High Court shows displeasure At CBEC’s Tax Recovery tactics

CLR Editorial Notes: The Hon’ble Punjab and Haryana High Court had to two issues to consider in the writ petition filed by the assessee.

(i) whether the revenue department is justified in initiating a recovery proceeding on the basis of a Circular dated 01.01.2013, even when an application for waiver of pre-deposit is pending before the Appellate Authorities for the reason that on such application for stay or waiver of pre deposit, no orders have been passed?

(ii) whether the second proviso in sub-section (2A) of section 35C of the Excise Act, is directory and that the Tribunal in appropriate circumstances can extend the period of stay beyond 180 days?

The Hon’ble HC held that :

(i) The Circular is purported to be issued in terms of the judgement in Krishna Sales (73) ELT 519 (SC). Though inKrishna Sales it was held that mere filing of an appeal does not operate as stay or suspension of the order appealed against, the Board has overlooked the fact that the assessee is not seeking stay only on account of filing of an appeal, but for the reason that the assessee has sought dispensing with the pre-deposit of duty and penalty and has a right to demand decision on such application, a right which is created by the Statute. Therefore, the very basis of the Circular is untenable, misconceived, wholly illegal and arbitrary. Therefore, the condition of recovery, if no stay is granted within 30 days, is illegal, arbitrary, unjustified and consequently set aside (Larsen & Tuobro (Bom) referred);

(ii) As regards appeals pending before the Tribunal, the assessee has no control over the non-disposal of the appeal on account of non-availability of infrastructure; the members of the Tribunal and the workload. The vacation of stay for the reason that the Tribunal is not able to decide appeal within 180 days is a harsh, onerous and unreasonable condition. It burdens the assessee for no fault of his. Such a condition is onerous and renders the right of appeal as illusory. An order passed by a judicial forum cannot be annulled for no fault of the assessee. Therefore, s. 35C(2A) which provides for automatic vacation of stay on the expiry of 180 days has to be read down to mean that after 180 days the Revenue has a right to bring to the notice of the Tribunal the conduct of the assessee in delay or avoiding the decision of appeal, so as to warrant an order of vacation of stay. If the provision is not read down in the manner mentioned above, it suffers from illegality rendering the right of appeal as redundant.

(extracted from the case document)


Case Details



CWP No. 877 of 2013

Date of Decision: 26.02.2013

M/s PML Industries Limited¦.Petitioner


Commissioner of Central Excise & another¦.Respondents


1.   Whether Reporters of local papers may be allowed to see the judgment?
2.  To be referred to the Reporters or not?

3.  Whether the judgment should be reported in the Digest?

Present: Mr. Jagmohan Bansal, Advocate, for the petitioner. Mr. Kamal Sehgal, Advocate, for the respondents.


1. This order shall dispose of the afore-mentioned writ petition along with other writ petitions mentioned in the foot note of this order in respect of the provisions of Section 35C(2A) of the Central Excise Act, 1944 (for short ˜the Act™), whereby an order of waiver of pre-deposit of duty passed by the Tribunal stands vacated after expiry of 180 days, if the appeal is not decided in terms of the provisions inserted by Section 140 of the Finance Act, 2002 with effect from 11.05.2002 (hereinafter referred as ˜first set of cases™) and writ petitions such as CWP No.1606 of 2012, wherein the challenge is to the Circular issued by the Central Board of Customs & Excise (for short ˜the Board™) on 01.01.2013 (Annexure P-3) and further quashing of the demand raised in pursuance of such Circular. The Circular dated 1.1.2013 contemplates that the recovery shall be affected, if stay has not been granted within 30 days (hereinafter referred as ˜second set of cases™).

