Dr. Sanjiv Agarwal

Recently Central Board of Excise & Customs (CBEC) has issued a Circular directing the Department (Central Excise / Service Tax / Customs) to fast track the recovery proceedings in all cases where demand of tax or duty has been confirmed but not stayed, whether or not the assessee has gone into appeal, which is a legal right provided to the assessee.

Such a pro-revenue and coercive step seems to emanate from the fact that economy is in slow down mode and tax revenues are not on expected lines vis-a-vis budget targets. But the moot question that remains unanswered is that why did the Department wake up after almost two decades of apex court verdict which they are relying on now and that would it not amount to interfering with right of assessee to appeal and stay or waiver of pre- deposit of tax and penalties or even putting indirect pressure on the judicial machinery to hear the appeals and stay applications failing which assessees would be put to undue hardship, harassment and injustice when recovery is enforced. This appears to be true if one looks at the success rate of assessee’s appeals at higher appellate forums.

CBEC  Circular No. 967/01/2013-CX dated 01.01.2013 has come as a new year bomb on the indirect tax assessees for recovery of  confirmed demand of duty or tax, as the case may be, even during the pendency of appeal or stay application. Accordingly,

  • In case an appeal  has been filed without stay application against a confirmatory order, then recovery shall be initiated after such an appeal has been filed, without waiting for the statutory 60 days period to be exhausted.
  • Where an appeal has been filed with a stay application against an order, then recovery shall be initiated 30 days after the filing of appeal, if no stay is granted or after the disposal of stay petition in accordance with the conditions of stay, if any specified, whichever is earlier.
  • Where stay has been granted, then recovery is stayed as per conditions of stay.

 Thus, the assessee has to pay the demand within a period of 30 days of filling the stay application, even if same is pending with any appellate authority.

The basis of such a harsh action is a two decade old judicial pronouncement of Supreme Court  i.e., Collector of Customs, Bombay v. Krishna Sales Pvt. Ltd. (1993) 9 TMI 124 (SC) wherein it was observed that ‘mere filing of an appeal does not operate as a stay or suspension of demand order appealed against.’

It would be fair and reasonable that no coercive steps are taken during the pendency of stay applications. While courts and tribunals are expected to take reasonable time to hear and decide upon the stay applications, still, it may take ‘some’ time. While that may happen, there has to be clarity over the mindset of the department to effect recovery of demands which may be stayed in due course, so as to provide a reasonable remedy to the appellant assessee. As an alternative, where the demands involved are huge, the department as well as assessee, both may in their own interest request the appellate forum to hear the case expeditiously.

To reduce the number of disputes, it is also desirable to have simple, unambiguous and clear law and rules leaving almost no room for more than one interpretation, clarity of law at both ends (assessee and the adjudicating authority), quick or timely issuance of clarificatory circulars as and when required, acting on assessee’s doubts in a timely manner and strict measures against both – the habitual and willful offenders as well as revenue officers who wrongly adjudicate the demands (as proved by orders getting set aside in appeals).

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October 2021