TaxTMI 
TaxTMI 
2013 (5) TMI 622
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....he Central Board of Excise and Customs (C.B.E. & C. for short) dated 1-1-2013. The petitioners have challenged such Circular dated 1-1-2013 as also the individual demand notices issued by the respondents. For the purpose of this judgment, basic facts may be noted from Special Civil Application No. 1124 of 2013. 2. Petitioner is a company registered under the Companies Act. The petitioner is engaged in the business of manufacturing of fertilizers and other products. For manufacture of such products, the petitioner purchases inputs without payment of duty. Once the manufacturing process is over, the petitioner would be in a position to ascertain the quantity of input used for manufacture of products which are exempt from payment of duty and which are not. There is ongoing dispute between the petitioner and the Department with respect to Cenvat credit availed by the petitioner in the process. The Department contends that such credit was availed by the petitioner in breach of Cenvat Credit Rules. It is the case of the petitioner that such disputes started way back in the year 1998 and went up the Supreme Court and in the case of Commr. of C. Ex., Vadodara v. Gujarat State Fertilizer....
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....tate that it has been decided to rescind these circulars with immediate effect. Sr. No. Date Circular no and File number of CX-6 1. 18-11-1988 80/88 and 208/31/88 2. 2-3-1990 7/90 and 208/107/89 3. 21-12-1990 23/90 and 209/107/89 4. 12-11-1992 16/92 and 208/59/92 5. 3-8-1994 47/47/94 and 208/33/94 6. 2-6-1998 396/29/98 and 201/04/98 7. 25-2-2004 788/21/2004 and 208/41/2003 2. Henceforth, recovery proceedings shall be initiated against a confirmed demand in terms of the following order - Sr. No. Appellate Authority Situation Directions regarding recovery 1. NIL No appeal filed against a confirmatory order-in-original against which appeal lies with Commissioner (Appeals) Recovery to be initiated after expiry of statutory period of 60 days for filing appeal 2. Commissioner (Appeals) Appeal filed without stay application against a confirmatory order-in-original Recovery to be initiated after such an appeal has been filed, without waiting for the statutory 60 days period to be exhausted. 3. Commissioner (Appeals) Appeal filed with a stay application against an order-in....
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.... Court in case of Collector of Customs, Bombay v. Krishna Sales (P) Ltd. [1994 (73) E.L.T. 519 (S.C.)] has observed that "As is well known, mere filing of an Appeal does not operate as a stay or suspension of the Order appealed against". Accordingly, the above directions are hereby issued for initiating recovery of the confirmed demands. 4. Instructions in C.B.E. & C.'s Excise Manual of Supplementary instructions on the above subject or any other circular, instruction or letter contrary to this circular stand amended accordingly." 5. A perusal of the impugned circular would disclose that in supersession of various previous circulars, the C.B.E. & C. laid down fresh guidelines for initiation of recovery proceedings against confirmed demand of the departmental dues against the assessee. Para 1 of the circular, specifically rescinds as many as 7 previous circulars of the Board on the issue. Para 4 of the impugned circular further provides that instructions contained in Excise Manual of Supplementary instructions on the subject or any other circular, instruction or letter contrary to the said circular would stand amended accordingly. The revised guidelines contained in the said c....
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....ing any such power in the Departmental authorities to recover the dues when the appellate forum is seized of the appeal proceedings would amount to interfering with the exercise of judicial discretion of such appellate authority. Drawing our attention to the relevant statutory provisions in the Central Excise Act, 1944 and the Customs Act, 1962, the counsel would contend that the appellate authority and the Tribunal exercise discretionary powers of waiving pre-deposit, if grounds are so made out. Once the recovery is effected, question of waiver of pre-deposit becomes redundant. When, therefore, once the appellate authority is seized of the appeal along with the request for waiver of pre-deposit, the Departmental authorities cannot recover such dues. 7. Adopting such contentions of the counsel, learned advocate Shri P.M. Dave, further contended that earlier instructions of the C.B.E. & C. took into consideration various aspects of the matter and provided a balanced formula for recovery after permitting the assessee to avail remedy of appeals. Such procedure stood the test of time. It was, therefore, not necessary to make drastic changes in such procedure. He contended that once ....
