Report No. 162

Chapter V

Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT)

5.1. The CEGAT is constituted under section 129 of the Customs Act, 1962 and by virtue of the definition of the "Appellate Tribunal" in clause (AA) of section 2 of the Central Excise and Salt Act, 1944 read with sections 35B, 35C and 35D of the said Act, the said Tribunal is also the Appellate Tribunal for the purpose of the Central Excise and Salt Act, 1944. This Tribunal, it is necessary to point out, is not constituted under Article 323B, but under the special enactments aforementioned which are in no way connected with Article 323B.

Section 35L(b) of the Central Excise Act and section 130E(b) of the Customs Act, 1962 provide for a direct appeal to the Supreme Court against the orders of the Tribunal in matters relating to determination of any question having a relation to the rate of duty payable or to the value of the goods for the purpose of assessment, hereinafter referred to for the sake of convenience, as classification and valuation respectively. In other matters, a reference is provided to the concerned High Court under section 35G of the Central Excise Act and section 130 of the Customs Act.

As a matter of fact, not less than half of the matters which come before the CEGAT under both the enactments pertain either to the rate of duty payable or to the value of the goods for the purpose of assessment. In this manner, a direct statutory appeal to the Supreme Court is provided against half the number of orders passed by the Tribunal under both the enactments and these matters appear to be more significant having regard to the stakes involved therein both for the Revenue as well as the assessees. In other matters decided by the Tribunal, recourse to High Court by way of reference has to be adopted.

Even here, against any judgment delivered by the High Court on such reference, an appeal is provided to Supreme Court under section 35L(a) of the Central Excise Act and section 130E(a) of the Customs Act. Though these two enactments do not directly and specifically provide for an exclusion of judicial review by the High Court and the Supreme Court, they do so by necessary implication.

By providing a direct appeal to Supreme Court in a good number of cases decided by the Tribunal, which remedy is a far better and a wider remedy than the remedy of judicial review available under Article 226 or 227 or under Article 32 of the C onstitution of India and by providing for the reference to the High Court in other cases, the intention to exclude the right to judicial review by the High Court and the Supreme Court is abundantly-manifested.

The remedy of a reference to the High Court, a procedure prescribed by the Income-tax Act, 1961 (as well as the repealed Indian Income-tax Act, 1922), is a well-established procedure and no one has suggested that the right to judicial review is available against the orders of the Income-tax Appellate Tribunal in addition to the remedy of reference to the High Court and the appeal to Supreme Court from the orders of the High Court.

The Law Commission is of the opinion that the function performed by the CEGAT is of crucial importance both from the point of view of the Revenue as well the assessee. The matters coming before the Tribunal involve huge stakes, sometimes running into tens and hundreds of crores. The Tribunal has also got the power to grant stay pending the appeal, vide the proviso to section 35F of the Central Excise Act and the proviso to section 129E of the Customs Act. If a stay is granted and the appeal is not decided by the Tribunal within a reasonably short time, it will result in prejudice both to the Revenue as well as to the Assessees.

This is more so after the judgment of the larger Constitution Bench of the Supreme Court in Mafatlal Industries Ltd. v. Union of India, 1997 (5) SCC 536, affirming and upholding the doctrine of unjust enrichment and the validity of (Amending) Act 40 of 1991 giving statutory recognition to the aforesaid doctrine. It is in the interest of the assessees in particular that the disputes relating to classification and valuation are disposed of as quickly as possible.

The Law Commission has a feeling that the highly significant nature of the function performed by this Tribunal has not been duly and sufficiently appreciated by those concerned and it is probably for this reason that adequate number of Benches have not been created by the government which is absolutely essential for the prompt disposal of the large number of appeals filed before the Tribunal. (As a matter of fact, the facts and figures made available by the Tribunal show that the filing is increasing with every passing year which is only adding to the problem of the huge backlog which has already accumulated.)

In view of the fact that in a bulk of matters decided by this Tribunal, appeal lies to the Supreme Court directly under the two statutes aforementioned, it would not be unreasonable to infer that this Tribunal has been treated by the Parliament almost on par with the High Court. The status and dignity of this Tribunal deserves to be enhanced accordingly.

With a view to make this Tribunal a more effective instrument of law for achieving the objectives for which it has been constituted and for achieving the objectives underlying the Central Excise Act and the Customs Act, the following recommendations are made which the Commission hopes, will be given effect to, without any delay, by the Government of India. The recommendations are:-

(A) No person shall be appointed as the President of the Tribunal unless he is or has been the Chief Justice of a High Court. He must be a person reputed for his efficiency, integrity and hard work. Immediately upon his appointment he must be provided a residence in New Delhi consistent with his status besides other perquisites and amenities to which he was entitled as the Chief Justice of the High Court.

