JUDGMENT
G.A. Brahma Deva
I. R.O.A
1. Sl.No.1 to 20 of Part I are application filed by the above applicants for restoration of appeals which have been dismissed as per order No. F/249-299/2001 dated 27th February 2001 in the case of Wipro Limited and others and subsequent respective orders. These applications were filed on the ground that appeals are to be restored to their original nos. in view of the decision of the larger bench in the case of Kishan Sahakari Chini Mills Ltd. v. CCE, Kanpur reported in 2001 (131) ELT 370.
2. By Order No. F/249-299/2001 dated 27.2.2001, the tribunal observed that “in all these cases the proceedings were initiated with reference to the repealed provisions/ rules. When once the rules were deleted from the statute they were non-est in the eye of law. It is as if it hod never been passed in the statute. When once that rule is considered to be void abinitio nothing survives with reference to such rule. Accordingly, no action can be initiated with reference to such repealed provisions and all actions must stop and not even appeal can be entertained in such a situation. In the absence of a saving clause all the proceeding initiated under the old repealed rules would simply lapse”. In the view the Tribunal has taken, the appeal were dismissed as not maintainable.
3. The Counsel appearing for the respective parties submitted that the appeals are to be restored in view of the amendment in the Finance Act of 2001 by inserting Section 38A therein as well as in view of the decision of the larger bench in the case of Kisan Sahkari Chini Mills Ltd. v. Commissioner of Central Excise, Kanpur reported in 2001 (131) ELT 370. It was submitted by them that as per Section 131 of the Act a new Section 38A had been introduced with the provision that the same shall be deemed to have been inserted on or from 28.02.1944. The effect of the insertion of the said section is to the effect that repeal of Modvat provisions w.e.f. 1.4.2000 will not affect the previous operation of the rules and the right, privilege, obligation or liability acquired, accrued or incurred under the said repealed rules. It was also submitted that objects of the Finance Act is also to be taken into consideration in resorting these appeals.
4. In support of the application for restoration in ROA 213-217 of 2001 and ROA 203/01 filed by the Revenue, Smt. Radha Arun submitted that the said appeals are to be restored in view of the amendment/ insertion of Section 38A in the Finance Act of 2001. She also submitted that opinion given by the Additional Solicitor General with reference to retrospective validation of action taken under Section 11A of the Central Excise Act 1944 under the Finance Act 2001, is relevant in this context to decide the issue. She drew our attention to the relevant portion of the opinion as appeared in 2001 (133) ELT T9 under departmental clarification.
“Query NO.3) Whether these provisions would apply to proceedings that have attained finality and where appeal periods have expired?
Opinion: Under Section 110 of the Finance Act, any notice issued after the 17th of November, 1980 will be protected by the validation Act. the necessity for the amendment arose to overcome the judgment of the Hon’ble Supreme Court in the Cotspun Ltd. case. Further , the power to amend the law retrospectively has been recognized judicially in a number o pronouncements [for example, Privthvi Cotton Mills Ltd. v. Broach, (1969) 2 SCC 284]. The said judgment in para 4, clearly provides “If the legislature has the power over the subject matter and competence to make a valid law, it can at any time, make such a valid law and make it retrospectively so as to bind eve past transactions.” Therefore, where notice have already been issues, the judgments rendered in the context of the earlier provision would cease to be of relevance. In fact, in the case of Cotspon itself, where the judgment of the Supreme Court was rendered, in view of the validation provisions, recovery could be made notwithstanding the Cotspon judgment. Under these circumstances, if the SCNs have been issued then even in respect of past proceedings which even judgments have been rendered it will be open to the Department to make recoveries.”
5. It was duly replied by Shri Parameswaran that the opinion given by the Additional Solicitor General was in a different context with reference to the recovery proceedings under Section 11A and that the opinion is not a solution to the question involved herein.
6. The short point to be considered in all these applications is whether amendment brought out in the Finance Act 2001 is a ground for restoration of the appeals. We do not find any provision for restoration of the appeals either in the Central Excise Act or in the Rules. But Rule 20 of CEGAT Procedure Rules provides for restoration of the appeal, if the appeal was dismissed for default. Rule 20 of CEGAT Procedure Rules is as follows:-
“Where on the day fixed for the hearing of the appeal or on any other day to which such hearing may be adjourned, the appellant does not appear when the appeal is called on for hearing, the Tribunal may, in its discretion, either dismiss the appeal for default or hear and decide it on merits:
Provided that where an appeal has been dismissed for default and the appellant appears afterwards and satisfies the Tribunal that there was sufficient cause for his non-appearance when the appeal was called on for hearing, the Tribunal shall make an order setting aside the dismissal and restore the appeal.”
