the case or suit by a Tribunal or a court of law was lifted by virtue of Constitution Bench decision in the case of ELECTRONICS CORPORATION OF INDIA LTD. VERSUS UNION OF INDIA & ORS. [2011 (2) TMI 3 - SUPREME COURT]. Therefore, on the date on which appeal was dismissed by the learned CESTAT, there was no bar in proceeding with the matter in the absence of COD permission. The learned CESTAT proceeded on an erroneous understanding of law that the appeal instituted by the appellant on 1st June 2010 could not be decided on merits in the absence of COD permission - substantial question of law posed for determination in the instant appeal is answered in favour of the appellant. Issues Involved:1. Justification of CESTAT's dismissal of the appeal due to lack of COD permission.2. Interpretation of the requirement for COD permission in light of Supreme Court decisions.Issue-Wise Detailed Analysis:1. Justification of CESTAT's Dismissal of the Appeal Due to Lack of COD Permission:The primary issue in this appeal was whether the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) was justified in dismissing the appellant's appeal solely because the Committee on Disputes (COD) permission was not obtained at the time of filing and until the disposal of the appeal. The appellant, a Government of India undertaking, was engaged in a works contract and was registered under the 'Commercial or Industrial Construction Service' category. The appellant entered into a contract with Bharat Heavy Electrical Limited (BHEL) for construction work at Chandrapura Thermal Power Station, DVC, Jharkhand. The Directorate General of Central Excise Intelligence (DGCEI), Jamshedpur issued a show-cause notice to the appellant, questioning the benefit of exemption notifications and demanding service tax for the period 2005-06 to 2007-08. The order in original confirmed the demand, leading the appellant to file an appeal before CESTAT, Kolkata.CESTAT dismissed the appeal on 8th October 2012, citing the absence of COD clearance. This decision was based on the understanding that the appeal was filed before the Supreme Court's decision in Electronics Corporation of India Limited (ECIL) v. Union of India (2011), which abolished the requirement for COD permission. The appellant argued that the appeal should not have been dismissed on this ground, as the requirement for COD permission was lifted by the Constitution Bench decision in ECIL.2. Interpretation of the Requirement for COD Permission in Light of Supreme Court Decisions:The Supreme Court's decision in ECIL (2011) and Northern Coalfields Limited v. Heavy Engineering Corporation Limited (2016) played a crucial role in this case. The ECIL decision recalled the earlier directions requiring COD permission, stating that the mechanism had outlived its utility and caused delays in filing civil appeals, resulting in loss of revenue. The Northern Coalfields Limited case further clarified that the requirement for COD clearance was not mandatory and that the absence of such permission did not render the suit or proceedings illegal.The Court noted that the Permanent Machinery of Arbitration and the COD mechanism were outside the statutory provisions regulating arbitrations in India. The COD's role was to grant permission for instituting or pursuing proceedings, but its experience was found to be unsatisfactory, leading to the recall of directives regarding its constitution. The Department of Public Enterprises subsequently deleted the requirement for COD clearance.The appellant argued that filing the appeal before CESTAT was not barred by the directions in the ONGC group of cases, and the only restriction was on proceeding with the matter until COD permission was granted. By the time CESTAT dismissed the appeal, the requirement for COD permission had been lifted by the ECIL decision. The respondent, however, contended that the appeal filed prior to the ECIL decision required mandatory COD permission.Judgment:The Court concluded that CESTAT's dismissal of the appeal was based on an erroneous understanding of the law. The appeal was filed to save limitation, and the requirement for COD permission was not sacrosanct. The prohibition on proceeding with the case was lifted by the ECIL decision, and the legal position was further clarified by the Northern Coalfields Limited case. Therefore, the CESTAT's order dismissing the appeal for lack of COD permission was unsustainable.The substantial question of law was answered in favor of the appellant. The impugned order dated 8th October 2012 by CESTAT was set aside, and the appeal, along with all pending applications, was to be considered in accordance with the law. The parties were directed to appear before CESTAT on 8th January 2021 for an expeditious decision on the appeal.