TaxTMI 
TaxTMI 
2000 (9) TMI 1068
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....ediate product produced in the continuing process of manufacture of melamine from ammonia falling under CET sub-heading 2933.90, and Carbon Dioxide. The appellants claimed the benefit of Notification No. 40/85, dated 17-3-85 for Ammonia on the ground that it is used in the manufacture of molten urea which is a fertilizer. The benefit of the notification was denied by the Department on the ground that the molten urea is not actually used as a fertilizer but is used for production of melamine. 3. The assessees came up in appeal to the Tribunal against the impugned order of the Collector of Central Excise (Appeals), Bombay and the Tribunal, vide final order No. 159/97-C, dated 28-2-97, upheld the denial of the benefit of Notification 40/85, holding that only that ammonia which is utilised for the production of mineral or chemical fertilizer will be eligible for the benefit of the Notification. 4. In coming to its conclusion, the Tribunal followed its earlier order in the case of the same assessees reported in 1991 (56) E.L.T. 257. As regards the alternative plea for exemption under Notification 217/86, the Tribunal held, relying upon its earlier order No. 58-59/96-C, d....
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.... fertilizer or not. It is now well settled by a catena of decisions of this Court that for deciding whether an exemption notification gets attracted on the facts of a given case, the express language of the exemption notification has to be given its due effect." "In the light of the aforesaid settled legal position, we have, therefore, to confine ourselves in the express language employed by the exemption granting authority in its wisdom while it issued notification No. 40 of 1985. As noted earlier, the notification clearly refers to the goods of description specified in column (2) of the Table annexed to the notification and falling under enumerated chapters of the Tariff Act. One of the chapters mentioned therein is Chapter 31. The said chapter deals with fertilizers. Note No. 1 of the said chapter lays down that Heading Nos. 31.02, 31.03, 31.04 and 31.05 cover mineral or chemical fertilizers, even when they are clearly not to be used as fertilizers. When we turn to Heading No. 31.02, sub-heading No. 3102.00, we find the description of goods which refers to mineral or chemical fertilizers, nitrogenous." "The only contention before CEGAT was whether the term 'fertilizer&....
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.... was not a fertilizer and the intermediate product of molten urea was utilised in a continuous process of manufacture and, therefore, it must be held that ammonia was captively consumed for the purpose of manufacturing the ultimate product of melamine and not molten urea. On the express language of the Notification in question, it is not possible to agree with the contention of Shri Bhat, learned Additional Solicitor General that the term 'fertilizer' employed by the said notification must be understood by adopting the common parlance test to be referred to soil fertilizer only." "As a result of the aforesaid discussion, it must be held that the Collector of Central Excise (Appeals) as well as the CEGAT had patently erred in law in taking the view that Notification No. 40 of 1985 did not cover captively consumed ammonia utilised by the appellant input for manufacturing molten urea." "In the result, these appeals succeed and are allowed. The common judgment and order rendered by the CEGAT in all the six appeals as confirming in its turn the appellate orders passed by the Collector of Central Excise (Appeals) are quashed and set aside." 6. On the basis of the ab....
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....nbsp; S.A.L. Narayan Rao CIT v. Model Mills Nagpur [1967 (64) ITR 67 (S.C.)] 5. Ram Dass Rice & General Mills v. State of Punjab [1996 (100) STC 211 (P&H)] 6. Hero Cycles Ltd. v. State of Punjab & Others [1995 (99) STC 611 (P & H)] 7. M.K. Venkatachalam ITO v. Bombay Dyeing & Mfg. Co. Ltd. [AIR 1958 SC 875] 8. Poothundu Plantations Pvt. Ltd. v. Agricultural Income-tax Officer [1996 (66) ECR 224 (S.C.)] He submits that the foundation of the Tribunal's final order No. 159/97-C is the Tribunal's decision reported in 1991 (56) E.L.T. 257 which has been set aside by the Hon'ble Supreme Court and therefore, the plank on which the Tribunal's finding on Notification No. 40/85 entirely rested, has fallen on the ground and therefore, the Tribunal's final order is required to be recalled and the mistake in denying the benefit of the above notification is required to be corrected by holding that the assessees are eligible to the benefit of the notification for captively consumed ammonia used in the manufac....