7. As can be from the wordings of Proviso to Rule 20, appeal can be restored if the appeal was dismissed for default. In these cases the appeal were not dismissed for default but dismissed after considering the pleas made by the respective sides. Hence the question of restoration does not arise. In the result the applications for the restoration of the appeals are hereby rejected.
II. R.O.M
8. Sl.No. 1 to 26 of Part II are applicants filed by the applicants for rectification of mistake under Section 35(C) of the Act with reference to the final order No. F/368 to 298/2001 dated 08.03.2001 and subsequent respective orders. In the said orders it was held that since the Rules relating to modvat credit were deleted from the statute and in the absence of saving clause all the proceedings initiated under the old repealed rules would simply lapse and accordingly appeals were dismissed as not maintainable.
9. Shri Nair who commenced the argument on the point at issue in these batch of applications submitted that subsequent to passing of the aforesaid orders that new Section 38A was inserted under Section 131 of the Finance Act 2001 having retrospective effect and deemed to have been inserted and effective on and from 28.2.1944, and in view of that amended section, mistake has crept in the order and same is required to be rectified.
10. He referred to Section 131 of Finance Act 2001 which reads as under:-
“131. Insertion of new Section 38A. After section 38 of the Central Excise Act, the following section shall be inserted and shall be deemed to have been inserted on and form the 28th day of February, 2944, namely:-
38A. Effect of amendments, etc., of rules, notifications or orders. Where any rule, notification or order made or issued under this Act or any notification or order issued under such rule, is amended, repealed, superseded or rescinded, then, unless a different intention appears, such amendment, repeal, supersession or rescinding shall not-
(a) revive anything not in force or existing at the time at which the amendment, repeal, supersession or rescinding takes effect; or
(b) affect the previous operation of any rule, notification or order so amended, repealed, superseded or rescinded or anything duly done or suffered thereunder; or
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any rule, notification or order so amended, repealed, superseded or rescinded; or
(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed under or in violation of any rule, notification or order so amended, repealed, superseded or rescinded; or
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture, or punishment as aforesaid,
and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed as if the rule, notification or order, as the case may be, had not been amended, repealed, superseded or rescinded.”
11. He cited the decision of the Supreme Court in the case of M.K. Venkatachalam ITO v. Bombay Dyeing and Mfg. Co. Ltd. reported in AIR 1958 SC 875 in support of his contention that subsequent amendment having retrospective operation is a ground for rectification of mistake. Developing the arguments, Sri Parameswaran submitted that not only Section 38A was inserted under Section 131 of Finance Act, 2001, but also validation of action with reference of Section 131 has been made vide Section 132 of the Finance Act. He referred to Section 132 which reads as under:
“132. Validation of certain action taken. Any action taken or anything done or omitted to be done or purporting to have been taken or done or omitted to be done under any rule, notification, or order made or issued under the Central Excise Act, or any notification or order issued under such rule at any time during the period commencing on and from the 28th day of February, 1944, and ending with the day, the Finance Bill, 2001 had been in force at all material times and, accordingly, notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority,-
(a) any action taken or anything done or omitted to be done, during the said period in respect of any excisable goods under any of such rule, notification or order, shall be deemed to always have been, as validly taken or done or omitted to be done as if the amendment made by Section 131 of the Finance Act, 2001 had been in force at all material times.
(b) no suit or other proceedings shall be maintained or continued in any court, tribunal or other authority for any action taken or anything done or omitted to be done, in respect of any excisable goods under any of such rule, notification or order, and no enforcement shall be made by any court, of any decree or order relating to such action taken or anything done or omitted to be done as if the amendment made by Section 131 of the Finance Act, 2001 had bee in force at all material times;
(c) recovery shall be made of all such amounts of duty or interest of penalty or fine or credit of duty in respect of inputs or capital goods or other charges which have not been collected or, as the case may be, which have ben refunded, as if the amendment made by Section 131 of the Finance Act, 2001 had been force at all material times.
