By TIOL News Service

CHANDIGARH, MAR 15, 2013: FIFTY Four Writ Petitions are before the High Court as an offshoot of the controversial New Year Circular 967/2013 of the CBEC . The following questions of law arise for consideration:

(1) Whether the revenue is justified in initiating recovery proceedings on the basis of Circular dated 01.01.2013, even when an application for waiver of pre-deposit is pending before the Appellate Authorities for the reason that on such application for stay or waiver of pre deposit, no orders have been passed?

(2) Whether the second proviso in sub-section ( 2A ) of Section 35 C is directory and that the Tribunal in appropriate circumstances can extend the period of stay beyond 180 days?

The High Court examined the issue in respect of

(i) appeals filed or pending before the Commissioner (Appeals), and

(ii) the appeals filed or pending before the Tribunal and observed:

Appeals filed and pending before the Commissioner (Appeals).

Section 35 of the Act confers right of appeal to any person aggrieved by any decision or order passed under the Act. Sub-section ( 4A ) contemplates that the Commissioner (Appeals) shall where it is possible to do so, hear and decide every appeal within a period of six months from the date on which it is filed. Section 35F empowers the Commissioner (Appeals) or the Tribunal to dispense with the deposit of duty demanded or penalty levied, if it causes undue hardship, subject to such conditions as it may deem fit to impose so as to safeguard the interest of Revenue. The further proviso contemplates that where an application is filed before the Commissioner (Appeals) and if it is possible to do so, the Commissioner (Appeals) shall decide such application within 30 days from the date of its filing.

Column 4 of the impugned Circular contemplates that if no stay is granted within 30 days, the recovery is to be initiated. The assessee in no way can insure that the Commissioner (Appeals) shall decide his application for dispensation of the duty demanded and penalty levied within a period of 30 days . Therefore, for no fault on the part of the assessee , even if the appeal has been presented within the period of limitation along with an application for waiver of condition of pre-deposit of the duty demanded and penalty levied, the remedy of consideration of his application for pre-deposit pending hearing of appeal provided by the Statute stands negated by the circular. The Revenue cannot take a right which has been conferred by statute only for the reason that the application for waiver of pre-deposit could not be disposed of within 30 days. The Revenue cannot encroach upon the right of due consideration by the Appellate Authority on the strength of circular. The right of consideration on the application cannot be rendered illusory. It would be a farce, if without considering the application for pre- deposit, the recovery proceedings are initiated for no fault of the assessee . The rights of the parties need to be examined on the day, when an appeal is filed. The assessee is entitled to an order on such appeal and the application on that day. If on purely fortuitous circumstance, the appeal or the application are not taken up for hearing, the right of the assessee of due consideration cannot be defeated by virtue of an executive direction. It would be wholly unjustified to recover the amount even though, the assessee has filed appeal and an application but the Appellate Authority is not able to decide the applications within 30 days. Since, the Statute has not provided for such consequence, the executive cannot order the recovery of the amount only for the reason, that the application for waiver of pre deposit has not been decided by the Appellate Authorities.

Since the Statute confers a right of appeal on the assessee and also right to make an application to dispense with deposit of the duty demanded and penalty levied in the manner which the Appellate Authority deems appropriate. Therefore, unless such jurisdiction is exercised by the Appellate Authority either way i.e. to grant benefit of waiver or impose such conditions as it may consider appropriate, the Board cannot direct the Administrative Officers to recover the demand raised against the assessee . The statutory right of appeal or of consideration of an application for pre- deposit cannot be frustrated administratively.

The Circular is purportedly issued in terms of judgment in Krishna Sales (P) Ltd. Case. The said judgment lays down that mere filing of an appeal does not operate as stay or suspension of the order appealed against. But the Board over-looked the fact that the assessee is not seeking stay only on account of filing of an appeal, but for the reason that the assessee has sought dispensing with the pre-deposit of duty demanded and penalty levied and has a right to demand decision on such application, the right which is created by the Statute. Therefore, the very basis of the Circular is untenable, misconceived, wholly illegal and arbitrary. Therefore, the condition of recovery, if no stay is granted within 30 days, is illegal, arbitrary, unjustified and consequently set aside.

Therefore, right of consideration in appeal and on an application for waiver of pre-deposit, is a right conferred by the Statute and such right cannot be defeated on the basis of Circular, which contemplates that the recovery can be effected, if stay is not granted within 30 days. Therefore, such condition in the Circular is not legal and is therefore set aside with the observation that till such time, the application for waiver of pre-deposit is decided in an appeal filed in terms of the Statute, the Revenue shall not proceed to recover the same provided that the assessee does not delay the hearing of the appeal directly or indirectly. In the event, the assessee is delaying the decision, the Revenue shall be at liberty to move an application before the Commissioner (Appeals) to take the application for waiver of pre-deposit and seek orders thereon in accordance with law. If such an application is filed by the Revenue, the Commissioner (Appeals) shall decide the same expeditiously.

Thus, in respect of first question of law, it is held that direction to recover the duty demanded and penalty levied, if the stay was not granted within 30 days, contravenes the right of consideration of appeal and of an application for waiver of pre-deposit conferred under Section 35B read with Section 35F of the Act and is illegal. Such direction to the Administrative Officers to recover the amount pending consideration of application of waiver of pre-deposit is not justified and, thus, not enforceable in law.

Appeals filed or pending before the Tribunal : The right to appeal before the Tribunal is conferred under Section 35B of the Act. The Appellate Tribunal passes an order in terms of Section 35C of the Act. Sub-section ( 2A ) contemplates that the 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. The second proviso inserted contemplates that if an order of stay is made in any proceedings 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. The further proviso is if an 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.

Though the right of appeal is a creation of Statute and it can be exercised only subject to the conditions specified therein, but the conditions specified have to be in relation to the assessee as something which is required to be complied with by the assessee . But where the assessee has no control over the functioning of the Tribunal, then the provision of vacation of stay cannot be sustained.

The assessee having preferred appeal and that Tribunal being satisfied that condition for dispensing with the pre-deposit of duty demanded and penalty levied is made out, is compelled to pay the duty demanded and penalty levied, if the appeal is not decided within 180 days. The assessee has no control in respect of matters pending before the Tribunal; in the matter of availability of infrastructure ; the members of the Tribunal and the workload. Therefore, for the reason that the Tribunal is not able to decide appeal within 180 days, the vacation of stay is a harsh and onerous and unreasonable condition. The condition of vacation of stay for the inability of the Tribunal to decide the appeal is burdening the assessee for no fault of his. Such a condition is onerous and renders the right of appeal as illusory. An order passed by a judicial forum is sought to be annulled for no fault of assessee . Therefore, such condition of automatic vacation of stay on the expiry of 180 days, has to be read down to mean that after 180 days the Revenue has a right to bring to the notice of the Tribunal the conduct of the assessee in delay or avoiding the decision of appeal, so as to warrant an order of vacation of stay . If the provision is not read down in the manner mentioned above, such condition suffers from illegality rendering the right of appeal as redundant.

Consequently, the second proviso in sub-section ( 2A ) of Section 35C is ordered to be read down to mean that after 180 days, the Revenue has a right to seek vacation of stay on proof of the fact that the assessee is the one, who is defaulted or taken steps to delay the ultimate decision.

(See 2013-TIOL-201-HC-P&H-CX)