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....dered subsequent to the decision of the Tribunal, if there was no further investigation on facts involved and the principle of the High Court or the Supreme Court decision could be straightaway applied to show that the decision already issued was a mistake. In case of S.A.L. Narayana Rao, cited supra, the facts were that, by order dated 27-7-55, the Income-tax officer levied an additional tax on excess dividend declared by the respondent company. Thereafter, the Bombay High Court, in the case of Khatau Makanji Spinning & Weaving Co. Ltd. v. Commissioner of Income-tax [1956 (30) ITR 841] held that levy of tax on excess dividend was illegal. The respondent company applied to the ITO for refund of tax paid although it was not expressly stated in the application that the order be rectified under Section 35 of the Income-tax Act. The ITO rejected the request by order dated 2-11-1957 on the ground that the assessment was completed well before the judgment of the Bombay High Court. Against the order of ITO, the company applied to the Commissioner of Income-tax under Section 33A of the Income-tax to revise that order but the Commissioner of Income-tax rejected the application as time-barre....
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....the assessment orders by allowing deductions of the amounts by way of provision for taxation. The argument of the learned Advocate on behalf of the Revenue was that in order to attract the provisions of Section 35, what must be shown is that the mistake was committed at the time of making of the order and not that the order was ultimately found to suffer from an infirmity or a mistake was subsequently discovered in the order as a result of later judicial pronouncements. The High Court held that the submission of the Revenue was not well founded. The Court held as under : "It is true that the Wealth-tax officer did not have before him the decision of this Court in Raipur Manufacturing Company case or that of the Supreme Court in Kesoram Industries and Cotton Mills case when he passed the assessment orders in the petitioner's cases and that both the decisions were given after the assessment orders were made. But these decisions did not enact or make the law in any sense but merely interpreted the expression 'debt owed' occurring in section 2(m) of the Act which was undoubtedly on the statute book at the time when the assessment orders were made by the Wealth-tax office....
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....n the case of Kil Kotagiri Tea and Coffee Estates Co. Ltd. v. Income-tax Appellate Tribunal and Others reported in 1988 (174) ITR 579, the Hon'ble Kerala High Court held that an assessment order based upon interpretation or application of law ultimately found to be wrong in the light of later judicial pronouncements, discloses a mistake apparent from the record and requires to be rectified. In that case, the question related to interest on advance tax paid beyond the due date. The question was answered in the negative by the Income-tax officer; the Commissioner of Income-tax (Appeals) upheld the plea of the assessee and reversed the order of the Income-tax officer. In second appeal, the Income-tax Appellate Tribunal held that the belated payments are not to be taken into account as advance tax for the purpose of section 214 of the Income-tax Act, 1961, therefore, interest is inadmissible for such belated payments. The Tribunal's order was based upon the decision of the Kerala High Court reported in 1980 (122) ITR 587 in the case of Sethumadhavan v. Commissioner of Income-tax. The judgment of the Single Judge in Sethumadhavan's case was reversed by the Division Bench of the ....
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.... the decision of the Supreme Court. A subsequent binding decision of the Supreme Court or the High Court has retrospective operation and overruling is always retrospective." The Court allowed the Writ petition and directed the ITAT to restore the petition for rectification and dispose of the same in accordance with law and in the light of the observations contained in the High Court judgment . 14.  In the case of B.V.K. Seshavataram, the Hon'ble Andhra Pradesh High Court held that a decision of the Supreme Court which was passed subsequent to finalisation of assessments giving the benefit of depreciation allowance to the assessees can form the basis for rectifying the order of assessment under Section 164 of the Income-tax Act, 1964. The claim for depreciation allowance by the assessees who were co-owners of a Rice Mill was, intially allowed by the Assessing officer. Subsequently by an order under Section 154 of the Income-tax Act, 1961, the depreciation allowance was withdrawn on the basis of decision rendered by the Supreme Court in Seth Banarsi Dass v. CIT - (1983) 166 ITR 783. The assessees successfully challenged the rectification order under Section 154 before ....
