Incidental stay power in central excise appeals upheld where deletion of penalty appeared prima facie unsustainable.

The CESTAT, New Delhi held that its appellate jurisdiction under Section 35B of the Central Excise Act includes incidental and ancillary power to grant an effective stay, and that this power is not limited by the deposit mechanism in Section 35F. On the facts, the order-in-appeal had failed to address material findings of the Original Authority concerning fake invoices and inadmissible Modvat credit, so the challenge to deletion of penalty disclosed a strong prima facie case. The order-in-appeal was stayed to the extent it had set aside the penalty.

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Issues: Whether the Tribunal had power to stay the order-in-appeal setting aside the penalty and whether the facts disclosed a prima facie case for grant of stay.

Analysis: The Tribunal held that the power to entertain and decide an appeal under Section 35B of the Central Excise Act, 1944 carries with it incidental and ancillary authority to pass an effective stay order. Such power is not confined to the deposit mechanism contemplated by Section 35F of the Central Excise Act, 1944. On the facts, the order-in-appeal had not dealt with the material findings recorded by the Original Authority regarding issuance of fake invoices and passing on of inadmissible Modvat credit, and therefore the challenge to the deletion of penalty disclosed a strong prima facie case.

Conclusion: The Tribunal had jurisdiction to grant stay, and the impugned order-in-appeal was stayed to the extent it had set aside the penalty.

Ratio Decidendi: The appellate tribunal has incidental and ancillary power to grant stay in aid of its appellate jurisdiction, and such power may be exercised where the impugned order appears prima facie unsustainable.

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