THE issues before the Bench are - Whether in case assessee or its
representatives were not present at the time of hearing, Tribunal has the
authority to dismiss the same for default. And the answer is
NO.
Facts of the case
Assessee is a public sector undertaking
engaged in the import of crude oil, refining and marketing the same. It had
filed its ROI for AY 2000-01 declaring taxable income of Rs.597 crores after claiming deduction u/s 80IA and 80IB in respect
of its LPG bottling plant. During assessment, AO had disallowed the claim for
deduction u/s 80I and 80IB and determined the taxable income at Rs.730 Crores. On appeal, CIT(A) upheld
the order of the AO and dismissed the petitioner's appeal. On further appeal,
Tribunal had dismissed the same without considering the merits of the
petitioner's case, only on the ground of want of prosecution, as none was
present on behalf of assessee. Assessee stated that on receipt of Tribunal’s
order, its executives initiated process of drafting a Miscellaneous Application
seeking to recall the said order and for that purpose even had a meeting with
their Counsel. The Senior Officers of the petitioner were under the impression
that the process of filing of Miscellaneous Application was complete and
according to them they were waiting for a notice for hearing of the
Miscellaneous Application from the Tribunal. Subsequently, when the petitioner
was preparing for hearing of its appeal for a subsequent AY, it noticed that
though a draft Miscellaneous Application was in the file, an acknowledged copy
of the same from the Tribunal was not available in its record. On enquiry with
the Tribunal the petitioner learnt that no Miscellaneous Application for
recalling of the order dated 6 December 2007 was on the file of the Tribunal.
Thus, a Miscellaneous Application was filed before the Tribunal seeking to
recall the order passed relating to AY 2000-01. Tribunal heard the petitioner on
its Miscellaneous Application and dismissed the same on the ground that the
application for recall had been filed beyond a period of 4 years from the date
of the order of Tribunal. Alternatively, the Tribunal in the impugned order held
that even if one proceeded on the basis that Section 254(2) is not applicable to
an application for recall yet the same would be barred by limitation as the
period provided under Limitation Act for setting aside an ex parte order would
be 30 days from the date of passing the order. Therefore, in view of inordinate
delay of more than 4 years in filing on 6 August 2012 its Miscellaneous
Application from order dated 6 December 2007 was dismissed.
Before HC, the assessee’s counsel had contended that original order passed
by Tribunal on 6 December 2007 on the petitioner's appeal was an order in breach
of Rule 24 of the Tribunal Rules. This Rule mandates that when the appellant
before the Tribunal was not present and/or represented at the hearing then the
Tribunal can only dispose of the appeal on merits after hearing the respondent
and not for default. In the present case, order dated 6 December 2007 was an
order dismissing the appeal only on account of want of prosecution i.e. without
considering the merits of the appeal. The Miscellaneous Application for recall
of the order dated 6 December 2007 made by the petitioner was an application to
be considered within the province of Section 254(1). However, the Tribunal
misdirected itself by treating the application for recall as an application for
rectification u/s 254(2) and not u/s 254(1). Application for recall was made by
the petitioner under the proviso to Rule 24 of the Tribunal Rules which does not
provide for any period of limitation. Thus, such an application was
appropriately required to be considered by the Tribunal under the proviso to
Rule 24 of the Tribunal Rules without incorporating any period of limitation
therein. The delay in moving the Miscellaneous Application was on account of
genuine mistake /misunderstanding and no sooner the appellant realized the same
in July 2012 an application was filed within a month for recall of the same. The
interests of justice would require that the order of Tribunal be recalled and
the matter be heard on merits. This was for the reason that the petitioner's
representatives were not present at the time when the matter was called out by
the Tribunal but reached soon thereafter to be informed that the matter had been
dismissed. However, the petitioner's representative were unable to mention the
appeal before the Tribunal on that very day to apply for recall of the order
dismissing its appeal only on account of such a practice of mentioning not being
permitted by the Tribunal. Consequently, the petitioner was unable to have the
order of dismissal for non prosecution recalled on 4 December 2007 itself and
correct the injustice.
