TIOL-DDT 72
11 03 2005
Friday

A new Sub section 2A was inserted in Section 35C of the Central Excise Act with effect from 11.5.2002, to stipulate that if the Tribunal does not dispose of an appeal within six months, the stay granted will stand vacated. This was not a bright new idea of the CBEC. Just a year ago, the Income Tax Act was amended to insert a similar provision in Section 254. The Income Tax Appellate Tribunal has held that in spite of the amendment, the Tribunal had the power to extend the stay. In Centre for Women’s Development Studies v. Deputy Director of Income-tax - 2003-TIOL-05-ITAT-DEL, the ITAT held :

“On a careful perusal of the relevant new provisions in the law and aforesaid judicial pronouncements, we are of the considered opinion that sub-section 2A was inserted in section 254 to curtail the delays and ensure the disposal of the pending appeals within a reasonable time frame. There is no intention of the Legislature to curtail or withdraw the powers of the Tribunal for granting a stay exceeding a period of six months. Had it been the intention of the Legislature, there would be a specific amendment in the Act to this effect because if the powers of the Tribunal for granting the stay exceeding six months are withdrawn by this amendment, the object of imparting justice by the Tribunal cannot be achieved even in those cases where the assessee has co-operated with the Tribunal to its full extent and the hearing is in progress. We, therefore, are of the considered view that the Tribunal has power to grant a further stay on the expiry of six months of earlier stay if the facts and circumstances so demand.”

The issue reached the CESTAT (then CEGAT) and in M/s Kumar Cotton Mills Pvt. Ltd. V/s CCE, Ahmedabad-I (2002-TIOL-17-CESTAT-MUM) CEGAT, held that the amendment will not apply to cases where stay had been already granted and even for future cases it will not effect the waiver of pre- deposit. The Tribunal held:-

a) where the Tribunal has made an order of stay prior to the amendment under Section 35C i.e 11.05.2002, the order would have validity until the disposal of the appeal and would not be hit by the second proviso to section 35C(2A) of the CEA’44;

b) where the order on the stay application is made after 11.05.2002, the Tribunal’s power to continue protection so given is not circumscribed and the Tribunal on an application being made by the applicant, is competent to extend the date of coverage of the stay order.

Board was suitably appalled at the Tribunal’s decision and in Circular no. 738/54/2003-CX., dated 19.08.2003 informed the field that SLP was filed against the Tribunal order and advised the Commissioners to file reference applications in the High Courts in similar cases.

But the CESTAT in Themis Pharmaceuticals & Others v/s CCE, Mumbai (2003-TIOL-64-CESTAT-MUM) took a different view. It took stock of the mounting arrears and observed that it was not possible to dispose of appeals within 180 days. It suggested certain steps to the Government.

(i) Urgent Recruitment of Additional Members and creation of Additional Benches by the Government at Mumbai for a period of 2-3 years. Section 129 (1) of the Customs Act, 1962 allows the Central Government to appoint as many Members as it thinks fit.

(ii) Urgent filling of vacancies of Members and temporary shifting of Members and supporting staff to Mumbai from Zones of low pendency.

(iii) Notifying and giving urgent effect to proviso (d) to sub-section (1) of Section 35B inserted by Finance (No. 2) Act, 1998 five years ago and shifting thousands of pending Modvat appeals for decision by Joint Secretary (Revision Application). A few J.C.D.R.s may be diverted to hear and decide these cases.

(iv) Out-of-turn hearing of appeals by Tribunal within 6 months where stay has been granted.

(v) Computerisation of the Tribunal Registry to enable bunching of similar appeals for expeditious disposal.
This bench observed that in Kumar Cotton Mills case, the Tribunal was not required to go into the question after the amendment and therefore it was an order in vacuum and so was not binding. The bench held that

(i) Section 35F requires pre-deposit of duty and penalty pending appeal.

(ii) Proviso to the said Section 35F gives statutory power to the Tribunal to dispense with such pre-deposit in suitable cases.

(iii) Since no amendment has been made to Section 35F, Tribunal’s power to waive pre-deposit during the pendency of appeal remains unaltered.

(iv) Power of the Tribunal to stay recovery and to grant stay of an order appealed against is incidental to exercising its appellate function.

(v) Amendment of Section 35C by the Finance Act, 2002 places a specific legal restraint on exercise of such incidental power beyond 180 days as per clear wordings of sub-section (2A) of the said section 35C.

