In taxing statutes, Departmental Officers are vested with the powers to adjudicate various disputes and these decisions are known as quasi-judicial orders. Such officers lack legal acumen to write such orders since most of the officers are not qualified in the branch of law. The adjudication orders thus are not written in the manner the judgments are delivered by the Courts. Many a times, observations have been made by higher judicial forums about the quality of adjudication by quasi-judicial authorities. Concept of passing the orders against the assessees and in favour of revenue is trending over the years. Why is it so? I have no better words on this issue than by Sh. S J Singh, Advocate who has been a Commissioner of Central Excise and Service Tax at various locations, and has written on a social media site as under:
……The pervasive mistrust with their own system is sitting like a ghost on the backs of the officers and colouring their vision and fettering their discretion? Or, is it that there is lack of knowledge of law and procedure and, therefore, there is lack of courage to take the correct decision and ghost is only an excuse for not taking correct decision? Or, is it mixture of both the situations. But, in all such circumstances the adjudicating authorities follow the safe route and pass “pro-revenue” order without caring if the order is legal and proper and more importantly just and fair. In such a milieu, the laudatory goal of building the trust between the Government and the public is a casualty for which no tears are shed. The “pro-revenue” order is a ‘delicious cake with desirable topping’ for everyone in the Department. It keeps the adjudicating officer and his support staff “safe” and more contented are the officers and the authority/authorities that review such orders. Such orders are “accepted” with one axiomatic line, “The order is pro-revenue, legal and proper.” All officers up to Commissioner/Chief Commissioner sign the dotted line without bothering to understand the propriety of the order.
The acceptance of a fair and proper speaking order which is against the interest of revenue requires correct understanding of law and some courage and conviction. The unfounded but lurking fear of some trouble in future shuts the thinking faculties and all requirements of unbiased and impartial views are thrown out of the window. If any senior officer in the hierarchy, which is involved in the review proceeding, is nearing promotion, then judiciousness is the first causality. If the senior most in the hierarchy is nearing promotion or retirement then even oral instructions are issued that no “anti-revenue” order should be put up for acceptance. On the contrary, only draft review directions should be put up. They want to make their officers impotent adjudicating authorities, but want them growl when threatening assessees.
The system of vigilance audit is condemnable, when the power to review exists, if Department finds an order acceptable it can always file an appeal rather than harassing any adjudicating officer. The fear is instilled in the minds of the young officers and they are made to believe that confirming demands is a norm. Anyone in vigilance today has to be in adjudication tomorrow and has the Department been able to stop corruption in litigation at the appellate forums if that is the fear. With filing fees for either side before Supreme Court now being slated to as high as Rs. 25 lakhs if amount of interest, penalty and duty is about Rs. 24 crores, it is time an end is put to frivolous litigation and that is possible if Department starts trusting more of its officers, a multiple officer adjudicating authority like money laundering can be one of the considered option. If an order which is genuine is reviewed, it may cause temporary discomfiture to the officer but he normally has the last laugh as 90 percent of such reviews fall flat before higher appellate authorities. Vigilance in routine should have nothing to do with adjudication order unless some complaint is involved.
2. The above revelations of an ex-adjudicating officerare shocking. Why fear passing adjudication orders on merit? Time and again, Government has been issuing instructions to the officers to take decisions fearlessly. Unfortunately fear looms large which effects merit. While sufficient review/ appeal mechanism is in place, no officer can be said to have suffered for passing adjudication against the revenue. If somebody has suffered, it was for proven mistake or misconduct. In the case of Union of India v. K.K. Dhawan [(1993) 2 SCC 56], the Hon’bleSupreme Court has held that disciplinary action could be initiated in respect of judicial or quasi-judicial functions against the officer who exercises judicial or quasi-judicial powers acting negligently or recklessly. Therefore, fear of vigilance among the officers is unfounded unless the officer has been negligent or reckless.