12. Referring to the decision of the Supreme Court in the case of Mathew M. Thomas v. CIT report in 1999 (111) ELT 4 SCC, he said that proceedings shall include proceedings at the appellate stage and the appeal doe snot acquire finality till such time it is considered as final under the Act and hence even rectification of a mistake is a continuation of the proceedings. He submitted that Section 35-C(2) has been in force and mistake has crept in due to retrospective operation of the Amendment Act. Subsequent legislation having retrospective operation is a ground for rectification of mistake and in this context, he said that “the Hon’ble Supreme Court in the case of M.K. Venkatachalam ITO, while considering the scope of the expression ‘mistake apparent from the record’ has laid down that a mistake of law which is glaring and obvious even due to retrospective operation of any amending act, would fall within the purview of the said expression ‘mistake apparent form the record’ and needs to be rectified,” relying upon the following decisions:-
M.K. Venkatachalam ITO v. Bombay 1958 (34) ITR 143 (SC) Dyeing and Mfg. Co. Ltd. = AIR 1958 SC 875 J.M. Bhatia, Appellate Asst. Commissioner 1986 (73) AIR 268 of Wealth Tax v. V.J.M. Shah ITO v. Ashok Textiles Ltd. 1961 (48) AIR 699
13. He submitted that in view of the above rulings rectification of mistake would not amount to exercising the power of review, since on the date of considering ROM, the law applicable will have to be taken into account. Others while adopting the arguments submitted mistake requires to be rectified in view of the insertion of Section 38A having retrospective operation in the Finance Act, 2001.
14. Smt. Radha Arun opposed these applications on the ground that no mistake has crept in the orders to be rectified.
15. We have carefully considered the matter. Subsequent amendment having retrospective operation can form the basis for rectification of mistake in terms of Section 35-C(2) of the Central Excise Act, 1944 is an issue to be considered herein. Section 35-C(2) is as under:
“35-C(2). The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent form the record, amend any order passed by it under Sub-section (1) any shall make such amendments if the mistake is brought to it notice by the Commissioner of Central Excise or the other party to the appeal.”
16. Any mistake apparent form the record can be rectified in terms of Section 35-C(2) of the Act. It was submitted on behalf of the respective parties that there was no mistake in the order at the time of passing the order since the relevant Rules relating to Modvat credit wee deleted from the statute without saving clause, but, nevertheless the said order has become invalid any wrong by virtue of the retrospective operation of the Amendment Act by inserting Section 38A in the Finance Act, 2001. It was also argued on behalf of the applicants that order has not reached the finality since provision for ROM is provided in the statute and the law applicable on the date of considering ROM is to be taken into account since rectification of mistake is a continuation of proceedings. The plea of the parties is strengthened by the view taken by the Supreme Court and High Court with reference to similar provisions under the Income Tax Act and Wealth Tax Act. In the case of Parashurama Pottery Works Co. Ltd. v. D.R. Trivedi, Wealth Tax Officer reported in 1975 (100) ITR 651, the Gujarat High Court held that the order of assessment passed by the Wealth Tax Officer cannot be said to be final in the literal sense of the order. The order so conducted to be liable to be modified under Section 35 of the Wealth Tax Act if the condition precedent to the exercise of the power under that Section was satisfied. It has turned down the arguments 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…..”
17. In the case of J.M. Bhatia, Appellate Assistant Commissioner of Wealth Tax and others, Appellate V.J.M. Shah, Respondent, it was held that “resort to the rectification power was not required to be made by reference to any provision in the Amending Act but dehors the Amending Act power was sought to be exercised under the original section, namely, 35(7) of the Wealth Tax Act – AAC’s order dated June, 26, 1970 had not become final in the literal sense of the word notwithstanding the fact that no appeal had been preferred against that order or that the requisite period for appeal was allowed to expire – Order was and continued to be liable to be modified u/s. 35(7) and therefore, the assessee also would not be in a position to invoke the principle of finality of orders or the sanctity of the existing rights which are said to have been acquired by her under the initial order.”
