HIGH COURT FOR THE STATES OF PUNJAB AND
HARAYANA AT CHANDIGARH
CWP No. 877 of 2013
Date of Decision: 26.02.2013
M/s PML Industries Limited
Versus
Commissioner of Central Excise & another
ORDER
Hemant Gupta, J.
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 CC & CE v. Kumar Cotton Mills (P.) Ltd. 2005 (180) ELT 434, the Tribunal ordered the interim 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 (P.) 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 v. Commissioner of Central Excise, Vadodara 2004 (169) ELT 269 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 v. CCE 2004 (169) ELT 267 (Tri-Delhi), 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 v. Deputy Director of Income Tax2002 (257) ITR 60. 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). 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.
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12. We find that in Themis Pharmaceuticals v. Commissioner 2003 (157) ELT 569, the Bench has taken note of the fact that it is practically not 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 v. 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.
7. On the other hand, learned counsel for the Revenue has pointed out that the Legislature has imposed condition in respect of cessation of interim order after the expiry of one hundred and eighty days. It is contended that the Commissioner (Appeals) as well as the Tribunal are not the Authorities under the Central Government and, therefore, the Central Government cannot ensure that the appeals are decided in a particular time-frame. Therefore, to protect the interest of the Revenue, the Legislature has decided for automatic cessation of stay. The right of appeal is creation of Statute and that Statute can determine the conditions on fulfilment of which alone, the appeal would lie. Therefore, the condition of cessation of interim order cannot be said to onerous or rendering the remedy of appeal as illusory. It is, in fact, pointed out that the Circular was issued as the Hon’ble Supreme Court in case of Collector of Customs v. Krishna Sales (P) Ltd. 1994 (73) ELT 519 has observed that ‘mere filing of an Appeal does not operate as a stay or suspension of the Order appealed against’. Therefore, the Board was within its competence to issue Circular to recover the amount of duty, interest or penalty in the absence of any stay by the competent Tribunal.
8. We have heard learned counsel for the parties and find that following questions of law arise for consideration:
(1) Whether the revenue is justified in initiating recovery proceedings on the basis of 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?
(2) Whether the second proviso in sub-section (2A) of Section 35C is directory and that the Tribunal in appropriate circumstances can extend the period of stay beyond 180 days?
9. At this stage, the relevant provisions of the Act as well as the Circular dated 01.01.2003 need to be extracted. The same are as under:
Central Excise Act, 1944
“35A. Procedure in appeal – (1) The Commissioner (Appeals) shall give an opportunity to the appellant to be heard, if he so desires.
(2) The Commissioner (Appeals) may, at the hearing of an appeal, allow an appellant to go into any ground of appeal not specified in the grounds of appeal, if the Commissioner (Appeals) is satisfied that the omission off that ground from the grounds of appeal was not willful or unreasonable.
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(4) The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision.
(4A) The Commissioner (Appeals) shall, where it is possible to do so, hear and decide every appeal within a period of six months from the date on which it is filed. (sub-section (4A) inserted by Section 129 of the Finance Act, 2001 w.e.f. 11.05.2001)
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“35C. Orders of Appellate Tribunal –
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(2A) The Appellate Tribunal, shall where it is possible to do so, hear and decide every appeal within a period of three years from the date on which such appeal is filed;
Provided that where an order of stay is made in any proceeding relating to an appeal filed under sub-section (1) of Section 25B, the Appellate Tribunal shall dispose of the appeal within a period of one hundred and eighty days from the date of such order;
Provided further that if such appeal is not disposed of within the period specified in the first proviso, the stay order shall, on the expiry of that period, stand vacated. (proviso inserted by Section 140 of the Finance Act, 2002 w.e.f. 11.05.2002)
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“35F. Deposit, pending appeal, of duty demanded or penalty levied – Where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of Central Excise Authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied;
Provided that where in any particular case, the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue.
Provided further that where an application is filed before the Commissioner (Appeals) for dispensing with the deposit of duty demanded or penalty levied under the first proviso, the Commissioner (Appeals) shall, where it is possible to do so, decide such application within thirty days from the date of its filing.”
Circular dated 01.01.2003
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(2) Henceforth, recovery proceedings shall be initiated against a confirmed demand in terms of the following order:
