2013 (5) TMI 622 - HC - Central Excise

Court Affirms Customs Board's Recovery Guidelines, Emphasizes Timely Disposal of Stay Applications

GUJARAT STATE FERTILIZER CO. LTD. Versus UNION OF INDIA

The court upheld the authority of the Central Board of Excise and Customs (C.B.E. & C.) to issue recovery guidelines under Rule 31 of the Central ... Recovery proceedings - circular dated 1-1-2013 - power of the board (CBEC) - recovery during the pendency of appeal before appellate forum - held that:- condition Nos. 3, 6 and 9, if read rigidly, fail to clear the test of reasonableness and thus fall foul to Article 14 of the Constitution. - there would be situations where for no fault of the assessee a stay application filed before the appellate forum may not be disposed of within 30 days of its filing. In such a situation, the said conditions would not require the recovery officer to initiate recovery proceedings. However, if after filing of stay application, it is found that the assessee is prolonging the hearing thereof or for some such similar reasons attributable to the assessee stay application is lingering, surely it would be open for the Revenue to proceed with the recovery irrespective of pendency of appeal and the stay application. - Decided against revenue. Regarding second appeal before tribunal when commissioner (appeals) reject the first appeal - held that:- to provide that recovery should commence immediately after the order is passed by the Appellate Commissioner, in our view, would not be permissible. - to provide that as soon as the order is passed by the Commissioner confirming the duty demand made by the adjudicating authority, the order should be executed without any leverage would give rise to large number of cases which would travel to the High Court at such an interim stage. We are not inclined to accept a situation where such unnecessary litigation would arise. - Condition No. 10 insofar as it provides for immediate recovery as soon as the order is passed in appeal also needs to be read down as to permitting reasonable time to the assessee to seek protection from the appellate forum. This period of reasonable time must be judged in the facts of each case and cannot be equated with full period of limitation. - Decided partly in favor of revenue. Regarding appealable orders either before the High Court or the Supreme Court - held that:- The period of limitation prescribed for filing such appeal is 180 days. The Central Excise Act or the Customs Act nowhere envisages that for the entire period of full 180 days of limitation, even at the stage of third appellate stage, the Revenue must stay its hand off. We, therefore, uphold Condition No. 11 without any modification. - Decided in favor of revenue. Protection of the interest of revenue - held that:- It would be highly desirable that the Appellate Commissioner and the Tribunal bestow their utmost consideration to the application for pre-deposit waiver and dispose of them as quickly as possible. While considering the question of waiver of pre-deposit, it is within the jurisdiction of the appellate forum to impose such conditions as deemed fit to safeguard the interest of the Revenue. - If the authorities fail to discharge their statutory functions, the High Court will be unnecessarily burdened with the hearing of the cases which are required to be heard by the statutory authorities constituted under the relevant Statutes, and the Legislative intention may be frustrated. Appellate authorities directed to pass appropriate orders on the stay applications expeditiously and preferably within four weeks of such application. None of the clauses of Circular, dated 1-1-2013 cover such a situation where having granted stay, the Tribunal could not dispose of the appeal within the period of 180 days and therefore, stay would be vacated. This circular is also not part of the specifically rescinded circulars mentioned in para 1 of the impugned circular. In our view, it would also not be covered under the description of any other circular, instruction or letter contrary to the said circular. In that view of the matter, the said circular dated 26-5-2010 would continue to operate in the limited field occupied by the said circular irrespective of the fresh guidelines dated 1-1-2013. We wonder why in the present day of advanced technology, the Department should be groping for latest information and current status of assessees further appeal proceedings. Surely, with proper inter-departmental cooperation and computerization and utilization of such technology, the Department should be in a position to track every appeal before the Appellate Commissioner or the Tribunal and the precise stage at which such proceedings are pending, including the reason for such pendency. This, of course, is an issue which the Department needs to address itself internally and we leave it to them. Decision on individual Special civil applications - in most of the cases, stay application was pending for no fault of the assessee. Issues Involved:1. Challenge to recovery notices issued by the Customs and Central Excise Department.2. Validity of the C.B.E. & C. Circular dated 1-1-2013.3. Powers of the C.B.E. & C. to issue such guidelines.4. Reasonableness of the guidelines for initiating recovery proceedings.5. Impact of pending appeals and stay applications on recovery proceedings.Detailed Analysis:1. Challenge to Recovery Notices:In this group of petitions, the petitioners challenged various recovery notices issued by the Customs and Central Excise Department based on the revised guidelines issued by the Central Board of Excise and Customs (C.B.E. & C.) dated 1-1-2013. The petitioners contended that the recovery notices were unjust as their appeals and stay applications were pending.2. Validity of the C.B.E. & C. Circular Dated 1-1-2013:The petitioners questioned the legality of the C.B.E. & C. Circular dated 1-1-2013, which laid down fresh guidelines for initiating recovery proceedings against confirmed demand of departmental dues. The circular rescinded several previous circulars and provided a new framework for recovery.3. Powers of the C.B.E. & C. to Issue Guidelines:The petitioners argued that the C.B.E. & C. lacked the power to issue such guidelines under Section 37B of the Central Excise Act, 1944, and Rule 31 of the Central Excise Rules, 2002. The court, however, found that Rule 31 empowered the Board to issue written instructions for incidental or supplementary matters consistent with the provisions of the Act and Rules. Thus, the Board had the authority to issue the impugned circular.4. Reasonableness of the Guidelines:The guidelines provided different timelines for initiating recovery based on various scenarios, such as appeals filed without stay applications or with pending stay applications. The court examined the reasonableness of these guidelines, particularly clauses 3, 6, 9, 10, and 11 of para 2 of the circular.5. Impact of Pending Appeals and Stay Applications on Recovery:The court recognized that there could be numerous reasons beyond the control of the assessee for the non-disposal of stay applications within 30 days. It was deemed unreasonable to initiate recovery proceedings if the delay was not attributable to the assessee. The court read down clauses 3, 6, and 9 to require recovery officers to consider whether the delay was due to the assessee's actions before initiating recovery. Clause 10 was also read down to allow reasonable time for the assessee to seek protection from the appellate forum. However, clause 11, which pertained to recovery after a decision by the Tribunal or High Court, was upheld.Individual Cases:The court applied the above principles to individual cases, quashing recovery notices where appeals and stay applications were pending and not delayed due to the assessee's actions. In cases where the Tribunal had granted stay but could not dispose of the appeal within six months, the court clarified that the earlier circular dated 26-5-2010 would continue to operate.Conclusion:The court directed the respondents to circulate copies of the judgment to all Chief Commissioners for uniform implementation. It emphasized the need for the appellate authorities to expedite the disposal of stay applications to balance the interests of the revenue and the assessees.