By TIOL News Service

ALLAHABAD , APR 13, 2010: AN overzealous Assistant Commissioner of Central Excise has no respect for the Tribunal or High Court; he ruled that CESTAT has erred and High Court has no jurisdiction , but the High Court was not impressed and imposed a cost of Rs. One lakh to be paid to the assessee. The High Court chose this action instead of initiating contempt.

The petitioner was engaged in the processing grey fabrics. The officers of the revenue department visited the premises of the petitioner on 18.11.1998 and seized certain private records. It is alleged that some unaccounted grey fabrics and semi-processed finished fabrics were recovered from the premises. On the basis of material found at the time of search, it has been inferred that the petitioner was indulged in removing manufactured goods without payment of duty and, accordingly, a demand had been raised and penalty had been imposed. Against the order of the Adjudicating Authority, the petitioner filed appeal before the Tribunal along with an application under Section 35-F of the Act for waiver of pre-deposit and stay of the demand till the disposal of the appeal. The Tribunal vide order dated 17.8.2005 allowed the application in part and directed the petitioner to deposit a sum of Rupees one crore within a period of eight weeks. Against the order of the Tribunal, the petitioner filed Writ Petition in the High Court which modified the Tribunal's order and the petitioner was directed to deposit a sum of Rupees twenty lacs and the Tribunal was directed to decide the appeal expeditiously. In pursuance of the order of this Court, the petitioner had deposited a sum of Rupees twenty lacs .

It appears that since the appeal could not be decided within a period of 180 days, the petitioner moved a miscellaneous application for extension of the stay order. The Tribunal vide order dated 14.8.2008 extended the stay order, already granted, till the disposal of the appeal. The aforesaid order of the Tribunal has neither been challenged by the Revenue before higher Court nor has it been vacated. The aforesaid order of the Tribunal exists till date. Despite the aforesaid order of the Tribunal granting stay till the disposal of appeal, the respondent- Assistant Commissioner, Central Excise Division, Rae Bareli has issued the impugned notice of demand dated 11.1.2010 for recovery of Rupees 652.16 lacs .

The High Court noted that Section 35C ( 2A ) of the Act has been inserted on 11.5.2002 by the Finance Act, which reads as follows:

"( 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."

The above provision came up for consideration before the two Members' Bench of the Tribunal. The Bench in the case of Kumar Cotton Mills Private Limited v. CCE , Ahmedabad - 2002-TIOL-17-CESTAT-MUM has held that even though the period of the order of stay initially passed, would come to an end on expiry of 180 days in view of the amended provisions, the jurisdiction of the Tribunal to extend the period of stay by passing fresh order is not affected.

In the case of IPCL v. Commissioner of Central Excise, Vadodara - 2004-TIOL-556-CESTAT-MUM-LB, the above view of the two Members' Bench has been affirmed by the Larger Bench of the Tribunal. Against the order of the two Members' Bench of the Tribunal in the case of Kumar Cotton Mills Private Limited v. CCE , Ahmedabad , the department had filed appeal before the Supreme Court. The said appeal was decided on 13.1.2005. The Apex Court upheld the view of the larger Bench of the Tribunal in the case of IPCL v. Commissioner of Central Excise, Vadodara in Commissioner of Customs & Central Excixe , Ahmedabad v. Kumar Cotton Mills Pvt. Ltd ., reported in 2005 -TIOL-42-SC-CESTAT.

In view of the above, the High Court was of the view that the Tribunal was competent to extend the stay order till the disposal of appeal. The order dated 14.8.2008, passed by the Tribunal, extending the stay till the disposal of appeal, is valid till date. It has neither been challenged before any of the higher Court nor it has been vacated. Needless to say that the order of the Tribunal is binding upon the lower authority, including the Assistant Commissioner, Central Excise Division, Rae Bareli-respondent no. 3. Once there was a stay order in existence, respondent no. 3 has no legal authority to circumvent the said order and initiate the recovery proceeding. Therefore, in the circumstances of the case, the High Court was of the view that the impugned notice of demand is patently arbitrary and without authority of law.

The High Court referred to paragraph-6 of the counter affidavit:

"That in response to contents of paragraph nos. 12 to 15 of the writ petition it is submitted that the two proviso of Section 35-C ( 2A ) of the Act provides that the order no. 745 of 2008 dated 1.5.2008 passed by the Hon'ble Tribunal granting stay TILL DISPOSAL OF THE APPEAL is erroneous and the Hon'ble CESTAT is not empowered to give such a blanket stay order. Further, the Hon'ble Tribunal has to decide the matter within three years. Thus, Hon'ble CESTAT has erred in passing stay order dated 14.8.2008 and not deciding appeal of the party pertaining to year 2005. This Hon'ble High Court has no jurisdiction to pass orders on the writ petition of the petitioner as alternative remedy was available to it which the assessee availed by way of appeal to Tribunal. Petitioner has also filed a Misc. Application No. E/M/48-51/21/2010 dated 20.1.2010 on the present issue."

The High Court observed, “The aforesaid averments made in paragraph-6 of the counter affidavit are contemptuous in nature. The Assistant Commissioner, Central Excise Division, Rae Bareli has no authority to say that the order of the Tribunal is erroneous and this Court has no jurisdiction to pass the order. “

In the case of Union of India Versus Kamlakshi Finance Corporation Ltd ., reported in 2002-TIOL-484-SC-CX-LB , the Apex Court while dealing with the situation wherein the Assistant Collector has not followed the order of the Appellate Authority, observed:

"The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not acceptable to the department-in itself an objectionable phrase-and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws."

In the present case it is admitted case that the order of the Tribunal has not been challenged by the revenue in any higher Court and the same holds good till date. The said order of the Tribunal was binding upon the revenue authority. Revenue authority cannot refuse to obey the order on any pretext. The refusal to obey the order amounts to violation of judicial discipline. In the present case, knowingly there is an order of Tribunal staying the demand till the disposal of appeal, the demand notice has been issued. Not only that, in paragraph-6 of the counter affidavit, the authority of the Tribunal and this Court has been challenged by breaking all judicial norms and discipline. The High Court was of the view that the language used in the counter affidavit is contemptuous in nature. However, having regard to the facts and circumstances, instead of taking a contempt proceeding against the officer concerned, the High Court imposed an exemplary costs of Rupees one lac on the respondent-officer, which will be payable to the petitioner within two months by account payee cheque or draft with a further warning to the officer not to act in haste and arbitrarily in future.

The writ petition is allowed and the demand notice dated 11.1.2010 issued by the Assistant Commissioner, Central Excise Division, Rae Bareli is hereby quashed with the cost stated above.

(See 2010-TIOL-234-HC-ALL-CX in 'Excise')