(vi) Tribunal being a creature of the same statute can not question the vires of the said sub-section (2A).
And so the stay petition was dismissed but the waiver of pre deposit was to continue. (And that is all that an assessee wants – or is it? About that a little later)

Board took note of this judgement and by Circular no. 766/72/2003-CX. Dated 16.10.2003, withdrew the previous circular advising reference applications.

But soon, the position changed with a Larger Bench of the Tribunal in IPCL V/s Commissioner of Central Excise, Vadodara (2004-TIOL-556-CESTAT-MUM-LB), not agreeing with the Themis case and upholding the Kumar Cotton Mills case. The Larger Bench observed that the Themis bench should not have brushed aside the Kumar judgement as given in vacuum. If the Bench disagreed, it should have been referred to a Larger Bench. It further observed that

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.

In a rare gesture of accepting defeat gracefully, the Board in Circular no. 797/30/2004-CX dated 6th September ‘2004, communicated that it was decided not to appeal against this Larger Bench decision of the Tribunal.

But remember, the SLP in the Kumar case was pending in the Supreme Court. And the Apex Court gave its judgement recently which we carried yesterday - 2005-TIOL-42-SC-CESTAT. While dismissing the Revenue Appeal, the Supreme Court observed that the amendment cannot punish the assessee for matters which may be completely beyond their control. It further observed,

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 (supra) 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.

DDT has a very knowledgeable senior citizen friend, who writes in his comments on several issues concerning the department. Two months ago he wrote to me,

“there is absolutely no justification for automatic vacation of the stay at the expiry of 180 days when the Tribunal has not been able to dispose of the appeal within that period for its own reasons. Why should the appellant who has no control over the Tribunal's listing of appeals be penalised to go in for another application for extension of the stay paying Rs 500/- as fees?”

Sir, the Supreme Court agrees with you; will the Government? A stay is a stay and an application and hearing for extension of such stay is sheer waste of time and money, both of which we routinely waste.

But the Government has other ideas. The Board is planning to issue a circular to the effect that a stay is only for the past period and the order appealed against can be enforced for the future period. Please see DDT 67(3.3.2005). If the circular is finally issued( and it is sure to be issued), the appellants have to file a stay application against the order and its future implementation!

Laws that are impossible to enforce bring the Law itself into disrepute, are a breeding ground for corruption, and bring a detriment far beyond their immediate scope.

Shavings of Shed Antlers of Chital and Sambhar – export allowed.

Export of Shavings of Shed Antlers of Chital and Sambhar and Manufactured Articles of Shavings of Shed Antlers of Chital and Sambhar, is prohibited as per S. Nos. 39 & 40 of Chapter 5 to Schedule 2 of the “ITC(HS) Classifications of Export and Import Items 1st September, 2004 –31st March, 2009. Now this is amended to allow export of these items till September 6th 2005. The DGFT has also prescribed the procedure for exporting these items. - NOTIFICATION NO. 28/2004-09, Dated: March 7, 2005 and PUBLIC NOTICE NO.58/2004-09, Dated: March 7, 2005

AIR Drawback for furnace oil supplied to EOUs

The DGFT has announced an All Industry rate of drawback of Rs.1300/- per MT for furnace oil supplied by domestic oil companies to EOU/SEZ units. - NOTIFICATION NO. 29/2004-09, Dated: March 9, 2005

Import of Metallic Scrap – some more inspection agencies Notified

As per Para 2.32 (I) of the Handbook of Procedures, for importing metal scrap, a certificate from an Inspection and Certifying agency given in Appendix 28 has to be furnished to the effect that:-

a) The consignment does not contain any type of arms, ammunition, mines, shells, cartridges, radio active contaminated or any other explosive material in any form either used or otherwise.

b) the imported item(s) is actually a metallic waste/scrap/ seconds/defective as per the internationally accepted parameters for such a classification.

Now some more agencies are added to the list. PUBLIC NOTICE NO. 59/2004-09, Dated: March 9, 2005

Exim Bank's Line of Credit of USD 15 million to Government of Senegal

The Export-Import Bank of India (Exim Bank) has concluded an agreement with the Government of the Senegal making available a Line of Credit (LOC) up to an aggregate sum of USD 15 million (US Dollar fifteen million only). The credit is available for financing export of eligible Indian goods and services to Senegal for development of rural small and medium enterprises and agricultural machinery and equipment from India to buyers in Senegal. The credit agreement has become effective on February 9, 2005. RBI CIRCULAR NO. 36, Dated: March 7, 2005

Give me one hundred men who fear no one but God and hate nothing but sin and I will move the world

Until Monday with more of DDT

Have a Nice Weekend

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