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....ing the validity of recovery proceedings initiated pending appeal and stay application, on facts of the case, proceeded to grant waiver of pre-deposit finding that the case was fit for such consideration. This decision, therefore, was rendered in the special facts of the case. (iv) In the case of Vidhya Ply & Board Pvt. Ltd. v. Union of India, 1992 (61) E.L.T. 231 (All.) wherein a Division Bench of the Allahabad High Court held and observed as under : "4. Now section 35F of the Act under certain circumstances makes it mandatory on the person desirous of appealing against a decision or order under the Act to deposit with the adjudicating authority the duty demanded or penalty levied by the decision appealed against. Under the proviso the appellate authority is conferred with the discretion to dispense with such deposit on such condition as it may deem fit to impose, where the appellate authority is of the opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such a person. Thus a statutory obligation is cast on the appellate authority where its powers under the proviso are invoked by the person appealing to it, to make such order as it may t....
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....ion which led to the decisions of the Delhi High Court and of this Court take due notice of the fact that the delay in the disposal of an appeal by an assessee or for that matter the delay in the disposal of a stay application may take place for reasons which lie outside the control of the assessee. Where the failure of the Appellate Authority to dispose of the appeal or the application for stay arises without any default on the part of the assessee, and without the assessee having resorted to any dilatory tactics, there would, in our view, be no reason or justification to penalize the assessee by recovering the demand in the meantime. Undoubtedly, where the assessee has been responsible for the delay in the disposal of the stay application, such an assessee cannot be heard to complain if the Revenue were to initiate steps for recovery. But the vice of the circular of the Board dated 1 January 2013 is that it mandates that steps for recovery must be initiated thirty days after the filing of the appeal if no stay is granted. Counsel appearing on behalf of the Revenue submits that the Board has directed that a period of thirty days should be allowed to lapse after the filing of the a....
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....e such success, the decision of the Tribunal was not implemented on the ground that the Customs Authorities had decided to go in appeal against the decision of the Tribunal. It was in this background, the Supreme Court had observed that if the authorities were of the opinion that goods were not to be released pending the appeal, the course open for them is to obtain an order of stay or other appropriate direction from the Tribunal or the Supreme Court, as the case may be, and without obtaining such order, they cannot refuse to implement the order under appeal. On this background, it was observed that mere filing of appeal does not operate as a stay or suspension of the order appealed against. (ii) Once a duty is confirmed by the adjudicating authority, appeal would be competent only if the entire amount with penalty and interest is deposited with the Revenue. Only if the appellate forum waives pre-deposit, the appeal can be pursued without satisfying such demand. It was contended that what is required for waiver of pre-deposit is undue hardship which has been explained by the Supreme Court in various decisions including in the case of Benara Valves Ltd. v. Commissioner of Centra....
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....nd examined as to what extent the ground of arbitrariness can be the basis for striking down a statutory provision as being violation of Article 14 of the Constitution. In the present case, however, we are not concerned with the vires of any statute. (v) Decision in the case of Khoday Distilleries Ltd. v. State of Karnataka, (1996) 10 SCC 304 was pressed in service for the same purpose. Here also, we notice that the decision was rendered by the Supreme Court in the background of challenge to a statutory rule as being violative of Article l4 of the Constitution on the ground of arbitrariness. 10. We may record that in the context of challenge to the circular, the petitioners have, in addition to joining the Departmental authorities, also joined C.B.E. & C. In number of matters, C.B.E. & C. was duly served, but there was no representation on behalf of the Board. We have, looking to the fact that number of petitions have cropped up only on the issue of recoveries initiated on the basis of the impugned circular, heard the learned counsel for the parties for final disposal of the petition at this stage itself. 11. We may first deal with the challenge to the very power of the C.....
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....the Board to issue instructions, orders and directions for the purpose of uniformity in classification of goods or with respect to levy of duty thereon or for the implementation of any other provisions of the Act or any other law for the time being in force insofar as they relate to any prohibition, restriction or procedure for import or exports of goods. The power of the Board, therefore, to issue any orders, instructions, or directions for the implementation of the provisions of the Act if the Board considers it necessary and expedient to do so cannot be questioned. Recovery of customs duty with or without interest and penalty would certainly arise out of the provisions made in the Customs Act, 1962 and the Rules made thereunder. For example, Section 142 of the Customs Act pertains to recovery of sums to the Government. The Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995 provides for the procedure for such recoveries. In that view of the matter, power of the Board to issue such instructions for recovery of customs duty would flow from Section 151A of the Customs Act, 1962. 12. Section 37B of the Central Excise Act, 1944, however, is n....
