2013 (10) TMI 1194 - HC - Central Excise

Court limits waiver extension, stresses timely disposal, clarifies legislative intent

Commissioner, Customs And Central Excise Versus M/s JP. Transformers

The High Court held that the Tribunal erred in granting an indefinite waiver of pre-deposit of assessed demand during the appeal, extending the stay ... Extension of Period of Stay beyond 365 days – Interpretation of Section 35-C - Effect of Amendment u/s 35-C of Central Excise Act 1944 - Whether the CESTAT has erred in granting waiver of pre-deposit of assessed demand in favour of the respondents during pendency of the appeal – Held that:- the Judgemetn in Kumar Cotton Mills Pvt. Ltd. [2005 (1) TMI 114 - SUPREME COURT OF INDIA] cannot be interpreted to give powers to the Tribunal to extend the order of waiver of pre-deposit indefinitely. - Such an order is likely to be misused by the assessee. Entire object and purpose of insertion of sub-section 2A in Section 35C by Section 140 of the Finance Act, 2002 (20 of 2002) w.e.f. 11.5.2002 and third Proviso by Finance Act, 2013 will stand defeated, if the waiver of pre-deposit is granted indefinitely – the appeal is disposed of with directions to the CESTAT to decide the appeal expeditiously and if possible within a period of six months from the date of the extension – The waiver of pre-deposit will continue to be valid upto the period of six months from its last extension dated 3.6.2013. - Decided in favour of Revenue. Issues:- Interpretation of Section 35-C of the Central Excise Act, 1944- Granting waiver of pre-deposit of assessed demand during the pendency of an appeal- Extension of the period of stay beyond 365 daysInterpretation of Section 35-C of the Central Excise Act, 1944:The appeal in question arose from an order passed by the Central Excise and Service Tax Appellate Tribunal, where the waiver of pre-deposit of assessed demand was extended due to the appeal not being disposed of within 365 days. The substantial question of law raised was whether the Tribunal erred in granting this waiver, thereby extending the period of stay beyond 365 days, in light of the recent amendment to Section 35-C of the Central Excise Act, 1944. The Hon'ble Supreme Court's decision in Commissioner of Cus. & C.Ex., Ahmedabad v. Kumar Cotton Mills Pvt. Ltd. was cited, emphasizing that the Tribunal should only extend the period of stay on good cause and if satisfied that the delay in disposal was not attributable to the party.Granting Waiver of Pre-Deposit During Appeal:The Tribunal's decision to extend the waiver of pre-deposit indefinitely was challenged by the Central Excise Department, arguing that such an extension could defeat the purpose of the second and third provisos to Section 35-C (2A) of the Act. It was contended that the Tribunal did not provide reasons for the delay in disposing of the appeal within 365 days, and allowing indefinite waiver could lead to potential misuse by the assessee. The High Court agreed with the department's stance, highlighting that the object and purpose of the relevant statutory provisions would be defeated if waivers were granted indefinitely.Extension of the Period of Stay Beyond 365 Days:In disposing of the appeal, the High Court directed the CESTAT to decide the matter expeditiously, ideally within six months from the date of the last extension granted on 3.6.2013. The Court emphasized that while acknowledging the workload and pendency of appeals, the indefinite extension of waivers was not in line with the legislative intent behind the relevant provisions. The judgment in Kumar Cotton Mills Pvt. Ltd. was clarified to not grant the Tribunal the authority to extend waivers indefinitely, ensuring that the stay order would remain valid for a specific period.In conclusion, the High Court's judgment provided clarity on the limitations of extending waivers of pre-deposit during the pendency of appeals, emphasizing the need for expeditious disposal of cases while upholding the legislative intent behind the relevant statutory provisions.