WITHDRAWAL OF AN APPEAL

It has been clearly laid down by the Apex Court from time to time that the right of appeal is a matter of substantive right and this right becomes vested in a party when the proceedings are first initiated, even before a decision is given in the matter. Such a right cannot be taken away except by express enactment or necessary intendment.

In this regard, some judicial considerations are as under :

• In Janaradan Reddy vs. The State, AIR 1951 SC 124 and in Ganpat Rai vs. Agarwal Chamber of Commerce Ltd, AIR 1952 SC 409, Supreme Court upheld the principle that a right of appeal is not merely a matter of procedure but it is a matter of substantive right.
• An intention to interfere with or to impair or imperil such a vested right cannot be presumed unless such intention is clearly manifested by express words or necessary implication [Hoosein Kasam Dada (India) Limited vs. State of Madhya Pradesh & Others (1983) 13 ELT 1277 (SC)].
• At various instances different courts including the Apex Court has decided that if the right of appeal is vested and the assessee chooses not to exercise that right and later on files a special leave petition, then in such a case the authority may refuse to undertake the matter and reject the case and instruct the assessee to proceed only through the appeal route [Alembic Glass Industries Ltd. vs. UOI (1998) 97 ELT 28 (SC)]
• Right of appeal is creature of the statute and can never be termed as an inherent right. Example of inherent right is filing a suit provided the same is not barred by limitation. Appeal right is conferred by the statute but one thing important here is that while conferring the right of appeal, the statute may impose certain restrictions such as limitation or pre – deposit of penalty or limiting the area of appeal to questions of law etc. Such limitations as specified in the statute shall be strictly followed [Raj Kumar Shivhare vs. Asstt. Director, Directorate of Enforcement (2010) 253 ELT 3 (SC)] ? R ight of appeal is a substantive right that is provided by the statute and it automatically vests in the aggrieved party. Therefore all the rights it carries with it that in itself means that such a right cannot be negated or taken away. [CCE & CU vs. Met India Ltd. (2010) 20 STR 560 (GUJ)]
• Though right of appeal is statutory right under the Central Excise Act 1944 but it is not an absolute right and hence is bound by the provisions of section 35F. [Vibha Fluid Systems Engineering Pvt. Ltd. vs. UOI (2013) 287 ELT 29 (GUJ)]

The result of an appeal filed by an aggrieved person can be:

• Affirmed: where the reviewing court agrees with the result of the lower court’s ruling(s) or
• Reversed: Where the reviewing court disagrees with the result of the lower court’s rulings(s), and overturns their decision or
• Remanded: where the reviewing court sends the case back to the lower court.

Can an appeal once filed be withdrawn?

Though, it is generally well settled that right of appeal by an aggrieved person is to be construed liberally, there is very limited clarity on the issue as to whether an appeal once filed by an aggrieved person can be withdrawn.

Neither the Central Excise Act 1944 / Customs Act, 1962 / Finance Act, 1994 nor the Rules made under therespective statutes nor the CEGAT (Procedure) Rules, 1982 contain any specific provision to permit an aggrieved person to withdraw his appeal, either with the permission of the appellate authority or without such permission. This issue becomes very important inasmuch appellate authorities are vested with powers of enhancement of demands and hence usually due caution is exercised by appellate authorities while entertaining such requests, from aggrieved persons.

One would wonder as to why an aggrieved person would want to withdraw an appeal after it is filed. Some examples / situations are given hereafter for ease of understanding:

a) Cases where there are mistakes apparent for record in an order passed by adjudicating authority / appellate authority against which an application for rectification is filed but the same is not disposed off. Hence, an appeal is filed, to protect the interest of the aggrieved person. Subsequent to the filing of appeal, relief is granted in rectification.

b) A services exporter has substantial unutilised CENVAT credit and is uncertain as to its utilisation against service tax payable on taxable services that may be provided in future. Hence, refund for unutilised CENVAT credit is applied for, which is rejected. In order to protect his interest, an appeal is filed. However, subsequent to the filing of appeal, the said services exporter has local transactions where service tax is payable. Issues arise in such cases as to whether an appeal filed can be withdrawn and service tax payable on local transactions be set off against unutilised CENVAT credit.