3. The Assesseesas also the counsels have started losing trust in the Departmental Adjudication for the reason that more often the adjudicating officers are passing orders confirming the demand made in the show cause notice, demanding interest and imposing penalty and in case of refunds, rejection is not quite uncommon. The lack of trust in the system of dispensing justice in order to save one’s own skin is so dominant that the principles, object and fairness get vanished. In a number of cases, where revenue stake is very high, there is tendency either to avoid taking decisions or to take pro-revenue stand to avoid any controversy whatsoever. The officers are of the view that if they take decisions against the revenue, certain motives can be attributed towards them. ‘Confirm the demand’ and ‘’reject the refund’’ as also the appeal is the approach widely followed which is based on the principle of “I should be safe” or “let the higher authority take a decision”. Thus ‘passing the buck’ approach most officers follow and this trend is unabated. In the conference of Hon’ble members of CESTAT held inMumbai on 16.05.2015, Hon’ble President of the CESTAT has observed as under:
There is a widely shared faith deficit in the departmental adjudication process which is perceived by assessees to being undermined on account of inadequate training of officers in .essential elements of adjudication, absence of fairness, neutrality and a non-partisan approach to ascertainment of relevant facts and application of appropriate legal principles. There is an urgent need for training of Revenue Officers, particularly those assigned adjudication functions, in the art and essential principles of adjudication. Department adjudicators must rise up to meet the challenges to effective and competent delivery of this function and must realise the established verity that an adjudicator is essentially chartered the function of administering legislative policy; and in tax administration/ adjudication, to ascertain leviabilityof tax in a legislative and statutory context, on fair and neutral ascertainment of the relevant transactional facts by reference to applicable legal principles and thus to arrive at the determination of leviability of tax, interest and penalties or otherwise. Departmental adjudicators must comprehend that their function is to administer the law and that collection of Revenue is merely the by-product of this essential function, not the purpose of it. Given the broad faith deficit perception in departmental adjudication, CESTAT has come to be regarded as the primary level, rather than a first or a second appellate level quasi-judicial adjudication, contrary to what the CESTAT is structurally conceived to be. The Tribunal is also the final fact finding Authority. The statutorily ordained and contemporaneously perceived position of the CESTAT invests on us an awesome and onerous responsibility to deliver upon a very high degree and quality of professional competence, requiring a fair and elaborate process of hearing duly observing all relevant elements of due process culminating in reasoned and speaking orders dealing with every contested matrix of fact, every nuance of appreciation of evidence and all propositions of law whether statutory, precedential or interpretive.
4. The observations are not incorrect in as much as there is no review mechanism to improve the quality of adjudication. Also there is no system in place to find out the numbers of orders passed by a particular officer which ultimately are sustained in higher appellate forums. If majority of orders passed by a particular are not sustained, then there is something seriously wrong with the officer deciding the matter. If the attitude is to confirm the demand and reject the refund as well as the appeal, there can be a serious debate whether these forums are really required.
5. Central Excise Department has issued Adjudication Manual long time back and most of the instructions therein have been reiterated in the CBEC Manual of Supplementary Instructions. The “Draft – Adjudication Manual” of CBEC, under the topic of “General Importance of Adjudication” at relevant pages provides as under:
Page 4
“The authorities exercising quasi- judicial function are duty bound to justify their existence and carry credibility with the people by inspiring confidence in the adjudicatory process. The public is entitled to have assurance that process of correction is in place and working. It is requirement of the law that correction process of judgments should not only appear to be implemented but also seen to have been implemented. These functions, therefore, cast a heavy responsibility on the officers invested with the power of adjudication and confiscation to use it with utmost care and caution, free from any prejudice or bias, so that innocent does not suffer by any injustice done to him and the real offender does not escape the punishment provided by law.”
Page 14
“………..Judicial and quasi-judicial authorities should exercise their power fairly, reasonably and impartially in just manner and they should not decide a matter on basis of an enquiry unknown to the party, but they should decide on the basis and material on record. Their decisions should not be biased, arbitrary or based on mere conjectures and surmises………………..”
