Monday, August 02, 2010

CAN TRIBUNAL GRANT INTEREST AND COMPENSATION?


 

AND WHAT HAPPENS IF THE INTEREST OR COMPENSATION, WHEN GRANTED IS NOT PAID BY THE DEPARTMENT?


 

by

K. VIJAY KUMAR*

MA, BL, B.Ed, MBA

Superintendent of Central Excise, Hyderabad

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"Be you ever so high, the law is above is you"


 

There are several instances when an appellant before the Tribunal makes out a case that he has been unfairly put to trouble by the department. It may be a case of goods being illegally detained, pre- deposit not returned etc. In such cases there were occasions when the Tribunal granted interest on the illegally held amounts or granted compensation for illegally held goods.


 

The Central Excise Act or the Customs Act does not have provisions for such payments. Then can the CEGAT, which is a creation of the statute, namely the Customs Act, go beyond the provisions of the Act, which created it and award compensation and interest? If the Tribunal in its wisdom sanctions such interest and compensation and if the department does not honour such order, what is the remedy for the appellant who won the case in CEGAT after spending huge amounts of money and for the CEGAT itself, whose order has been disobeyed?


 

Recently the Western Zonal Bench of the Hon'ble CEGAT had occasion to address this issue in Sachin Textiles Pvt Ltd v CCE – Surat-I 2001(127) ELT 108. As the Hon'ble bench could not decide the issue, it was referred to a larger bench with an observation that the issue is of paramount importance and needs to be settled at the earliest. The bench elaborately discussed the issue and even invited views from counsels, not party to the appeal to state their views.


 

The South Zonal Bench of the Tribunal in ITC Bhadrachalam Paper Boards Ltd v CCE, Hyderabad – 2000(124) ELT 1100(Trib)
based on a Supreme Court order in Kuil Fireworks v Collector – 1997(95) ELT3(SC)
and Tribunal's own order in
Gulf Olefines(P) Ltd,
directed to pay interest at the rate of 12% for the period the Revenue illegally held the money of the appellant.


 

The Eastern Bench of the Tribunal in Konark Cement & Asbestos Ltd v Commissioner, Bhubaneswar – 200(120) ELT 634(Trb),
granted 18% interest quoting an earlier order of the Tribunal in Sawhney Export House(P) Ltd v Commissioner of Customs, New Delhi – 1999(113) ELT.81
(there is a mistake in this citation), wherein the Tribunal not only awarded 18% interest, but also observed that the Government can recover that amount from the Assistant Commissioner!


 

It may be noted that these were cases of interest for which there was no provision under the Act. Was the Tribunal right in granting interest beyond the scope of the Act itself, which created the Tribunal?


 

The Orissa High Court held that " The Tribunal being a creature of statute can exercise such powers only which have been conferred by the statute."1993(68) ELT 739(Orissa). The Allahabad High Court held, " Since the Act or the Rules do not provide for grant of any interest, the authorities under the Act,
including the CEGAT
(emphasis added), have no power to award interest-
1991(51) ELT) 255(All).

That being the position, what happens when CEGAT allows interest and compensation and the department knowing about the High Court orders holding such payments as beyond the powers of the CEGAT, withholds payment of these sums. Can the departmental officers be punished for contempt? For that matter, can the departmental officers be punished for disobeying the orders of the CEGAT, especially the ones, which are within the powers of the Tribunal? (But then who decides that?) And who would do the punishing? CEGAT or the Courts?


 

In the Sachin Textiles case, the Western Bench made a sarcastic remark, "
Unfortunately, the revenue officers are always under the obligation and compulsion of earning additional revenue. "These officers would rather give priority to this requirement than the obligation to follow the law."
The Tribunal further observed, " in the absence of any enforcement authority, the Tribunal even if it makes any specific direction, is helpless in the face of lack of enforcement". So after winning a case in the Tribunal after years of struggle and spending huge amounts of money, for the appellant, is the order of the Tribunal, a piece of paper which the field officer of the department may choose to accept or ignore at his sweet will and is the Tribunal a helpless spectator?


 

In UOI v Kamalakshi Finance Corporation – 1991(55) ELT.433 (SC),
the Hon'ble Supreme Court held that Judicial Discipline requires that the orders of the appellate authority should be followed unreservedly by the subordinate authorities.

In Modi Cements Ltd v CCE, Raipur,- 200(123) ELT 982(Trib), the CEGAT held that "The healthy rule of judicial discipline requires following of the Tribunal's orders, as otherwise it will be an undue harassment to the assessee and chaos in the administration of Tax Laws".