The selection of the President should be made by a committee consisting of the Hon'ble Chief Justice of India and the two senior most Judges of the Supreme Court. As a matter of convention, it must be ensured that there is no time lag between the retirement of a President and the appointment of his successor. Only where a suitable sitting or retired Chief Justice is not available, should a senior sitting or retired High Court Judge with the requisite qualities be considered. An effective and efficient President would go a long way in improving the work-culture of the Tribunal-a fact borne out by experience.

(B) Section 129 of the Customs Act calls for an amendment. The appointment of the President of the Tribunal should be a direct-appointment in the manner stated above, whereas section 129, as it stands now, contemplates appointing one of the Members of the Tribunal as the President thereof.

While the appointment of the Vice-President can be done from among the Members, the President of the Tribunal should be chosen directly from among the sitting or retired Chief Justices or retiring or retired senior Judges of the High Court.

(C) In the matter of appointment of Judicial Members of the Tribunal, an attempt should be made, as far as possible, to recruit Members of the Bar between the age of 45 and 50. They must be provided with an official residence as soon as possible upon their appointment/posting to a particular city and they should also be entitled to all the perquisites and amenities admissible to their office. Not making a suitable residence available almost immediately upon their posting to a place and driving them to seek private accommodation at exhorbitant cost acts as a disincentive to those considering joining this service.

It is equally necessary to provide that these Judicial Members should be considered for appointment as Judges of the High Courts (of the State from which they hail) in the quota normally reserved for members of the subordinate judiciary and if for any reason this course is not found feasible or practicable, they may be considered under sub-clause (b) of clause 2 of Article 217 read with extension (aa) and/or (b) appended to the said clause. If this assurance is held out, many members of the Bar may be attracted to this office, which may incidentally have the added advantage of making available persons of competence, who have acquired expertise in Central Excise and Customs matters to the High Courts.

The prompt recruitment and posting of Judicial and Administrative Members is again a necessity, which though an obvious requirement, has not really been honoured in practice. In this connection, the practice of taking District Judges on deputation to work as Judicial Members of the Tribunal should be encouraged. They should retain a lien in their parent service so that their chances of promotion or of appointment to the High Court are not jeopardised.

(D) in matters where a reference lies to the High Court under section 35G of the Central Excise Act and section 130 of the Customs Act, the requirement of applying to the Tribunal for making a reference as provided by sub-section (1) of section 35G and sub-section (1) of section 130 respectively of the said enactments may be dispensed with. Section 35G and section 130 may be suitably amended providing that any person aggrieved with the decision of the Tribunal may apply to the High Court for directing the Tribunal to refer the questions of law arising from the decision of the Tribunal.

The time limitation for making such an application can be retained at six months as is now provided by sub section (3) of the aforesaid sections. It must however be Provided that a person so applying to the High Court should clearly state the questions of law which he seeks to raise and should also specify the paragraphs in the decision/judgment of the Tribunal relevant to the questions sought to be raised. Such a provision is necessary in view of the fact that the judgment of the Tribunal may deal with several other questions of law and fact.

(E) In every High court there should at least be one Bench regularly hearing matters arising under the Income-tax Act, Central Excise and Salt Act and the Customs Act. The matters arising under the latter two enactments should, as far as possible, be given precedence in the matter of hearing.

(F) Every Bench of the Tribunal should be headed by a Vice-President. For this purpose, there must be as many Vice-Presidents as there are Benches of the Tribunal. At any rate, the important centres like Mumbai, Ahmedabad, Chennai and Calcutta should necessarily have a Vice-President each.

(G) The number of Benches should be commensurate with the work in the Tribunal. Since every Member/Bench of the Tribunal is expected to dispose of a particular number of cases every year, the number of Benches should be determined on the above basis and provided for. On the present pendency, there ought to be at least 20 to 22 Benches, in all. As stated hereinabove, the filing in the Tribunal is going up with every passing year - and not decreasing.

(H) Special care should be taken while appointing the Senior Departmental Representatives (SDRs) and Junior Departmental Representatives (JDRs). Their role is no less important. Persons of competence and integrity alone should be designated as such.

(I) The recommendations made regarding Central Administrative Tribunal under paragraphs 4.9, 4.10, 4.11 and 4.13, supra, shall also be extended to CEGAT also.