On the other hand, the Revenue’s
counsel had submitted that the order passed by the Tribunal calls for no
interference as it had been passed on an application made for recall of an order
dated 6 December 2007 u/s 254(2). In these circumstances, as the application
filed by the petitioner was beyond the period of 4 years, the Tribunal had no
jurisdiction to entertain the application. Thus the application dated 6 August
2012 has rightly been dismissed. Even if it is assumed that the application
filed by the petitioner appropriately falls for consideration u/s 254(1), the
same had rightly been held to be barred by limitation. This was on account of
the fact that the period of 30 days as provided under the Limitation Act would
apply for setting aside an exparte order i. e. 30 days from the date of the order. In any event, it
was submitted that even if, it was held that no period of limitation had been
provided for application made u/s 254(1) and the period of limitation under the
Limitation Act was inapplicable, yet the impugned order was justified in
dismissing the application on the ground of laches.
For the purpose of considering the period of laches
the period of 4 years provided u/s 254(2) had appropriately been taken as the
outer most limit for filing the application for recall which could then be
considered on merits of the application including the delay, if any, if not more
than 4 years. The order of recall was received by the appellant on 18 December
2007. At no point of time prior to August 2012 did the petitioner make any
movement to have the order dated 6 December 2007 recalled. The period to
consider the limitation/ laches commences from 18
December 2007 and not from July 2012 as urged on behalf of the petitioner.
Held that,
++ it is contended by the
petitioner that the order passed on 6 December 2007 on its appeal was an order
passed in breach of Rule 24 of the Tribunal's Rules. We find that when the
appellant is not present before the Tribunal when the appeal is called out for
hearing the Tribunal could either adjourn the hearing of the appeal in its
inherent jurisdiction or in terms of Rule 24 of the Tribunal Rules dispose of
the appeal on merits after hearing the respondent. In this case the Tribunal has
dismissed the petitioner's appeal for non prosecution. The Tribunal has not
considered the merits nor heard the respondents on merits before dismissing the
appeal. Thus the Tribunal has not exercised its inherent jurisdiction of
adjourning the appeal or in terms of Rule 24 of the Tribunal Rules of deciding
the appeal on merits after hearing the respondents. We find that in terms of
Rule 24 of the Tribunal Rules the option of dismissing an appeal for default is
not available to the Tribunal. In fact, Income Tax Appellate Tribunal Rules 1946
as amended in 1948 (Tribunal Rules 1946) provided for dismissal of appeal by the
Tribunal for default on the part of the appellant before it;
++ the Rule allowing the Tribunal
to dismiss an appeal for non prosecution/default was a subject matter of
challenge before the SC in CIT vs. S. Chenniappa Mudaliar (1969) 74 ITR and the Apex Court held that such a
provision in the rule was ultra vires the provisions
of the parent Act viz. Section 33(4) of the Income Tax Act, 1922 which mandated
the Tribunal to decide the appeal on merits. Therefore, we find that Rule 24 of
the Tribunal Rules as applicable in this case advisedly does not provide for
dismissal of appeal for default. At this stage it was faintly suggested by the
revenue that such a power of dismissal for default can be exercised by the
Tribunal in exercise of its inherent powers as judicial/quasi judicial
authority. This course is not open to the Tribunal as the Apex Court in S. Chenniappa Mudaliar has held that
the Tribunal is mandated by Section 33(4) of the Income Tax Act 1922 (1922 Act)
to decide the appeal before it on merits. It would therefore, be noted that
Section 33(4) of the 1922 Act and Section 254(1) of the Act are almost
identically worded. Thus it is not open the Tribunal to exercise its inherent
powers to dismiss the appeal for default as the mandate of Section 254(1) of the
Act is to dispose of the appeal on merits even in the absence of the appellant;
++ this Court in the matter of
Chemipol vs. Union of India (2009-TIOL-676-HC-MUM-CESTAT) while dealing with the powers of
Customs Excise and Service Tax Appellate Tribunal to dismiss an appeal for
default has observed that though every Court or Tribunal has an inherent power
to dismiss the proceeding for non prosecution yet this inherent power is lost
where the statute requires the Court or the Tribunal to hear the appeal on
merits. In this case Rule 24 of the Tribunal Rules mandates the Tribunal to
decide the appeal on merits even in absence of the appellant after hearing the
respondents. In view of the above, we hold that the Tribunal did commit an error
in passing the order dated 6 December 2007 in dismissing the appeal on the
ground of want of prosecution. Therefore, in such a case the appellant is
entitled to move the Tribunal to set right the breach of Rule 24 of the Tribunal
Rules and have an order passed in breach thereof to be set aside;
++ we find that the order dated 6
December 2007 does suffer from an error apparent on the face of the record
namely dismissing the appeal on account of non prosecution in breach of Rule 24
of the Tribunal Rules. The Tribunal has no power to dismiss the application on
the ground of non keeping in view Rule - 24 of the
Tribunal Rules. Therefore, dismissing an appeal for non prosecution in the face
of Rule 24 of the Tribunal Rules is an error apparent on the face of the record
leading to an irregular order which can be rectified u/s 254(2). In fact during
the course of hearing the petitioner placed reliance on the Bombay HC decision
in Khushalchand B. Daga vs.