In the very early days of the CEGAT, it had an occasion to consider such an issue. In Navrang Dyeing Pvt Ltd v CC, Bombay - 1984(17) ELT 357(Trib), the Tribunal had to consider the case of an Assistant Collector who did not release the goods as ordered by the Tribunal. In an affidavit filed with the Tribunal, the AC, stated, " My action in not releasing the goods was totally due to my bona fide understanding of the correct legal position…"

The Tribunal considered the following questions.

  1. Whether the respondent collector disobeyed the order of the Tribunal?
  2. If so, was there justification for disobeying the order?
  3. Can justification be pleaded as defence?
  4. Is disobedience if any wanton and deliberate?
  5. To what action is the (Assistant) Collector liable?


 

And the Tribunal came to the conclusion that

  1. Disobedience is established.
  2. There was no justification
  3. Even if there was justification, it can not be a defence.
  4. Disobedience is not casual or unintentional.
  5. Proper course is to initiate contempt proceedings, but it is refrained as " immaturity, lack of experience and non realisation of the consequences of disobedience could have been the reason rather than arrogance and power drunkenness."


 

The Tribunal in that case observed, " When sanctity is attached to established Courts and Tribunals it follows as a corollary that all orders emanating from these Public Institutions should be respected and strictly complied with. The order must be implicitly observed, every diligence must be exercised to obey. The welfare of the people can be attained only when there is justice administered lawfully, judicially without fear or favour and those that are responsible for administration of such justice, and those seek justice as parties and those who help in the administration of justice have to be protected from insults, annoyance or even obstructions. Administration of justice can not be effective unless respect for it is fostered and maintained. Interference with it shakes the very pillar of the administration of justice and the confidence of the people in courts, which is of a prime importance to the litigants in their struggle for the protection of their rights and liberties. No Tribunal can function properly unless it is allowed to keep its dignity, and unless it has power to enforce discipline and respect in its administration of justice. ...
The Assistant Collector would do well to remember that in disobeying the order of the Tribunal, she has not only attempted to undermine the authority of the institution established by law but has brought disrepute to the department."


 

After seventeen years of this decision, now the Bombay bench of the Tribunal laments that it has no power to enforce its orders! Incidentally, one of the members of the bench, who delivered the Navrang Dyeing order later, became Chairman of the CBEC. May be he could have done something to ensure that the officers obeyed the orders of the Tribunal.


 

The Tribunal and the courts were unanimous that judicial discipline requires that the orders of the superior appellate authority have to be obeyed, even if appeals against those orders are pending. In Kamlakshi Finance referred to above, the supreme Court upheld the strictures passed by the High Court against two Assistant Collectors and held that the mere fact of appeal having been filed against the order is no ground for not following it. In Collector v Krishna sales – 1994(73) ELT 519(SC), the Hon'ble Supreme Court held that pendence of appeal does not operate as stay. In Hindustan Photo Films Mfg. Co. Ltd v Collector – 1991(56)ELT 602(Trib), the Tribunal observed that mere filing of an appeal and a stay petition to the Supreme Court does not entitle the department to refuse to implement the Tribunal's order. Two Collectors concerned were directed to appear personally before the Tribunal if the order was not implemented.

In Sukhdev Chakraborty v Collector – 1993(67) ELT198, the Tribunal held that the Tribunal was competent to refer the matter to the High Court under the Contempt of Courts Act when order of the Tribunal was not respected by lower authorities. A similar decision was given in M. Durga Prasada Rao v Collector (perhaps not reported in ELT).


 

The Tribunal in Ion Exchange(I) Ltd v Collector – 1991(56) ELT 865 held that the Tribunal's powers implied the power of doing all acts or employing all means essentially necessary for executing its orders. Power to grant also impliedly conveys power of punishing disobedience. In Harsha Tractors Ltd v Collector -–1991(56)ELT 609(T) , it was held that the Tribunal has inherent, incidental and ancillary powers to enforce compliance of its own orders but not that of orders passed by a lower authority. This would mean that the Tribunal can not do anything if the orders of Commissioner (Appeals) are not obeyed, but if the Tribunal's orders are disobeyed, something can be done. What? Nobody really knows!

Is a proceeding under the Contempt of Court Act the remedy? If so, can the CEGAT punish for contempt? Or should it refer the matter to the High Court? Can the Tribunal be given the power to punish contempt of itself.