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....mpowers the Board to issue written instructions providing for any incidental or supplementary matters consistent with the provisions of the Act and the Rules. Thus, under Rule 31 of the Central Excise Rules, 2002, the Board has sufficiently wide powers for issuing instructions which may provide for any incidental or supplementary matters, only limiting condition being that such instruction must be consistent with the provisions of the Act and the Central Excise Rules, 2002. Issuing guidelines for the purpose of uniformity in recovery procedure would certainly fall within incidental or supplementary matters. In that view of the matter, we cannot accept the contention of the petitioners that the Board lacked power to issue the instructions in question. 14. This brings us to the validity of different instructions contained in the impugned circular. In this context, we may recall that the petitioners did not take any objection with respect to the conditions contained in clauses 1, 2, 4, 5, 7 and 8. They however, opposed the legality of the instructions contained in clauses 3, 6, 9, 10 and 11 of para 2 of the said circular. 15. Various instructions contained in said para 2 can be ....
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.... governs a situation where an appeal lies before the Tribunal against an order-in-original issued by the Commissioner. Such appeal is filed along with stay application. Here also, it is provided that recovery should be initiated after 30 days of filing of the appeal, if no stay is granted or after disposal of the stay petition, whichever is earlier. Clause 9 covers a situation where a second appeal against an order of the Appellate Commissioner confirming the demand for the first time is filed. In essence, therefore, the appeal before the Tribunal is a second appeal. Insofar as the assessee is concerned, it happens to be a first challenge to the appellate order which would have reversed the order of the adjudicating authority. In such a situation also, it is provided that recovery would be initiated after 30 days of filing of appeal or disposal of the stay application whichever is earlier. Clause 10 pertains to a second appeal before the Tribunal at the instance of the assessee which appeal is directed against the order of the Appellate Commissioner confirming the order of the adjudicating authority. In such a situation, it is provided that recovery should be initiated immediately ....
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....easons which may be completely beyond the control of the assessee as well as the Revenue which may lead to non-disposal of the stay application. In fact, in majority of the cases which have arisen in these petitions, such reasons can be traced. It is not unknown that because of paucity of time either the Appellate Commissioners or the Tribunal are unable to dispose of stay applications within a short-time. To expect such appellate forum to invariably to do so within 30 days of filing of such proceedings would, under the prevailing conditions, be quite impossible. Before us, large number of cases have come in the present group for recovery where the petitioners have preferred their appeals either before the appellate authority or the Tribunal. Such appeals are filed within the period of limitation. Such appeals are accompanied by stay applications. Such stay applications have not been taken up for hearing by the Commissioner or the Tribunal simply because of want of time. In some cases, the Commissioner has granted date of first hearing after several months of the filing of the appeal and the stay applications. On many such dates, either due to non-availability of the Commissioner o....
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....r a order which relates to any duty demanded in respect of goods which are not under the control of the Central Excise authorities or penalty levied under the Central Excise Act, the person desirous of appealing against such a decision pending appeal shall deposit with the adjudicating authority the duty demanded or the penalty levied. Proviso to Section 35F of the Act provides that the Commissioner (Appeals) or the Tribunal is of the opinion that deposit of duty or penalty would cause undue hardship to such a person, may dispense with such deposit subject to such conditions as may be deemed fit so as to safeguard the interest of the Revenue. Further proviso to Section 35F provides that where an application is filed before the Commissioner (Appeals) for dispensing with the deposit, the Commissioner (Appeals) shall where it is possible to do so, decide such application within 30 days from the date of its filing. Similar provisions have also been made under the Customs Act, 1962 pertaining to pre-deposit pending appeal either before the Commissioner (Appeals) or the Tribunal and its waiver at the discretion of the appellate forum on the ground of undue hardship. Provisions of Section....
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....ons why such application could not be concluded, recovery must be commenced 30 days after filing of such an application and be completed cannot be countenanced. In our opinion, such procedure would be wholly unreasonable and arbitrary for the following reasons : (i) That the C.B.E. & C. itself having recognized that an assessee should be provided with reasonable opportunity to question an adverse decision before going ahead with the recovery thereof cannot thereafter put an unreasonable condition that the entire onus would be on the assessee to obtain stay from the higher forum or the Tribunal within 30 days from the filing of the application. (ii) The instruction completely ignores the possibility that such application may not be heard and disposed of within such short time permitted for variety of reasons which may not be attributable to the assessee. (iii) The instruction ignores a situation where the stay application may not be heard due to the reasons entirely attributable to the Revenue. In such a situation to permit recovery would be allowing the Revenue to take advantage of its own wrong. (iv) The instruction also fails to recognize the hard realities. As alread....