2. In CWP No.844 of 2013 falling in the first set of cases, the petitioner has pointed out that against the Order-in-Original dated 31.05.2007 and 21.08.2007, the appeals were filed before the Commissioner (Appeals), Customs & Central Excise, Chandigarh. The Commissioner (Appeals) upheld the order passed by the Adjudicating Authority on 17.01.2008. The petitioner filed further appeal before the Customs, Excise & Service Tax Appellate Tribunal (for short ˜the Tribunal™). The Tribunal waived the deposit of duty and penalty as well as recovery subject to deposit of Rs.5 lacs vide order dated 19.05.2008. Since the appeal could not be heard within the prescribed period of one hundred and eighty days for no fault on the part of the petitioner, therefore, in terms of the Supreme Court decision in Commissioner of Customs & Central Excise, Ahmedabad Vs. Kumar Cotton Mills Pvt. Ltd. 2005 (180) ELT 434, the Tribunal ordered theinterim stay to continue till further orders on 03.03.2009. In spite of such order, the Department initiated the recovery proceedings vide communication dated 20.11.2012 (Annexure P-8), as the stay is said to have come to an end after the expiry of one hundred and eighty days. In pursuance of such communication, the petitioner informed the Department that the Tribunal has granted stay and the same was extended till further orders. However, the Department again directed the petitioner to deposit the dues vide letter dated 17.12.2012 (Annexure P-10), which led to invocation of the jurisdiction of this Court.

3. Mr. Jagmohan Bansal, learned counsel for the petitioner argued that the second proviso incorporating provisions of automatic vacation of stay is onerous and makes the remedy of appeal illusory and nugatory, as on the expiry of one hundred and eighty days of the stay, the stay is automatically deemed to be vacated, even if the assessee is not in fault in any manner. It is argued that the right of appeal has to be meaningful and cannot be a farce, when without any fault of the assessee, the stay is vacated. The petitioner had made out case for waiver of condition of pre-deposit, but still on the basis of administrative circular, the recovery is sought to be initiated. Learned counsel relies upon an order passed by the Supreme Court in Kumar Cotton Mills Pvt. Ltd. case (supra), wherein the Court observed to the following effect:

6. The sub-section which was introduced in terrorem cannot be construed as punishing the assesses for matters which may be completely beyond their control. For example, many of the Tribunals are not constituted and it is not possible for such Tribunals to dispose of matters. Occasionally by reason of other administrative exigencies for which the assessee cannot be held liable, the stay applications are not disposed within the time specified. The reasoning of the Tribunal expressed in the impugned order and as expressed in the Larger Bench matter, namely IPCL Vs. Commissioner of Central Excise, Vadodara 2004 (169) ELT 267 cannot be faulted. However, we should not be understood as holding that any latitude is given to the Tribunal to extend the period of stay except on good cause and only if the Tribunal is satisfied that the matter could not be heard and disposed of by reason of the fault of the Tribunal for reasons not attributable to the assessee.

4. He also referred to a Larger Bench order of the Tribunal in IPCL Vs. Commissioner of Central Excise, Vadodara 2004 (169) ELT 267,wherein the Tribunal observed that the inherent jurisdiction of the Tribunal to grant interim relief so as to make the ultimate relief effective cannot be curtailed indirectly by sub-section (2A) of the Act. The Bench observed as under:

 6. The observation of the Bench that if the Tribunal grants further extension of stay beyond the period of 180 days the amendment would become redundant is also not justified. A similar contention raised in regard to sub-section (2A) of Section 254 of the Income Tax Act was not accepted by the Income Tax Appellate Tribunal in Centre for Women™s Development Studies Vs. Deputy Director of Income Tax 2002 (257) ITR 60. The inherent jurisdiction of the Tribunal to grant interim relief so as tomake the ultimate relief effective cannot be curtailed indirectly by sub-section (2A). At the end of the period of 180 days when the appellant makes an application for extension of the stay the Tribunal can always consider whether there is any change in the circumstances which would justify  extension  or  modification  of  the  stay.   The  Revenue  gets  an opportunity to bring to the notice of the Tribunal such changed circumstances e.g. a binding decision on the issue in its favour.