 

Recently the Supreme Court considered this very issue in T. Sudhakar Prasad v State of Andhra Pradesh decided on 13.12.2000 (yet to be reported), though relating to the contempt jurisdiction of Administrative Tribunals. The High Court of AP had held that "As such, it is clear that in the State, the High Court is the only superior Court and the superior Court of Record. The High Court is the custodian of the dignity and majesty of law in the State, concerning not only itself but also all Courts subordinate to it. Subordinate Courts/Tribunals have not been empowered to punish contempt of themselves. They have to report to the High Court in the prescribed form and then the High Court will exercise the said power."

Section 17 of the Administrative Tribunal Act 1985,reads "17. Power to punish for contempt - A Tribunal shall have, and exercise, the same jurisdiction, powers and authority in respect of contempt of itself as a High Court has and may exercise and, for this purpose, the provisions of the Contempt of Courts Act, 1971 (70 of 1971), shall have effect subject to the modifications that:

  1. the references therein to a High Court shall be construed as including a reference to such Tribunal;
  2. xxxxxxxx"

The High Court of AP held section 17 of the Administrative Tribunal Act 1985, non est as Section 19 of the Contempt of Courts Act 1971 provided for appeal to the Supreme Court from an order of the High Court and applying that provision to the Administrative Tribunal Act 1985, it would mean that there can be a direct appeal from the Tribunal to Supreme Court. But this was specifically barred by the Supreme Court's decision in L. Chandra Kumar v UOI and others – 1997(92)ELT 318(SC)

Regarding contempt, the supreme Court observed in the above case, "Articles 129 and 215 of the Constitution of India declare Supreme Court and every High Court to be a Court of Record having all the powers of such a Court including the power to punish for contempt of itself. These articles do not confer any new jurisdiction or status on the Supreme Court and the High Courts. They merely recognise a pre-existing situation that the Supreme Court and the High Courts are Courts of record and by virtue of being Courts of record have inherent jurisdiction to punish for contempt of themselves.

In
T.N. Seshan, Chief Election Commr. of India v. Union of India, 1995(4) SCC 611, it was held that merely because some of the service conditions of the Chief Election Commissioner are akin to those of the Supreme Court judges, that does not confer the status of a Supreme Court judge on the C.E.C. Of late it is found that even personnel belonging to other fora claim equation as High Court or Supreme Court Judges merely because certain jurisdictions earlier exercised by those Courts are transferred to them not realising the distinction between constitutional and statutory functionaries".

In Supreme Court Bar Association v. Union of India and another, 1998(4) SCC 409,
it was held that "Courts of record enjoy power to punish for contempt as a part of their inherent jurisdiction; the existence and availability of such power being essential to enable the Courts to administer justice according to law in a regular, orderly and effective manner and to uphold the majesty of law and prevent interference in the due administration of justice. No Act of Parliament can take away that inherent jurisdiction of the Court of Record to punish for contempt and Parliament's power and legislation on the subject cannot be so exercised as to stultify the status and dignity of the Supreme Court and/or the High Court though such a legislation may serve as a guide for their determination of the nature of punishment which a Court of Record may impose in the case of established contempt".

Finally the Supreme Court upheld the validity of Section 17 of the Administrative Tribunals Act 1985 and held that the Tribunal can decide contempt cases.

But this was because there is an express provision for that under the Act. Neither the Customs Act nor the Central Excise Act provides for anything remotely dealing with contempt.

In spite of nearly two decades of the existence of the CEGAT and any number of solemn judicial pronouncements, we are still not clear on


 

  1. Whether the Tribunal can award interest and compensation not provided for in the Act? and
  2. What the Tribunal can do in case of disobedience of its orders?


 

The issues are to be discussed before a larger bench and it may take years before a decision is taken, but before that, I humbly make the following


 

Suggestions: -


 

  1. Amend the law to make provisions granting the CEGAT explicit powers to punish for contempt of itself.
  2. Disobedience of the orders of the Tribunal should automatically attract contempt proceedings.
  3. In awarding punishment for contempt, the Tribunal should have all the powers of the High Court and appeal should be to the Supreme Court.
  4. Orders of commissioner (Appeals) should also be treated similarly with contempt jurisdiction to be exercised by the CEGAT.


 

All this is fine. There is contempt, when I do not obey the law as laid down by higher appellate authorities. But what happens when the assessees do not obey the orders? Should they also not be hauled up for contempt?


 

"Be you ever so high, the law is above you"`


 


 

EXCISE LAW TIMES – 15. 03. 2001 – A 124

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