Commissioner of Central Excise Jaipur-I vs Chotelal Virendra Kumar

We have heard learned counsel appearing for the Department and learned counsel appearing for the assessee.

This Central Excise Appeal under Section 35G of the Central Excise Act, 1944 (for short ''the Act of 1944'') read with Section 83 of the Finance Act, 1994, is reported to be delayed by 76 days.

We have gone through the grounds for condonation of delay and find that the delay has been explained on good and sufficient grounds. The delay condonation application is accordingly allowed. The delay in filing the appeal is condoned.

By the impugned order dated 23.01.2014, the Customs, Excise & Service Tax Appellate Tribunal (for short, ''the CESTAT'') has, on an application for extending the stay order which had expired in view of the provisions of Section 35C(2A) of the Act of 1944, extended the operation of the stay granted to the respondent, to operate during pendency of the appeal.

The appeal has been preferred on a question of law as follows:-

"Whether the Hon''ble CESTAT has erred in granting waiver of pre-deposit of assessed demand in favour of the respondent during pendency of the appeal thereby extending the period of stay beyond 365 days ignoring the recent amendment to Section 35C of the Central Excise Act, 1944?"

The question of law raised in the appeal seeks interpretation of Section 35C of the Act of 1944. The Supreme Court in 2005 (123) ECR 6 (SC), had held as follows:-

"6. The sub-section which was introduced in terrorem cannot be construed as punishing the assessees for matters which may be completely beyond their control. For example, many of the Tribunals are not constituted and it is not possible for such Tribunals to dispose of matters. Occasionally by reason of other administrative exigencies for which the assessee cannot be held liable, the stay applications are not disposed within the time specified. The reasoning of the Tribunal expressed in the impugned order and as expressed in the Larger Bench matter, namely, IPCL v. Commissioner of Central Excise, Vadodara (supra) cannot be faulted. However we should not be understood as holding that any latitude is given to the Tribunal to extend the period of stay except on good cause and only if the Tribunal is satisfied that the matter could not be heard and disposed of by reason of the fault of the Tribunal for reasons not attributable to the assessee."

A third Proviso was added in Section 35C(2A) by the Finance Act, 2013 as follows:-

"Provided also that where such appeal is not disposed of within the period specified in the first proviso, the Appellate Tribunal may, on an application made in this behalf by a party and on being satisfied that the delay in disposing of the appeal is not attributable to such party, extend the period of stay to such further period, as it thinks fit, not exceeding one hundred and eighty-five days, and in case the appeal is not so disposed of within the total period of three hundred and six-five days from the date of order referred to in the first proviso, the stay order shall, on the expiry of the said period, stand vacated."

It is submitted by learned counsel appearing for the Department that the only reason given by the CESTAT for extending the stay order to operate until decision of the appeal, is that the appeal could not be disposed of for no fault of the petitioner, and that in view of pendency of several older appeals, the stay order deserves to be extended till the hearing of appeal.

It is submitted by learned counsel appearing for the Department that the question raised in the present case is covered by the judgment of the Allahabad High Court in Commissioner of Cus. and C. Ex. Vs. J.P. Transformers, , and the judgment of the Karnataka High Court in The Commissioner of Income Tax C.R. Building, Queens Road Bangalore and The Deputy Commissioner of Income Tax Circle - 11(3), C.R. Building, Queens Road Bangalore Vs. M/s Ecom Gill Coffee Trading Pvt. Ltd., No. 489/11, Borewell Road Whitefield Bangalore - 560066, . In both these cases, the Courts have held that the Appellate Tribunal committed a positive error in consciously extending the interim order of stay granted in the pending appeal beyond the period of 365 days, which is the outer limit stipulated in the statutory provisions.

Whereas the Allahabad High Court, in view of the fact that there was large pendency of appeals in CESTAT, disposed of the appeal with direction to the CESTAT to decide the appeal expeditiously and if possible, within a period of six months from the date of last extension, allowed waiver of pre-deposit to continue upto the period of six months.

We are informed that thousands of appeals are pending in the CESTAT, arising from six States, for which earlier there was only one Bench and only recently a second Bench has been constituted. The final hearing of the appeals ordinarily takes about three years in CESTAT, and that in the present case also, hearing of appeal, filed in the year 2012, will take some more time.

We are also informed that in the Finance Act, 2014, with effect from 01.10.2014, Section 35C(2A) has been omitted and that appeals can be filed now for hearing with a deposit of 10% of the demand.

Considering the facts and circumstances of the case and the pendency of the appeals in the CESTAT, New Delhi, we dispose of this appeal, in accordance with the view taken by the Allahabad High Court, with directions to the CESTAT, New Delhi, to decide the appeal as expeditiously as possible, and preferably within a period of six months from today. The waiver of pre-deposit will be valid upto the period of six months from today. We expect that the appeal will be decided on or before 23.05.2015. This order has been passed with an understanding that the assessee will not seek any unavoidable adjournment.