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....nt footing. It envisages a second appeal before the Tribunal at the hands of the assessee. Such a situation would arise when a demand is confirmed by the adjudicating authority and the assessee's appeal is also rejected by the Appellate Commissioner. Having lost at two stages, and when the assessee is in second appeal before the Tribunal, C.B.E. & C. circular distinguishes such a case from other similar appeals before the Tribunal covered under Condition Nos. 3, 6 and 9. We also do not find that such distinction is not reasonable. Therefore, the requirement that in such a case the Revenue must wait for the full period of limitation to see whether the assessee files the appeal with stay application, is not provided, in such a situation, we do not think it is drastically incorrect or improper. However, to provide that recovery should commence immediately after the order is passed by the Appellate Commissioner, in our view, would not be permissible. We say so for the following reasons : (i) Appeal in such a situation is before the Tribunal. We cannot shut our eyes to the hard realities that the Tribunal as a machinery, may not always be available to an assessee to knock at the door....
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....ds on a different footing. It covers a case where decision is rendered by the Tribunal or the High Court and further appeal is available either before the High Court or the Supreme Court. In such a situation, the circular envisages immediate recovery if no stay is in operation. We are inclined to uphold this condition for the following reasons : (i) Situation covered in condition No. 11 would arise only once either the Tribunal in first or second appeal or the High Court in second or third appeal has decided against the assessee. The order of the Tribunal would be appealable either before the High Court or the Supreme Court depending on the subject matter of the issue under appeal. Such appeal would be available only on a substantial question of law, the Tribunal being the final fact finding authority. If the High Court has already decided such an appeal, there would be no further statutory appeal before the Supreme Court, but only special leave petition under Article 136 of the Constitution which also would be an extraordinary remedy. In such a situation, to expect the Revenue to stay its hands off either for the full period of limitation and then after watching the outcome of ....
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....missioner (Appeals), 1997 (2) GLR 913 = 1998 (97) E.L.T. 424 (Guj.). "16. Having regard to the all these circumstances, we find that the appellate authorities are required to be directed that whenever such applications for stay and/or waiver of condition of pre-deposit are made, they shall hear expeditiously and pass appropriate orders expeditiously and preferably within a month and if it is not possible to pass final orders on such applications, it can pass appropriate ad interim orders subject to such conditions as may be necessary at that stage so as to see that interest of both the sides are taken care and the litigant does not carry a feeling that his request did not receive timely attention by the judicial forum. 17. 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. 18. We, therefore, direct that the appellate authorities shall pass appropriate orders on the stay applications expeditiously and preferably within four weeks of such a....
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....ar and decide every appeal within a period of three years from the date on which such appeal is filed : Provided that where an order of stay is made in any proceedings relating to an appeal filed under sub-section (1) of section 35-B, the Appellate Tribunal shall dispose of the appeal within a period of one hundred and eighty days from the date of such order : Provided further that if such 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." Sub-section (2A) of Section 35C thus requires the Tribunal, as far as it is possible, to hear and decide every appeal within three years. Proviso thereto requires the Tribunal to dispose of the appeal within 180 days wherever any order of stay is granted in the proceedings. Further proviso provides that if such appeal is not disposed of within the specified period, stay order shall on the expiry of the said period stand vacated. In the Circular dated 26-5-2010, C.B.E. & C. in this context provided that : "4. A harmonious reading of the statutory provision and judicial pronouncements in the matter would mean that while the Tribunals are expecte....
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....ore 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. 34. We may now advert to individual cases. (1) In Special Civil Application No. 1124 of 2013, as we have noticed, the petition is filed by the Gujarat State Fertilizer Co. Ltd. Tax Appeal is pending before the High Court. In the stay application, notice is also issued. Previously, the entire issue was decided in favour of the petitioner right upto the stage of the Supreme Court. Subsequently, depending on a later decision of the Supreme Court where certain observations were made, the entire issue is reopened by the Revenue. Considering such special facts, we are inclined to stay the further recovery till the High Court disposes of the stay application. Under the circumstances, the impugned notice for recovery is quashed. (2) In Special Civil Application No. 977 of 2013, following details arise : 1. Date/(s) of impugned notice of recovery : 16-1-2013 2. Date/(s) of order/(s)-in-original : 14-10-2010 3. First App....
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....1-2013. 2. Date/(s) of order/(s)-in-original : (i) 1-9-2010, (ii) 5-4-2011, (iii) 16-2-2012. 3. First Appeal, whether before Commissioner (Appeals)/Tribunal : Commissioner (Appeals). 4. Appeal files within limitation and accompanied by stay application : Yes. 5. Status of such appeal and stay application : Pending 6. If pending, the reasons why : No hearing has been granted by the Commissioner though the petitioner has not prayed for time. Applying the above principles, the impugned recovery notices are quashed. (7) In Special Civil Application No. 1511 of 2013, following details arise : 1. Date/(s) of impugned notice of recovery : 8-1-2013 and 21-1-2013. 2. Date/(s) of order/(s)-in-original : 28-11-2008. 3. First Appeal, whether before Commissioner (Appeals)/Tribunal : Tribunal The Tribunal had already granted stay on condition to deposit 50% of the amount. Such condition was also fulfilled by the petitioner. However, since the Tribunal could not dispose of the appeal within six months as envisaged in Section 35C(2A) of the Central Excise Act, 1944, the stay would stand vacated. The Department is therefore proceeding with the recovery. It is pointe....
