Advocate Anandaday Misshra
For long there was a chaos as to what will be modus of stay on recovery after the stay applications have been dispensed off by an amendment in Section 35B(7)(a) of CEA,1944 .
Before referring to the CBEC circular no . 984/08/2014-CX., Dated: September 16, 2014, it is very important to refer the legal standing as below :
a. stay application is not required to be filed alongwith an appeal as Section 35B(7)(a) was amended , by deleting the expression therein i.e” for grant of stay.
b. erstwhile Section 35F was parent Section for coining the expression “stay & waiver” and by its wording it created a necessity for stay beside this no other section was authority for coining and providing stay and waiver of pre deposit.
c. Now after an amendment in Section 35B(7)(a) and deletion of 1st , 2nd and 3rd proviso to Section 35C (2A) , there wont be any word or expression of stay & waiver anymore.
Whereas, the department was always considering that since stay was not given to a party under erstwhile Section 35F and/or the assessee has not complied with the stay order ,its appeal is dismissed so recovery is to be initiated by considering that order has attained the finality .
W.e.f 06.08.2014 , in absence of expression of stay and waiver from the body of CEA,1944,especially after the amendments in Section 35B(7) (a) ,Section 35C(2A) read with new Section 35F, the recovery can’t be initiated by the time the order attains the finality .
It is also pertinent to note that since no order for stay can be passed either by Commissioner(appeals) or by Honourable Tribunal , even otherwise department can’t ask for recovery of an amount in excess of an amount of 7.5% and /or 10% mandatory pre-deposit under Section 35F of CEA,1944 especially w.e.f 06.08.2014.
In other words , erstwhile Section 35F which was valid upto 05.08.2014, created an era of stay , waiver of pre deposit , undue hardship , financial hardship , settled matter, covered issue etc, when such factors are not recognised then department cannot ask for stay and/or recovery
It must be known, as also settled in law by plethora of ruling of Honourable Apex court, that “something which is neither recognised nor provided in law, then it cannot be asked to be done and if not done it cannot be wrong . There must be some authority to act, demand and recover.
One school of thoughts has had been advising then too we must file stay applications as CESTAT has inherent power .
Above all, the intention of legislation is already reflected by the budget speech of Honourable FM at 252 that no stay hearings . If stay itself will not be heard then how department can ask for a stay order .
The intention behind 7.5% and/or 10% quantification of pre -deposit has to be understood in as much as stay matters ate maximum time of Honourable Tribunals and High Court therefore, the amount has been quantified and the expression of stay itself has been removed from the CEA,1944.
Only when an order attains the finality on being dismissed or not appealed , then only recovery proceedings can be initiated by the department .
Finally CBEC has clarified the above scenario ,under circular no. . 984/08/2014-CX., Dated: September 16, 2014 as below :
“4. Recovery of the Amounts during the Pendency of Appeal:
4.1 Vide Circular No.967/1/2013 dated 1st January, 2013, Board has issued detailed instructions with regard to recovery of the amounts due to the Government during the pendency of stay applications or appeals with the appellate authority. This Circular would not apply to cases where appeal is filed after the enactment of the amended Section 35F of the Central Excise Act, 1944 or Section 129E of the Customs Act, 1962.
4.2 No coercive measures for the recovery of balance amount i.e., the amount in excess of 7.5% or 10% deposited in terms of Section 35F of Central Excise Act, 1944 or Section 129E of Customs Act, 1962, shall be taken during the pendency of appeal where the party/assessee shows to the jurisdictional authorities:
(i) proof of payment of stipulated amount as pre-deposit of 7.5% / 10%, subject to a limit of Rs.10 crores , as the case may be; and
(ii) the copy of appeal memo filed with the appellate authority.
4.3 Recovery action, if any, can be initiated only after the disposal of the case by the Commissioner (Appeal)/Tribunal in favour of the Department. For example, if the Tribunal decides a case in favour of the Department, recovery action for the amount over and above the amount deposited under the provisions of Section 35F/ 129E may be initiated unless the order of the Tribunal is stayed by the High Court/Supreme court. The recovery, in such cases, would include the interest, at the specified rate, from the date duty became payable, till the date of payment.”
Hope, with the aforesaid legal standing on the issue as well as CBEC circular clarifying the issue , the recovery will not be initiated by the Department for pending appeals against the duty of excise , service tax and also for customs duty .
(Advocate Anand Mishra, AMLEGALS– The author is a leading indirect tax advocate handling cases in CESTAT & High Courts of India. He can be contacted on firstname.lastname@example.org and for more please refer www.amlegals.com)