2002 (12) TMI 87 - SC - Central Excise

Rectification denied under Section 35C(2); earlier July 24, 1998 order restored as no apparent error

SC dismissed the rectification application, holding that the earlier order of 24 July 1998 was not vitiated by a mistake apparent on the record. The Court ... Mistake apparent on the face of the record - power of rectification under Section 35C(2) of the Central Excise Act, 1944 - review versus rectification - inadmissible or irrelevant material and its effect on final decision - preservation of an order where admissible material independently sustains the conclusionPower of rectification under Section 35C(2) of the Central Excise Act, 1944 - mistake apparent on the face of the record - review versus rectification - Whether the Appellate Tribunal rightly exercised its power under Section 35C(2) to set aside its earlier order on the ground of a mistake apparent from the record. - HELD THAT: - The Court examined the limited scope of Section 35C(2), holding that the Tribunal has no power of review and may correct only an obvious and patent mistake apparent on the record. A 'mistake apparent' cannot be a debatable point of law or one requiring prolonged reasoning. Where a decision is based on multiple materials, the presence of some material which ought not to have been relied upon does not ipso facto make the entire conclusion a mistake apparent if there was other relevant material capable of supporting the same conclusion. Applying that principle, the Court observed that the Tribunal had relied not only upon the contested test reports but also upon the respondents' own commercial literature; because the latter could independently sustain the conclusion that densified wood was manufactured, reliance on the reports did not render the original order vitiated by a mistake apparent. The Tribunal therefore exceeded the narrow corrective jurisdiction under Section 35C(2) in recalling and setting aside its earlier order. [Paras 9, 10, 11, 13, 14]The Tribunal's recall of its order was set aside and the original order dated 24th July, 1998 was restored because no mistake apparent on the face of the record was shown.Inadmissible or irrelevant material and its effect on final decision - preservation of an order where admissible material independently sustains the conclusion - Whether reliance by the Tribunal on certain test reports, which the respondents alleged were irrelevant, justified rectification when other admissible material was also relied upon. - HELD THAT: - The Court recognised that if an order were based solely on material that was irrelevant or could not lawfully be used, rectification might be justified. However, where the Tribunal's conclusion drew upon multiple sources and at least one source was admissible and capable of sustaining the conclusion, the mere utilisation of other inadmissible material does not amount to a mistake apparent requiring rectification. The Judicial Member herself noted that the Tribunal might still reach the same conclusion on the admissible literature. On that basis the Court concluded that the setting aside of the original order could not be sustained under the limited corrective provision. [Paras 11, 12, 13, 14]Because admissible material existed which could independently support the Tribunal's conclusion, rectification was not warranted and the original order was reinstated.Restoration of appeals - Whether the Civil Appeals filed in this Court, rendered infructuous by the Tribunal's subsequent recall, should be restored to the file. - HELD THAT: - The Court noted that upon the Tribunal's recall of its earlier order, the parties had withdrawn or allowed certain civil appeals to be treated as infructuous. The parties agreed that those appeals ought to be restored given the present outcome. In the exercise of its discretion and on the parties' consent, the Court ordered restoration of the appeals to the file for hearing in the normal course. [Paras 16]The previously filed Civil Appeals are restored to the file of this Court to be placed on the board in the normal course.Final Conclusion: The appeal is allowed; the Tribunal's order recalling and setting aside its earlier order dated 24th July, 1998 is set aside and the original order is restored. The Civil Appeals rendered infructuous by the Tribunal's recall are restored to this Court's file for listing in the normal course; no order as to costs. Issues:1. Whether the respondents were liable to pay duty and penalty for not disclosing manufacturing of densified wood.2. Whether the Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT) correctly held that the respondents were manufacturing densified wood.3. Whether the Tribunal had the power to rectify an order under Section 35C(2) of the Central Excise Act, 1944.4. Whether the Tribunal's reliance on certain reports and literature constituted a mistake apparent from the record justifying rectification.Analysis:Issue 1: The Commissioner initially held that the respondents were not manufacturing densified wood and thus not liable to pay duty. However, CEGAT later determined that the respondents were indeed manufacturing densified wood, but had not suppressed any material or misstated any fact, limiting the Department's period for duty determination.Issue 2: The respondents sought rectification under Section 35C(2) based on the Tribunal's reliance on certain reports and literature. The Tribunal's Vice President viewed this as a review application, which was not permissible as the Tribunal lacked review powers. However, the Judicial Member opined that reliance on the reports constituted an error apparent on the record, warranting rectification.Issue 3: The Tribunal's power under Section 35C(2) is limited to rectifying apparent mistakes from the record and not for review purposes. The final decision must not be based on material that is irrelevant or inadmissible. In this case, the Tribunal's reliance on multiple materials, including the respondents' literature, did not constitute a mistake apparent from the record.Issue 4: The Judicial Member's observation that the Tribunal might reach the same conclusion without the contested reports indicated that the reliance did not result in a mistake apparent from the record. Consequently, the original order dated 24th July, 1998 was reinstated, and the appeal was allowed with no costs.Final Decision: The Supreme Court allowed the appeal, restoring the original order dated 24th July, 1998. The Court clarified the limited scope of rectification under Section 35C(2) and emphasized that a decision based on multiple materials does not constitute a mistake apparent from the record. Additionally, the Court addressed the withdrawal and restoration of civil appeals related to the case.