12.        We find that in Themis Pharmaceuticals Vs. Commissioner 2003(157) ELT 569, the Bench has taken note of the fact that it is practicallynot possible to dispose of the appeals pending before the Bombay Bench of the Tribunal within 180 days. The Bench has also suggested some remedy for the problem. In this connection, we may observe that similar situation can arise in other Benches also where an appeal posted within 180   days could not be taken up for different reasons. It may be due to non-availability of time for the Bench or due to non-availability of the Bench itself. Unless the Tribunal has the power to extend stay beyond 180 days, the assessee™s interest will be in jeopardy for no fault of his. Even the order granting exemption from pre-deposit will be rendered nugatory as the assessee will be compelled to satisfy the demand during pendency of the appeal. It has been always the judicial view that no party should be prejudiced due to action or inaction on the part of the court (Rajkumar Dey & others Vs. Tarapada Dey, 1987 (4) SCC 398).13.      On going through the decision rendered by a bench of two members in Kumar Cotton Mills Ltd. we find that the Bench taking into consideration the importance of this issue permitted Advocates and Consultants not representing the applicants also to make submissions to assist the Court. A decision rendered after such hearing on the effect of the introduction of sub-section (2A) on the jurisdiction of the Tribunal as above should not have been just brushed aside as one rendered in ˜vacuum™. Even if the Bench which heard Themis Pharmaceuticals took a different view, it should have referred the issue for consideration by Larger Bench as judicial decision would demand.

14. In the light of the above discussion, we are inclined to uphold the view taken in Kumar Cotton Mills and agree with the view expressed in the reference order on the jurisdiction of the Tribunal to pass interim order. We disagree with the view taken in Themis Pharmaceuticals. We, therefore, hold that the Tribunal has jurisdiction to grant stay even after the expiry of 180 days from the date of initial order of stay. After answering the issue raised for consideration by the Larger Bench, as above, we send back the Miscellaneous Application for hearing by the appropriate Bench.

5. In CWP No.1606 of 2013 falling in the second set of cases, the Adjudicating Authority passed an order on 20.04.2002 raising demand of Cenvat credit of Rs.1,46,01,332/-. The petitioner filed an appeal before the Tribunal along with an application for waiver of pre-deposit, which is now pending for 07.03.2013. Such application was listed on 30.07.2012, 06.11.2012, 14.11.2012 and 30.11.2012. The Board has issued a Circular dated 01.01.2013 instructing the Administrative Officers to initiate recovery proceedings in the matters which are pending before the Appellate Authorities after filing of an appeal. Thereafter, a notice was served upon the petitioner on 15.01.2013. Feeling aggrieved, the petitioner challenged the Circular dated 01.01.2013 and notice dated 15.01.2013 before this Court.

6. It is argued that the assessee has no control over the decision of appeals either by the Commissioner (Appeals) or by the Tribunal, as final hearing and the decision thereon is dependent upon numerous factors on which the assessee has no control whatsoever. Non constitution of Tribunal; the lack of infrastructure and non-availability of members etc. can be some of the reasons for not deciding the appeals within 180 and/or 30 days. Still further, the pendency of appeals before each of the Forum is huge and it is practically impossible for most of the Tribunals and/or Commissioner (Appeals) to decide the appeals in a particular time-frame. Since the Statute has conferred a right of appeal, the said right has to be substantive and meaningful and cannot be taken away by imposing onerous, unjustified conditions on which assessee has no control. Once the Revenue is permitted to recover the amount, it seriously prejudices the right of appeal of an aggrieved person. Such recovery of the amount though an appeal is pending at the instance of the assessee is pre-judging the issue depriving the assessee of fair opportunity of hearing and decision by the Appellate Authorities……

(extracted from the case document)


Full Case Document Available for download


Tags: Case LawCBECPunjab and Haryana High Court

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