Some Judicial Considerations under Indirect Taxes

• When this question came up in Mahindra Mills Ltd. vs. CCE (1987) 31 ELT 295 (Special Bench – New Delhi),] the Tribunal held that while the parties have no absolute right of withdrawal of the appeal, the request therefor was being allowed in the circumstances of that case.
• When a similar request came from the appellant in another case (after considerable arguments had been heard for the appellant) a majority of the members held in the case of MRF Ltd vs. CCE (1987) 32 ELT 588 (Special Bench – New Delhi) that in the circumstances of that case the request for withdrawal must be declined, while the minority opinion was that it may be granted.
• In a later decision in Jenson and Nicholson (India) Ltd. vs. CCE (1989) 41 ELT 665 (Special Bench – New Delhi), the Tribunal held that the powers of the Appellate Tribunal are similar to the powers of an Appellate Court in the Code of Civil Procedure. Hence the Tribunal has the right (though under no specified rule) to grant permission to the appellant to withdraw his appeal. [in this regard reliance was placed on Hukumchand Mills vs. IT Commissioner Bombay – AIR 1967 SC 455 and New India Life Assurance Co. Ltd. vs. IT Commissioner, Bombay – AIR 1958 Bombay 143].
• The facts in Ramakrishnan Steel Industries Ltd. vs. Superintendent – (1993) 66 ELT 563 (MAD) were rather unusual. When the appeal by the department before the Tribunal was pending the department intimated the assessee that it had been decided to withdraw the appeal and directing the assessee to pay in accordance with the order of the Collector (Appeals) against which order the appeal to the Tribunal had been preferred by the department. The assessee duly complied and intimated the Tribunal also of the same and intimated they have no objection to the appeal being allowed to be withdrawn. But somehow the department had failed to intimate the Tribunal of its decision to withdraw the appeal. Hence, the Tribunal decided the appeal on merits by allowing the appeal of the department. The High Court set aside the order of the Tribunal holding that the decision to withdraw the appeal having been taken by the authority who had earlier ordered the filing of the appeal, the department was stopped from going back on the decision to withdraw when the assessee had, in pursuance of the communication, taken the necessary action to comply with the request therein about payment of duty.
• In Ralson Carbon vs. CCE (1999) 108 ELT 608 (CEGAT – New Delhi) the Tribunal permitted withdrawal on the basis of declaration under Kar Vivad Samadhan Scheme (KVSS).

A peculiar situation arose for consideration in Shiv Herbal Research Lab. P. Ltd vs. CCE & CU (2002) 139 ELT 133 (Tri – Mumbai). In that said case the appellant intimated the Tribunal that they had filed a declaration under KVSS and the appeal may be treated as withdrawn. Accordingly the Tribunal permitted withdrawal of the appeal. Evidently the appeal was dismissed as withdrawn. Later the appellant applied for restoration of the appeal pointing out that “an order u/s. 90(4) of the Finance Act 1998 for full and final settlement under the KVSS has not been passed”. The Tribunal declined to restore the appeal though the factual situation of certificate u/s. 90(2) not having been issued does not appear to have been controverter or disbelieved.

Judicial Considerations under Income Tax
In respect of proceedings under the Income Tax Act, it was held by the Supreme Court, in CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 433 (SC) that an appellant having once filed an appeal, cannot withdraw the same. In fact the Calcutta High Court held in Bhartia Steel and Engineering Co. P. Ltd. vs. ITO (1974) 97 ITR 154 (CAL) that even if the Tribunal had dismissed an appeal as withdrawn, the said order would be a nullity as having been passed without jurisdiction and the appeal will have to be treated as pending.

Conclusion

In the absence of specific provisions for withdrawal of an appeal under the Indirect Tax Laws (Service tax, Central Excise & Customs), practical issues / difficulties are faced by aggrieved persons, in particular. This issue needs to be addressed through amendments, in the Indirect Tax statutes / CESTAT (Procedures) Rules, 1982, as considered appropriate.