T.K. Surendran and others (1972) 85 ITR 48 to support
its view that the Tribunal cannot dismiss an appeal for default. In the case of
Khushalchand B. Daga this
Court held that in view of Rule 24 of the Tribunal Rules 1946 as then existing the Tribunal cannot dismiss an appeal for non
prosecution in view of the decision of the SC in the matter of S. Chenniappa Mudaliar. However, it
further also held that such an order dismissing an appeal for default of
appearance by the Tribunal was an order which suffered from an error apparent on
the face of the record. We are of the view that in the above circumstances if
there is an error apparent on the face of the record, Section 254(2) of the Act
alone is applicable. Where Parliament has provided a specific provision in the
Act to deal with a particular situation, it is not open to ignore the same and
apply some other provision. Section 254(2) empowers the Tribunal to
correct/rectify its order only within four years from the date of the order
which is sought to be rectified. In this case it is an admitted position that
the miscellaneous application is filed on 6 August 2012 i.e. beyond four years
of the order dated 6 December 2007 which is sought to be rectified;
++ it was next contended that in
any event Section 254(2) would have no application on the ground that
Miscellaneous Application made in August 2012 is under the proviso to Rule 24 of
the Tribunal Rules which does not have any period of limitation. Moreover in
such cases, it is contended that the application is not to rectify an error in
the order but is an application to set aside an order. We find that the
miscellaneous application made by the petitioner on 6 August 2012 could not have
been made under the proviso to Rule 24 of the Tribunal Rules. This is for the
reason that the proviso would be applicable only when the Tribunal has exercised
its power on the basis of the main part of Rule 24 of the Tribunal Rules i.e.
deciding the appeal on merits after hearing the respondents. Thus the
application of the proviso can only take place where the main part of Rule 24 of
the Tribunal Rules has been applied for dismissing the appeal i.e. appeal has
been disposed of on merits after hearing the respondents, in the absence of the
appellant. In this case admittedly the main part of Rule 24 of the Tribunal
Rules has not been applied and therefore, no occasion to invoke the proviso
thereto can arise. The proviso to Rule 24 of the Tribunal Rules has no
application where there is an error apparent on record. The invocation of the
proviso takes place when the Tribunal has correctly disposed of the appeal
before it in terms of the main part of Rule 24 of Tribunal Rules. Consequently,
in the present facts the issue of application of either Rule 254(1) or (2) to an
application made under the proviso to Rule 24 of the Tribunal Rules does not
arise;
++ we find
that there is an error apparent on record and the miscellaneous application is
to correct the error apparent from the record. The consequence of such
rectification application being allowed may lead to a fresh hearing in the
matter after having recalled the original order. However, the recall, if any, is
only as a consequence of rectifying the original order. It is pertinent to note
that Section 254(2) does not prohibit the recall of an order. In fact the
power/jurisdiction of the Tribunal to recall an order on rectification
application made under Section 254(2) is no longer resintegra. The issue stands covered by the decision of the
Apex Court in ACIT vs. Saurtashtra Kutch Stock
Exchange Limited (2008-TIOL-170-SC-IT) which held that though the
Tribunal has no power to review its own order, yet it has jurisdiction to
rectify any mistake apparent on the face of the record and as a consequence
therefore, Tribunal can even recall its order. In the above case before the
SC, Tribunal
dismissed the appeal of Stock Exchange holding that it was not entitled to
exemption under Section 11 read with Section - 12 of the Act. On 13 November
2000 the Stock Exchange filed a rectification application under Section 254(2)
of the Act before the Tribunal. The Tribunal by its order dated 5 September 2001