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....tay application : Yes. 5. Status of such appeal and stay application : Pending 6. If pending, the reasons why : The Tribunal was not available on the date of hearing of the appeal. Applying the above principles, the impugned recovery notice is quashed. (12) In Special Civil Application No. 1816 of 2013, following details arise : 1. Date/(s) of impugned notice of recovery : January 2013 and February 2013. 2. Date/(s) of order/(s)-in-original : In 22 matters ranging from 31-3-2009 to 23-11-2012. 3. First Appeal, whether before Commissioner (Appeals)/Tribunal : Commissioner (Appeals) & Central Government. 4. Appeal filed within limitation and accompanied by stay application : Yes. 5. Status of such appeal and stay application : Either pending or heard the application for stay, but no final order is passed. 6. If pending, the reasons why : Commissioner (Appeals) has not passed final order though no adjournment was sought by the petitioner. Applying the above principles, the impugned recovery notices are quashed. (13) In Special Civil Application Nos. 1818 and 1978 of 2013, following details arise : Both these petitions involve various demands conf....
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....4. Appeal filed within limitation and accompanied by stay application : Yes. 5. Status of such appeal and stay application : Pending 6. If pending, the reasons why : Non-availability of the Division Bench of the Tribunal. Applying the above principles, the impugned recovery notices are quashed. (17) In Special Civil Application No. 2213 of 2013, following details arise : 1. Date/(s) of impugned notice of recovery : 17-1-2013 and 7-2-2013 2. Date/(s) of order/(s)-in-original : 3-2-2012 3. First Appeal, whether before Commissioner (Appeals)/Tribunal : Commissioner (Appeals) 4. Appeal filed within limitation and accompanied by stay application : Yes. 5. Status of such appeal and stay application : Pending 6. If pending, the reasons why : Not yet decided by the Commissioner. Applying the above principles, the impugned recovery notices are quashed. (18) In Special Civil Application No. 2236 of 2013, following details arise : In this petition, the petitioner has challenged the recovery notice dated 6-2-2013, which refers to several separate orders confirming the duty demands. Some of these proceedings are pending before the Commissioner ....
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.... of 2013, following details arise : The petitioner has challenged the action of recoveries initiated by the respondents. Against different orders passed by the Additional Commissioner of Service Tax, the petitioner has preferred appeals before the Commissioner (Appeals) within the period of limitation along with stay application. Such proceedings were fixed for hearing on 22-2-2013. At that stage, the respondents attached the bank account of the petitioner and also withdrew unilaterally an amount of Rs. 54,88,000/-. We notice that the petitioner has not prayed for any time before the appellate authority on the date of hearing. It is stated that the petitioner's representative had made his submissions. It appears that stay application along with appeal could not be disposed of immediately. We are seriously concerned with the manner in which the respondents not only attached the bank account of the petitioner but unilaterally recovered a hefty sum from such account. Under the circumstances, following the ratio laid down hereinabove, recovery proceedings are quashed and the amount of Rs. 54,88,000/- withdrawn from the Bank account shall be returned to the petitioner by the respo....
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....peals)/Tribunal : Tribunal. 4. Appeal filed within limitation and accompanied by stay application : Yes. 5. Status of such appeal and stay application : Pending 6. If pending, the reasons why : No-availability of Division Bench of the Tribunal. Applying the above principles, the impugned recovery notice is quashed. (25) In Special Civil Application No. 2475 of 2013, following details arise : 1. Date/(s) of impugned notice of recovery : 15-2-2013 2. Date/(s) of order/(s)-in-original : 6-3-2012. 3. First Appeal, whether before Commissioner (Appeals)/ Tribunal : Commissioner (Appeals). 4. Appeal filed within limitation and accompanied by stay application : Yes. 5. Status of such appeal and stay application : Pending 6. If pending, the reasons why : Though hearing has been concluded on 13-12-2012, no order has been passed in the matter. Applying the above principles, the impugned recovery notice is quashed. (26) In Special Civil Application No. 2478 of 2013, following details arise : 1. Date/(s) of impugned notice of recovery : 12-2-2013. 2. Date/(s) of order/(s)-in-original : 3-1-2012 and 14-5-2012. 3. First Appeal, whether b....