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....ould be deemed to be a mistake apparent from the record. The Punjab & Haryana High Court remanded the case back to the Sales-tax Appellate Tribunal for passing proper orders in accordance with the provisions of law and directions of the Supreme Court. The decision in the Hero Cycles case was followed by the Punjab & Haryana High Court in the case of Ramdas Rice & General Mills v. State of Punjab & Haryana (supra). 16. In the case of Poothundu Plantations Pvt. Ltd. v. Agricultural Income-tax officer [1996 (66) ECR 224 SC], the case arose out of an order of rectification of mistake apparent on the face of the record under Section 36 of the Kerala Agricultural Income-tax Act. The question before the Supreme Court was whether an Agricultural Income-tax officer could rectify the order passed by his predecessor in office on the ground that the assessment order was passed by wrong construction of Section 12 of the Kerala Agricultural Income-tax Act, dealing with carrying forward of loss, on the strength of the decision of the Apex Court in the case of Anglo French Textile Company Ltd. v. Commissioner of Income-tax (1993 23 ITR 82). The Assistant Appellate Commissioner took the vie....
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....ustoms Act and the Central Excise Act in view of the fact that the provisions for rectification of mistake apparent from the record contained in Section 35C(2) of the Central Excise Act and Section 129-B(2) of the Customs Act are pari materia with the provisions of Section 35 of the Wealth-tax Act, 1957 and Sections 154 and 254 of the Income-tax Act, 1961. 19. In the judgments discussed above, the Courts have observed that the concerned Revenue authorities or the Income-tax Appellate Tribunal were not justified in refusing/rejecting ROM on the ground that a subsequent pronouncement by High Court or the Apex Court cannot be considered as a mistake apparent from the record. This makes it clear that the Appellate Tribunal has jurisdiction to rectify a mistake apparent from the record on the basis of a subsequent decision of a High Court or the Supreme Court, in cases where no further investigation on facts is required and where the principle of the High Court or the Supreme Court decision could be straightaway applied to show that the decision already issued was a mistake. However, the position is different in respect of subsequent decisions of the Tribunal because orders of t....
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.... it was an agreement of sale. In view of such an admission, the High Court has wrongly reversed the decree of the Appellate Court holding the transaction to be a real sale. In the second appeal, the High Court confirmed, in the first instance, the decree of the Appellate Court. Subsequently, the High Court has reviewed the judgment and reconsidered the matter holding that relevant precedents were not cited. Since this Court had given liberty to raise the questions of reviewability of the judgment of the High Court, the question arises whether the High Court could not have embarked upon appreciation of evidence and considered whether there was an error apparent on the face of the record. It was contended before the learned Single Judge that various decisions were not cited; proper consideration was not paid, in fact the sale deed was acted upon; and that there was no proof that the sale was not for valid consideration. The omission to cite an authority of law is not a ground for reviewing the prior judgment saying that there is an error apparent on the face of the record, since the Counsel has committed an error in not bringing to the notice of the Court the relevant precedents. In ....
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....d by it". The Court held that the power so conferred does not contemplate a rehearing which would have the effect of re-writing an order affecting the merits of the case. Else there would be no distinction between a power to review and a power to rectify a mistake. What is not permitted to be done by the Statute having deliberately omitted to confer review jurisdiction on the Tribunal cannot be indirectly achieved by recourse to Section 254(2) of the Act. 24. In para 38 of the order, the Court has held as under, "In the case of hand the documents in which the order dated 24-10-1996 came to be passed, is a matter of controversy. According to the petitioners, it was the opinion of the Tribunal that it shall first hear the application for additional evidence. According to the respondent the petitioners were trying to create a procedural mess, by insisting on arguing the appeal first on merits and strategically reserving submissions on the application to be made in the event of their failing on merits; that was the effort of the petitioners which was sought to be stalled by the Tribunal. In the later case, it was obligatory on the part of the petitioners to invite the attention....