allowed the application and held that there was mistake apparent on the record
which required rectification. Accordingly, the Tribunal recalled its order dated
27 October 2000 for the purpose of entertaining the appeal afresh. The revenue
filed a writ petition in the Gujarat High Court challenging the order dated 5
September 2001. The above challenge by the revenue was turned down by the
Gujarat High Court. The revenue carried the matter in appeal to the Apex Court
which also dismissed the appeal of the revenue. The Apex Court observed that the
Tribunal in its original order while dismissing the Stock Exchange (assessee's) appeal overlooked binding decisions of the
jurisdictional High Court. This mistake was corrected by the Tribunal under
Section 254(2) of the Act. The Supreme Court held that the rectification of an
order stands on the fundamental principle that justice is above all and upheld
the exercise of power under Section 254(2) of the Act by the Tribunal in
recalling its earlier order dated 27 October 2000. Thus recall of an order is
not barred on rectification application being made by one of the parties. In
these circumstances, the application would be an application for rectification
of the order dated 6 December 2007 and would stand governed by Section 254(2);
++ in the
facts of the present case there can be no denial that the order dated 6 December
2007 suffers from an error apparent from the record. The error is in having
ignored the mandate of Rule 24 of the Tribunal Rules which required the Tribunal
to dispose of the matter on merits after hearing the respondents. In these
circumstances, an application for rectification would lie under Section 254(2)
of the Act. The recall of an order would well be a consequence of rectifying an
order under Section 254(2) of the Act. In these circumstances, we find no reason
to interfere with the order of the Tribunal holding that Miscellaneous
Application filed by the appellant is barred by limitation under Section 254(2)
of the Act as it was filed beyond a period of four years from the order sought
to be rectified. Before concluding, we would like to make it clear that an order
passed in breach of Rule 24 of the Tribunal Rules, is an irregular order and not
a void order. However, even if it is assumed that the order in breach of Rule 24
of the Tribunal Rules is an void order, yet the same
would continue to be binding till it is set aside by a competent Tribunal. In
fact, the Apex Court in the Sultan Sadik v/s. Sanjay
Raj Subba reported in 2004 (2) SCC 277 had observed
that an order, even if not made in good faith, is still an act capable of legal
consequences. It bears no brand of invalidity upon its forehead. Unless the
necessary proceedings are taken at law to establish the cause of invalidity and
to get it quashed or otherwise upset, it will remain as effective for its
ostensible purpose as the most impeccable of orders. This must be equally true
even where the brand of invalidity is plainly visible, for there also the order
can effectively be resisted in law only by obtaining a decision of Court.
Further the Supreme Court in Sneh Gupta v/s. Dev Sarup (2009) 6 SCC 194 has observed the compromise decree,
as indicated herein before, even if void was required to be set aside. A consent
decree as is well known, is as good as a contested
decree. Such a decree must be set aside if it has been passed in violation of
law. For the said purpose, the provisions contained in Limitation Act 1963 would
be applicable. It is not the law that where the decree is void, no period of
limitation shall be attracted at all. Therefore, in this case also the period of
four years from the date of order sought to be rectified/recalled will apply as provided in Section 254(2)
of the Act. This is so even if it is assumed that the order dated 6 December
2006 is a void order. In view of the reasons given herein above, we find the
Tribunal was correct in dismissing the Miscellaneous Application by its order
dated 10 April 2013 as being beyond the period of four years as provided under
Section 254(2) of the Act. Accordingly, the petition is dismissed with no order
as to costs.
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