By TIOL News Service

JAIPUR, MAR 11, 2013: RECOVERY proceedings under the CBEC Circular No.967 /01/2013-CX dated 1.1.2013 are under challenge before the High Court.

The High Court noted the issue as:

“To start with, a plain perusal of the circular dated 1.1.2013 would unequivocally demonstrate that it is in the form of administrative instructions issued by the Central Board or Excise and Customs obligating the concerned authorities to initiate recovery proceedings against the confirmed demands in the eventualities narrated therein fixing periods therefore. Broadly, three situations have been contemplated

(1) where no appeal has been filed against a confirmatory order in original;

(2) where an appeal has been filed without stay application against a confirmatory order in original; and

(3) where an appeal has been filed with a stay application against such order.

In the first contingency, in terms of this circular, the process of recovery is to be initiated after the expiry of statutory period of 60 days for filing appeal and in the second, after the institution of the appeal. In the third eventuality, the process of recovery has been mandated to 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, as specified. Noticeably, it is by this category of cases where appeals have been filed alognwith the stay applications, which have remained undisposed and/or unattended, that the assessees (petitioners) are really distressed and aggrieved. They contend, to reiterate, that apart from the circular being invalid for want of statutory sanction, it is palpably arbitrary, unfair and unjust as thereby the assessees , who have approached the higher forums envisaged by the Act for redress against the confirmatory orders of demand, are sought to be penalized thereby for no fault of theirs.”

The High Court noted,

“It is apparent that once appeals are filed and more importantly along therewith applications for dispensing with the deposit of duty demanded or penalty levied are submitted, it is incumbent on the appellate forums (Commissioner (Appeals) or Tribunal, as the case may be to entertain the same as expeditiously as possible and pass orders thereon. Such a course, as is apparent from the legislatively designed scheme of Chapter VIA of the Act, is a statutory mandate and unless in a given fact situation, the assessee , in particular, is liable for the delay in this regard, he ought not to be penalized either for the failure of the Commissioner (Appeals) or the Tribunal, as the case may be, to entertain and dispose of either the appeal or the interim request for dispensing with the deposit of duty demanded or penalty levied.”

The High Court held,

“Though reference has been made to Section 37(2)( ib ) of the Act on behalf of the respondents to salvage the impugned circular, the same being apparently not in exercise of the powers conferred by the Rules, it assuredly has no sanction thereof. A plain perusal of Section 37B of the Act does not even seemingly permit issuance of the impugned circular for the purpose conveyed by it. Rule 31 of the Rules also does not validate the impugned circular as the same only confers powers on the Board or the Chief Commissioner or the Commissioner to issue written instructions providing for any incidental or supplemental matters consistent with the provisions of the Act and the Rules. In the teeth of the framework of the Act outlined under Chapter VIA of the Act, the impugned circular is conspicuously dissentient thereto qua the eventualities where appeals with applications for interim relief by way of dispensation of deposit of duty demanded or penalty levied are filed but pending without any decision whatsoever sans any default on the part of the assessee and for that matter, the appellants. Any view to the contrary would be repugnant to the statutory comprehensions and the underlying intendment of the Act providing the statutory remedies against the orders demanding duty and penalty as contemplated therein. The right of appeal being statutory in nature, the incidental provision for exemption, in deserving cases, by way of interim relief, from making the otherwise mandatory deposit of duty demanded or penalty levied, can by no means be trivialized or annihilated by any administrative ukase. Such a conferment can permissibly be circumscribed only by and to the extent ordained by the statute. The extinction of such a statutorily conferred right by any administrative fiat without the sanction of the enactment endowing the same is impermissible. The remedy by way of appeal and interim absolution from the requirement of deposit of duty demanded or penalty levied being a legislative prescript, denial thereof by the ipse dixit of an authority even statutory dehors legal ratification would be unsustainable. In absence of any enabling power therefor, express or implicit, by no means, can such an authority sans any valid empowerment vide instructions of administrative nature supplant statutory provisions of obverse over tones and thus, render the same otiose.”

The High Court further observed,

“The petitioners- assessees , whose appeals alongwith interim applications are pending without any decision for no fault of theirs, can by no means be left exposed to the megrim of the departmental authorities lest the statutory guarantee engrafted in Chapter VIA of the Act is rendered illusory. The plea that the power of issuing earlier circulars on the same issue with some protective features vis -a- vis the assesses now recalled envisages permissibility to withdraw the same lacks persuasion. In absence of any legal endorsement of the impugned circular dated 1.1.2013, it, in our comprehension, flies in the face of the provisions contained in Chapter VIA of the Act testifying a contrary legislative enjoinment and thus, cannot be sustained vis -a- vis the contingencies where the appeals with stay and interim applications for dispensing with the deposit of duty demanded or penalty levied are pending without being attended to or in which no final orders have been passed. We find ourselves in respectful agreement with the view expressed by the High Court of Judicature at Bombay in the batch of writ petitions disposed of on 1.2.2013 lead case being Writ Petition No. 878/2013 Larsen Toubro Ltd. V/s The Union of India and ors (2013- TIOL -99-HC-MUM-CX) .”

Held : The impugned circular dated 1.1.2013 obligating the concerned authorities to initiate recovery proceedings on the expiry of period as mentioned therein so far as it relates to the situations where appeals with stay applications have been filed, but no stay had been granted and the stay applications had been kept pending for reasons not attributable in any manner whatsoever to the petitioners/ assessees and resultantly, no interim relief had been granted, is non est . Consequently, no coercive steps for the recovery of the demands vis -a- vis such petitioners would be initiated. Instead, the respondents would ensure that such appeals and interim applications are heard as contemplated by the Act at the earliest and preferably within a period of three weeks herefrom . The petitioners would unfailingly cooperate with the forums to meet the time frame fixed, it is made clear that this Court has not offered its comment on the merits of the appeals and/or interim applications filed and that the concerned forums would take appropriate decisions thereon without in any manner influenced by this determination.

(See 2013-TIOL-185-HC-RAJ-CX)