6. Theprinciples enunciated in the rule book are required to be followed by the departmental adjudicating authorities. Theseguidelines have been made to ensure justice to the taxpayers and to stimulate trust between the Government and the public at large. Unfortunately, in reality revenue collection takes precedence over conviction of law and equality. Despite laudatory guidelines issued from time to time by the Department as well as by the higher judicial forums, the quality of quasi-judicial orders unfortunately has remained unimproved.In the case of Maneka Gandhi vs. Union of India- AIR 1978 SC 597, it was held that conferment of quasi-judicial power further implies that the person concerned must follow the rules of natural justice, and must give reasons for making the order which he is empowered to make. One more such case of the Supreme Court is Joint Commr. of Income Tax, Surat Vs. Saheli Leasing & Industries Ltd. – 2011 (22) S.T.R. 97 (S.C.), wherein the following guidelines have been issued how to write orders and to what extent these are followed is a question to be examined:
(1) Judgment/order not to contain anything not germane to facts of the case and ratio decidendi to be clearly spelt out,
(2) Draft to be gone through to find out anything essential which has escaped discussion,
(3) Ultimate judgment/order to sustain chronology and should be readable with flow and sequence of events generating interest in the reader,
(4) Care should be taken not to load orders with all legal knowledge as citation of too many judgments create confusion rather than clarity,
(5) Leading judgments and evolution should be mentioned,
(6) Psychology of reader to be borne in mind,
(7) Language should not be rhetoric,
(8) Endeavour should be made to pronounce judgment, at the earliest after conclusion of arguments and in any case not beyond three months,
(9) Instances likely to cause public agitation to be avoided.
Personal hearing – an empty formality?
7. In quasi-judicial system, one of the principles of natural justice to be followed is personal hearing. This is based on the principle audialterampartem. In other words, nobody should be condemned unheard and it refers to the idea that one cannot be fairly judged unless the cases for and against them have been heard. But in most of the cases, such principle if followed as an empty formality. One of my senior colleagues was once asked by the Adjudicating Authority to refer to only those arguments which are not in the reply. In other words, the authority in the guise to saving time and completing the formality of personal hearing, asked the counsel to make only those points which are in addition to those mentioned in the written reply/ submissions already on record. Since the issue in the matter was very big and involving hundreds of crores of demand, the counsel politely replied to the Commissioner that he had to be heard with all the arguments whether or not already mentioned in the reply/ submissions. Commissioner completely ignoring the very principles of natural justice again insisted to refer to only those arguments which are not mentioned in the reply and tried to convince the counsel that in any case, he would deal with those arguments. The Counsel seeing through the mood of the officer then offered to withdraw the reply in its entirety as if no reply has been filed and requested that all the arguments may be heard and recorded in the record of personal hearing. The Commissioner had no choice but to hear the matter at length and record the lengthy arguments. The personal hearing eventually took place for a number of days. The purpose of mentioning this incident is that the principle of “audialterampartem’’ is supreme in quasi-judicial adjudication which by no means can be cut short.
8. I happened to appear before a Commissioner of Central Excise (Appeals) who later retired as Member of the Central Board of Excise & Customs. As Commissioner (Appeals) he used to give 30-35 personal hearings in a day. The time mentioned in the letter for personal hearing used to be very precise e.g. 12.32 hrs. The next matter was fixed at 12.34 hrs., effectively leavinghardly any time for the counsel to argue the matter. The counsel was supposed to finish arguments within two minutes. No word was being uttered by this officer and it was the counsel who has to speak in the time left after settling down in the chair in front of the officer. Nothing was recorded on the personal hearing sheet while hearing the matter. God knows what was ultimately written thereafter. No signatures were obtained from the counsel and no copy of hearing sheet was provided. Therefore, the practice of recording personal hearing is also not uniform. Some officers even do not write while hearing the matter. Some simply write ‘heard- reiterated’ and some write a detailed hearing record. While in most of the cases, no copy of hearing record is provided to the litigant, in some cases, the officers are sensitized enough to provide a copy of hearing record and these officer take acknowledgment also of the hearing record. Thus there is no uniformity of recording the personal hearing.