18. Observations made by the Supreme Court in Para 5 of the said judgment is relevant in this context and same is reproduced as under:-
“5. It is clear that the ground which was urged before the High Court and which seemed to find favour with it that the question whether the Amending Act applied to assessments which were already completed was a highly debatable question and therefore, it was not a case of an error apparent on the face of the record which entitled the AAC to rectify his predecessor’s order but the question thus raised would, in our view, arise only if it is really a case of completed assessment in the literal sense of the word. It may be pointed out that this very aspect of the matter was pressed in service in the Bombay Dyeing case [(1958) 34 I.T.R. 143 : AIR 1958 SC 875] and this Court while negativing the contention has taken the view that the assessment order that had been initially passed in that case [which was under Section 18-A(5) of the Income Tax Act, 1922] could not be said to have become final in the literal sense of the word and in that behalf this Court pointed out that irrespective of the question wether any appeal had been preferred or not against that initial order was liable to be modified or rectified under Section 35 of the Act and therefor,e could not be said to have become final or complete and as such the contention raised would not be of much assistance to the assessee. After referring to the decision of the Privy Council in Delhi Cloth and General Mills Co. Ltd. v. ITC (AIR 1927 PC 242: (1926-27) 54 IA 421) as also to the Board’s decision in Colonial Sugar Refining Co. v. Irving (1905) AC 369) this Court with reference to the precise argument observed thus:
The same argument is put in another form by contending that the finality of the order passed by the Income Tax Officer cannot be impaired by the retrospective operation of the relevant provision. In our opinion, this argument doe snot really help the respondent’s case because the order passed by the Income Tax Officer under Section 18-A(5) cannot be said to be final in the literal sense of the word. This order was and continued to be liable to be modified under Section 35 of the Act. What the Income Tax Officer has purported to do in the present case is not to revise his order in the light of the retrospective amendment made by Section 13 of the Amendment Act alone, but to exercise his poe under Section 35 of the Act; and so the question which falls to be considered in the present appeal centers round the construction of the expression “mistake apparent from the record” used in Section 35. That is why we think the principle of the finality of the orders or the sanctity of the existing rights cannot be effectively invoked by the respondent in the present case.”
19. In the case of M.K. Venkatachalam, I.T.O. and Anr. v. Bombay Dyeing and Mfg. Co. Ltd. reported in 1958-(SC2)-GJX-0055-SC, the Supreme Court while interpreting the scope of the expressions/ mistake apparent from the record has made some observations. The said observations are relevant in this context and the same is reproduced as under:-
“It is urged for the respondent that the retrospective operation of the relevant provision is not intended to affect completed assessments. It is conceded that, if any assessment proceedings in respect of the assessee’s income for a period subsequent to the first of April 1952 were pending at the time when the Amendment Act passed, the proviso inserted by section 13 would govern the decision in such assessment proceeding; but where an assessment proceeding has been completed and an assessment order has been passed by the Income-tax Officer against the assessee, such a completed assessment would not be affected and cannot be reopended under Section 35 by virtue of the retrospective operation of the Amendment Act. In support of this contention, reliance is placed on the observations of the Privy Council in Delhi Cloth and General Mills Co. Ltd. v. Income-tax Commissioner, Delhi and Anr. [(1927) L.R. 54 I.A. 421]. Lord Blanesburg who delivered the judgment of the Board referred to the Board’s earlier decision in the Colonial Sugar Refining Company v. Irving [(1905) A.C. 369] where it was in effect laid down that, while provisions of a statue dealing merely with matters of procedure may properly, unless that construction be textually inadmissible, have retrospective effect attributed to them, provisions which touch a right in existence at the passing of the statue are not to be applied retrospectively in the absence of express enactment or necessary intendment. The learned Judge then added that “Their Lordships have no doubt that the provisions which, if applied retrospectively, would deprive of their existing finality orders which, when that statue came into force, were final, are provisions which touch existing rights.” The argument for the respondent is that the assessee has obtained a right under the order passed by the Income-Tax Office to claim credit for the specified amount under Section 18A(5) and the said right cannot be taken away by the retrospective operation of Section 13 of the Amendment Act. The same argument is put in another form by contending that the finality of the order passed by the Income-tax Officer under Section 18A(5) cannot be said to be final in the literal sense of the word. This order was and continued to be liable to be modified under Section 35 of the Act. What the Income-tax Officer has purported to do in the present case is not to revise his order in the light of the retrospective amendment made by Section 13 of the Amendment Act alone, but to exercise his power under Section 35 of the Act; and so the question which falls to be considered in the present appeal centers round the construction of the expression “mistake apparent from the record” used in Section 35. That is why we think the principle of the finality of the orders or the sanctity of the existing rights cannot be effectively invoked by the respondent in the present case.”