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.... the manufacture of melamine. As a result, the benefit of Notification No. 217/86 which is claimed as an alternative plea, is not available to the assessees since the two notifications cannot co-exist and the learned Counsel also conceded this position. 28. The ROM Application is hereby allowed. Sd/- (Jyoti Balasundaram) Member (J) 29. [Order per : V.K. Agrawal, Member (T)]. - I have the benefit to pursue the order as recorded by ld. Member (Judicial). With due respect I do not agree that a subsequent decision of the High Court and Supreme Court can form the basis of an application for rectification of mistake for the following reasons : 30. Sub-section (2) to Section 35C of the Central Excise Act provides that the Appellate Tribunal may at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1) and shall make such amendments in the mistake is brought to its notice by the Commissioner of Central Excise or the other party to the Appeal. It is worthwhile to notice that the power to rectify any mistake under this sub-section can be ex....
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....thout authority of law the refund was held to be available to the assessee. In this case no application for rectification of mistake was filed the request for refund in to be request for rectification. A view has therefore, been taken by the Hon'ble High Courts that the Supreme Courts in this decision laid down the law that a subsequent decision can validly form the basis for rectifying an order of assessment under Section 154 of the Income Tax Act. The ld. Advocates for the appellants has not cited any other decision of the Supreme Court in which it has been held that the subsequent decision of the Supreme Court will be a valid ground for rectification of mistake apparent on record. No doubt in the case of Poothundu Plantations Pvt. Ltd. v. Agricultural Income Tax Officer - 1996 (66) ECR 224 (SC), it was held that if the Supreme Court has construed a menaing of section, then any decision to the contrary given by any other authority must be held to be erroneous and such error must be treated as an error apparent on the record. However, in this case the Supreme Court on merit held that the Section 12 of the Kerala Agriculture Income Tax can not be interpreted in the manner in wh....
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....arty had died and the estate was in represented (ii) a judgment obtained by fraud tending to prejudice a non-party. "It was also held by the Delhi High Court, after refering to Corpous Juris Secundum (Vol. IXIX), "A motion to vacate will not be entered when the proper remedy is by some other proceedings, such as by appeal." Refering to section 254(2) of the Income Tax Act" court held "the language of the provisions is clear. The foundation for exercising the jurisdiction is "with a view to rectify any mistake apparent on the record and the object is achieved by amending any order passed by it". The power so conferred does not contemplate a rehearing which would have the effect of rewriting an order affecting the merits of the case." 34.  The facts of Deeksha Suri case, may be different but the ratio laid down by the Delhi High Court that power conferred by Section 254(2) of the Income Tax Act does not contemplate a rehearing is very relevant to the facts of the present matter. The appellants, if aggreived with the Tribunal's Order, have the right to go in appeal before the Supreme Court. 35.  Further, the Madras High Court in the case of Shree Palaniappa Transpo....
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....rectification of mistake could be made out." Larger Bench also held in that case that "the decision on a debatable point of law or facts is not a mistake apparent from the record and the debatable issue could not be the subject of an order of rectification. Rectification of mistake does not envisage the rectification of an alleged error of judgment". 37. I am, thus, of the view that a subsequent decision of the Supreme Court cannot form the basis of an application for rectification of mistake in the interest of finality of the decisions. If a subsequent decision is held to be the basis for an application for rectification of mistake, the finality of any decision will be hit adversely as subsequent decisions can be made basis for moving an application for rectification from time to time. In any case for a Tribunal having all India status a subsequent decision of a High Court cannot be made basis of an application for rectification of mistake. Further, a Larger Bench of this Tribunal has taken a view in Dinkar Khindria case, supra, that "the Tribunal under no. circumstances can recall an order passed and issued. Under the cover of rectification of mistakes, the Tribunal canno....