9. One more incident I cannot avoid sharing. I appeared before a Joint Commissioner of Central Excise and argued a case citing various judgments covering the issue and those judgments were also elaborated in the reply to the show cause notice. The Joint Commissioner passed the order rejecting thesubmissions holding that judgments cited cannot be considered since copies thereof were not provided by the Advocate. Such a ridiculous finding shocked me. All those judgments were reported judgments and the reporting periodicals from which the judgments were cited were meticulously stacked in the cupboards behind the seat of the Joint Commissioner. He did not even bother to open up his cupboard to look into the cited judgments and decide the matter accordingly. Surprisingly, such orders are accepted by the Department to be “legal and proper”.
10. One more interesting incident as narrated by one of my colleague at bar, is fresh in my mind when a counsel appeared before Commissioner of Customs (Appeals) who was known to be pro-revenue and was rejecting assessees’appeals left and right. The counselsoon after entering the room requested the Commissioner (Appeals) to reject the appeal immediately so that he can approach the next appellate forum. Commissioner (Appeals) was taken aback a little by this sudden unique request of the counsel and asked why he was saying so. Prompt came the reply from the counselthat he knew that the appeal was going to be rejected, so it is better it was rejected at the earliest to enable approach next forum. Such is the impression carried by the trade and the counsels about these forums.
11. In another occasion before the Commissioner who had to adjudicate a case booked by DGCEI, Commissioner after adjudication admitted that the asseessee had a better case, but since the case of DGCEI, he had no choice but to decide in favour of the revenue and said that although demand is running into few hundred crores, as per amended Section 35F, Department would get only Rs. 10 crores as a pre-deposit. Thus, revenue takes precedence over merit.
12. A number of matters where periodical demands have been raised but no decision has been taken and the matters have been put under ‘’çall book’’. Most of these matters have been originated from the audit objectionsraised by CAG which remain unsettled despite the matter is vociferously taken by the Department with the CAG. As per internal instructions, officers are supposed to issue periodical show cause notices toprotect themselves from the time bar defence by the assessees. The issue is kept pending for a number of years and in most of the cases, CAG is not accepting the stand of the Department leaving the audit paras unsettled. Rate of interest being so high which is presently pegged @ 18%, the asseessee is left high and dry for the indecision of the Department.
13. Problem of adjudicating authorities not being present on the appointed date and time and without notice to the litigant is also looming large. In the initial years of my practice, I used to go to attend hearing without checking whether the authority is available or not on the appointed time. On a number of occasions, I felt embarrassed on finding that the authority is not available due to some urgent meeting with seniors or otherwise. It becomes more difficult when the hearings are at outstations. Thereafter, I started ensuring the availability of the authority before proceeding for the hearing. Then in some more awful instances I found adjudicating officers being very much in office, but chatting merrily with other officers or visitors and completing the formality of hearing showing as if knowing the entire matter which in fact they never were aware before the personal hearing. When this is the attitude of the Adjudicating Officers, God help the assessees.
Officers seldom write the orders themselves
15. Adjudication Manual at page 25 mandates that even the narration of facts in an adjudication order has to be drafted by the Adjudication officer himself. But the reality is just opposite. Most of the Adjudicating Authorities find a junior officer who is fairly intelligent to write the decision as if the same is written by the adjudicating authority himself. The officer who themselves write the orders can be counted on fingers. Faced with thisreality, provisions have been made in the law itself that where duty, interest and prescribed percentage of penalty is deposited, then in that case, there is no need to issue a show cause notice or the adjudication order where show cause notice has been issued. Therefore, pressures are mounted these days on the assessees to accept the duty demand and to pay interest and penalty for the matters to be closed once for all. This saves efforts to write lengthy orders.
Delay in adjudication
16. Adjudication Manual further provides that where personal hearing has been completed, the decision should be communicated immediately or within a reasonable period of 5 days or at the most within 15 days where the said time limit of 15 days cannot be adhered to in a particular case. I have never come across a case where a decision has been pronounced immediately or within 5 days or within 15 days of completion of hearing. Thus the instructions are meant to be in the rule book only.