“It is in the light of this position that the extent of the Income-tax Officer’s power under Section 35 to rectify mistake apparent from the record must be determined; and in doing so, the scope and effect of the expression “mistake apparent from the record” has to be ascertained. At the time when the Income-tax Officer applied his mind to the question of rectifying the alleged mistake, there can be no doubt that he had to read the principal Act as containing the inserted proviso as from April 1, 1952. If that be the true position then the order which he made giving credit to the respondent for Rs. 50,603-15-0 is plainly and obviously inconsistent with a specific and clear provision of the statue and that must inevitably be treated as a mistake of law apparent from the record. If a mistake of fact apparent from the record of the assessment order can be rectified under Section 35, we see no reason why a mistake of law which is glaring and obvious cannot be similarly rectified. Prima facie it may appear somewhat strange that an order which was good and valid when it was made should be treated a patently invalid and wrong by virtue of the retrospective operation of the Amendment Act. But such a result is necessarily involved in the legal fiction about the retrospective operation of the Amendment Act. If, as a result of the said fiction we must read the subsequently inserted proviso as forming part of Section 18A(5) of the principal Act as from April 1, 1952, the conclusion is inescapable that the order in question is inconsistent with the provisions of the said proviso and must be deemed to suffer from a mistake apparent from the record. That is why we think that the Income-tax Officer was justified in the present case in exercising his power under Section 35 and rectifying the said mistakes. Incidentally we may mention that in Moka Venkatappaiah v. Additional Income-tax Officer, Bapatla [(1957) 32. I.T.R. 274], the High Court of Andhra has taken the same view.”
20. Although the decisions referred to above have ben rendered in the context of provisions of the Income Tax and Wealth Tax A t, the ratio would be directly applicable even to cases under the Customs 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 35-C(2) of the Central Excise Act and Section 129 B2 of the Customs Tax Act are pari-materia with the Section 35 of the Wealth Tax Act, 1957 and Sections 154 and 254 of the Income Tax Act, 1961.
21. On an analysis of the above decisions, we find that subsequent amendment having retrospective operation will form the basis for rectification of mistake. In these cases, the order was duly passed based upon the legal position as it stood on the day of passing the order. Obviously there was no mistake on the day of passing the order. But subsequently amendment inserting Section 38A having retrospective operation in the Finance Act, 2001 converts proper order into improper. As observed by the Supreme Court in the case of M.K. Venkatachalam, ITO v. Bombay Dyeing and Mfg. Co. Ltd. reported in 1958-(SC2)-GJX-0055-SC, “prima facie it may appear somewhat strange that in order it was good and valid when it was made should be treated as patently invalid and wrong by virtue of the retrospective operation of the Amendment Act. But such a result is necessarily involved in the legal fiction about the retrospective operation of the Amendment Act.” As a result of the said fiction, we must read the subsequently inserted Section 38A as forming part of the Principal Act w.e.f. the 28th day of February 1944 i.e. from its inception of the principal Act. It would be noticed that the main object of insertion of Section 38A in the Finance Act 2001 is to extend the retrospective operations of the relevant provisions with effect from 28th day of February 1944. The conclusion is inescapable that the order in question is inconsistent with the provisions of the Act and must be deemed to suffer from a mistake apparent from the record. In view of legal fiction, the mistake has crept in the order and same is required to be rectified following the rulings of the Apex Court.
22. In the view we have taken, mistake is rectified holding that the appeals are maintainable in view of the amendment/ changes brought out in the Finance Act, 2001. Accordingly, application filed by the parties for rectification of mistake are hereby allowed. In view of this rectification order, the respective appeals which were dismissed as not maintainable, are to be heard on merits to decide the issue of eligibility of Modvat credit on merits of each case. Registry to post the said appeals to hear on merits.
23. Thus, all the applications are disposed off in the above terms.
(Pronounced in open Court on 30/10/01)