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....basis of the Apex Court's decision. The basic question, in this context, is whether it is permissible to change the whole gamut of the decision of the Tribunal by an exercise of review in the pretext of "rectifying mistake apparent from the record". In my view, this is not permissible because this Tribunal has no inherent power of review, nor any power of review conferred by statute. The Tribunal is a creature of the statute and can exercise only those powers which are conferred on it by the parent statute as rightly observed by the Tribunal Larger Bench in the case of Dinkar Khindria [2000 (38) RLT 442]. Exercise of inherent power of review for rectification of errors of judgment is a realm that belongs only to courts of plenary jurisdiction. The power of this Tribunal to amend its own orders by way of rectification of mistake under Section 35C(2) of the Central Excise Act, 1944, is circumscribed by the limiting factor, viz. that the rectification must be confined to "mistakes apparent from the record". Such power can not be enlarged so as to assume the sweeping dimensions of the power of review which is a forbidden area for the Tribunal. It is a power conferred by statute on ....
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....ct an error of law, held that it was essential that such error of law must be one which was manifest on the face of the record. When does an error cease to be mere error and become an error apparent on the face of the record? The Supreme Court rendered its answer in the following paragraph :- "23. ....... Mr. Pathak for the first respondent contended on the strength of certain observations of Chagla, C.J. in 'Batuk K. Vyas v. Surat Borough Municipality", AIR 1953 Bom. 133 (R), that no error could be said to be apparent on the face of the record if it was not self-evident, & if it required an examination of argument to establish it. This test might afford a satisfactory basis for decision in the majority of cases. But there must be cases in which even this test might break down, because judicial opinions also differ, and an error that might be considered by one Judge as self-evident might not be so considered by another. The fact is that what is an error apparent on the face of the record cannot be defined precisely or exhaustively, there being an element of indefiniteness inherent in its very nature, and it must be left to be determined judicially on the facts of ....
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....ossibly witness a series of judicial pronouncements touching the issue covered by the Tribunal's order, like order of Larger Bench of the Tribunal, judgment of any High Court on reference or otherwise and judgment of the Supreme Court in appeal or otherwise. If the appellate order passed by the Tribunal is held to be amenable to amendments under Section 35C(2) on the ground of such order having been found to be incorrect in the light of subsequent decisions of Tribunel Larger Bench/High Court/Supreme Court rendered during the aforesaid period of four years, there can be a spate of ROM applications in relation to such appellate order during the said period. The inevitable result will be a chaotic situation on account of multiplicity of proceedings. This cannot be the legislative intent behind Section 35C(2). 46. I am also in full agreement with the findings of learned Brother, Shri V.K. Agrawal on the referred issue. 47. The ROM Application only requires to be rejected. Dated : 11-8-2000 Sd/- (P.G. Chacko) Member (J) 48. [Order per : K.K. Bhatia, Member (T)]. - I agree with the views in the Order recorded by Shri V.K. Agrawal, ld. Member....
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....t v. Ahmed Ishaque & Others - AIR 1955 SC 233. In fact, in the judgment relied by him he emphasised on the following sentence "The fact is that what is an error apparent on the face of the record cannot be defined precisely or exhaustively." Relying on this decision, however, one fact, which appeals to me, is that on 28-2-1997 when the final order in this case was pronounced, it was required to be examined, was there any orders of the Tribunal on record in existence? The earlier order relied in the case of the same assessee reported in 1991 (56) E.L.T. 257, was already on that date reversed by the Supreme Court. The order passed by the Tribunal on 28-2-1997 was on the basis of that order of Tribunal. On that very day, the Supreme Court having reversed it, the basis on which the Tribunal's order was made on 28-2-1997, having been knocked off, the edifice which has been built on the foundation having been removed, can not have given shelter to the Tribunal to reject the present case before them on that date. The point I am trying to emphasise is that in our judicial system there is a theory known as merger of the order of the lower authorities with that of the superior authority,....