Court rules against Circular mandating immediate recovery, protects appeal rights and limits undue burden on taxpayers.

PML Industries Ltd. Versus CCE.

PML Industries Ltd. Versus CCE. - 2013 (290) E.L.T. 3 (P & H), 2013 (30) S.T.R. 113 (P & H) Issues Involved:
1. Legality of initiating recovery proceedings based on Circular dated 01.01.2013 when an application for waiver of pre-deposit is pending.
2. Whether the second proviso in sub-section (2A) of Section 35C is directory and if the Tribunal can extend the period of stay beyond 180 days.

Issue 1: Legality of Initiating Recovery Proceedings Based on Circular Dated 01.01.2013
The court examined the Circular issued by the Central Board of Customs and Excise on 01.01.2013, which mandated recovery proceedings if no stay was granted within 30 days of filing an appeal. The petitioner argued that this provision was onerous and made the remedy of appeal illusory, as the stay would automatically be vacated after 180 days without any fault of the assessee. The court noted that the Commissioner (Appeals) is empowered to waive the pre-deposit requirement if it causes undue hardship, and such applications should ideally be decided within 30 days. However, the court found this 30-day requirement to be directory, not mandatory, as the assessee has no control over the Commissioner's ability to decide within this timeframe. The court held that the Circular's provision for initiating recovery if no stay is granted within 30 days contravenes the statutory right of appeal and consideration of waiver applications. Therefore, the Circular was deemed illegal and set aside, ensuring that recovery proceedings should not commence until the application for waiver is decided, provided the assessee does not delay the hearing.

Issue 2: Whether the Second Proviso in Sub-section (2A) of Section 35C is Directory
The court analyzed the second proviso of sub-section (2A) of Section 35C, which states that if an appeal is not disposed of within 180 days, the stay order shall stand vacated. The petitioner argued this provision was unreasonable as the delay in disposing of appeals often lies outside the control of the assessee. The court referred to precedents where similar provisions were read down to prevent undue hardship to the assessee. It was observed that the assessee has no control over the Tribunal's functioning and the infrastructure available to it. Thus, the automatic vacation of stay after 180 days was found to be harsh and unreasonable, rendering the right of appeal illusory. The court read down the provision to mean that after 180 days, the Revenue can seek vacation of stay only if it proves that the delay in disposing of the appeal was due to the assessee's conduct. This ensures the provision is not used to unfairly burden the assessee for delays beyond their control.

Conclusion
The court concluded that:
1. The Circular dated 01.01.2013 is illegal as it contravenes the statutory right of appeal and consideration of waiver applications. Recovery proceedings should not commence until the application for waiver is decided, provided the assessee does not delay the hearing.
2. The second proviso in sub-section (2A) of Section 35C should be read down to allow the Revenue to seek vacation of stay after 180 days only if the delay is attributable to the assessee. This interpretation ensures the provision is not used to unfairly burden the assessee for delays beyond their control.