OCTOBER 27, 2009

By Sunil Achutan

TIM Berners-Lee, the scientist who created the World Wide Web, in a recent symposium in Washington DC on the future of technology whilst admitting that his decision to include two forward slashes in internet addresses was a mistake added – “ Look at all the paper and trees that could have been saved if people had not had to write or type out those slashes on paper over the years – not to mention the human labour and time spent typing those two strokes millions of times in browser address boxes.”

The above report in Telegraph newspaper prompted me to pen this piece.

Section 140 of the Finance Act, 2002 saw the insertion of a new sub-section 2A in section 35C of the Central Excise Act, 1944 and a similar insertion in section 129B by section 127 of the Finance Act, 2002. For ease of reference, the said sub-section 2A in the Central Excise Act, 1944 is reproduced below –

“(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 35B, 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.”

(Underlining & emphasis supplied)

Whereas the principal sub-section 2A fails to hog any limelight as it only suggests an optimistic outlook in the Tribunal proceedings, akin to the one prevailing in sections 11A of the CEA, 1944 and section 28 of the Customs Act, 1962, the first and second provisos were the one which created a ruckus a few years ago.

In the case of Kumar Cotton Mills vs. CCE & Cus, Ahmedabad [2002-TIOL-17-CESTAT-MUM] , the Bench while holding that the Tribunal has the power to extend stay beyond 180 days observed –

“30. We find that the Income-tax Appellate Tribunal had occasion to deal with the very same issue…. The Tribunal in the cited judgment in the case of Centre for Women's Development Studies v. Deputy Director of Income-tax - 2002 (257) ITR 60 held as follows:

“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.”

In the case of Themis Pharmaceuticals vs. CCE, Mumbai 2003-TIOL-64-CESTAT-Mum, the Bench refused to follow the aforesaid decision in Kumar Cotton Mills [2002-TIOL-17-CESTAT-MUM] by opining - We are unable to agree that such a decision given in a vacuum in the absence of a dispute becomes a binding precedent for co-ordinate Benches. It was accordingly held by the Bench as under –

“Second proviso to sub-section (2A) of Section 35C ibid provides restriction on the continuance of stay beyond 180 days. Permitting extension and repeated extensions beyond 180 days would make the said provision nugatory and frustrate its clear mandate. The legislative change made by the Parliament through the Finance Act, 2002 would become redundant if such extensions beyond 180 days are to be granted by the Tribunal. Legal restraints placed by the said sub-section (2A) of Section 35C ibid should not be ignored or bypassed on grounds of convenience or expediency. [paras 3, 4, 10]”

Consequently, the matter came to be referred to the Larger Bench in the case of IPCL vs. CCE, Vadodara 2004-TIOL-556-CESTAT-MUM-LB and when it was held thus –

“It is found that in Themis Pharmaceuticals case, 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 it 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 the pendency of the appeal. It has always the judicial view that no party should be prejudiced due to action or inaction on the part of the Court. 2002-TIOL-17-CESTAT-Mum affirmed]. [paras 13, 14]”

The Apex Court in the case of Kumar Cotton Mills [2005-TIOL-42-SC-CESTAT] while approving the Larger Bench decision in IPCL Ltd. 2004-TIOL-556-CESTAT-MUM-LB observed –

“ 4. The Tribunal which was then known as Customs, Excise Gold (Control) Appellate Tribunal (CEGAT) came to the conclusion that the amendment did not affect stay orders which were passed prior to the date of coming into force of the amendment and also held that the amendment did not in any way curtail the powers of the Tribunal to grant stay exceeding six months.

5. During the pendency of the appeal before this Court, the matter was referred to a Larger Bench of the Tribunal. The Larger Bench has by its decision reported in 2004 (169)ELT 267 [ 2004-TIOL-556-CESTAT-MUM-LB] upheld the view impugned in this case. The decision of the Larger Bench has not been challenged by the Department being of the view that repeated special leave petition raising the same issue was unnecessary.

6. The sub-section which was introduced in terrorem cannot be construed as punishing the assessees 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 (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.”

All the above would make one ponder over the following question –

If the CESTAT indeed has the power to extend the stay granted beyond the mandatory period of 180 days, then why should the first and second provisos in sub-section 2A be allowed to continue?

At least, removing them would save the applicant's and the CESTAT's time not to mention precious ink and paper and ultimately allow the Tribunal to concentrate on bringing down the pendency levels prevailing in various Benches.

More importantly, let us make the earth Greener.

(The views expressed are strictly personal)