Top Security Ltd. vs Commissioner of Central Excise and Service Tax

This Appeal arises out an order passed on 18 September 2013 by the Customs, Excise and Service Tax Appellate Tribunal. That order reads as under :

"The Tribunal vide Stay Order No. S/951/13//CSTB-C-1 dated 18.6.2013 directed the Applicants to deposit the balance amount of Service tax along with interest within a period of two weeks. Subsequently, Applicants sought time vide Misc. Order dated 10.07.2013 for weeks time was granted to comply with the conditions of the stay order. Today, learned counsel appeared on behalf of the Appellant submitted that Appellant had made deposited the amount of service tax but unable to deposit the amount of interest. As the Appellant had not complied fully with the condition of the stay order. Therefore, the appeal is dismissed for non-compliance to the provisions of Section 35F of the Central Excise Act, read with Section 83 of the Finance Act However, Appellant shall have liberty to apply for restoration, in case the compliance with the condition of the stay order within eight weeks from today."

Thus, when the Appeal was filed by the Appellants it was entertained by the Tribunal. That Appeal challenged the order passed by the Commissioner of Central Excise and Service Tax, Pune-1. This order dated 31st October 2012 was challenged in the Appeal under section 86 of the Finance Act, 1994 filed in the said Tribunal. The Appeal was given a temporary registration number being ST/85563 of 2013.

In that Appeal, the period of dispute was 2010-11. Further, apprehending recovery by coercive means and insisting compliance with the condition of pre-deposit of entire tax amount, an application for stay was preferred in the Appeal by the appellant on which a stay order was passed on 18th June 2013 and a direction was issued to the appellants/applicants to deposit the balance amount of service tax along with interest within a period of two weeks. Time was extended by a further four weeks. However, on the Appellant''s pointing out to the Tribunal later that they have partially complied with the condition of deposit of the amount of service tax and they could not deposit the amount of interest, the Tribunal found that the compliance is partial and not complete, it proceeded to dismiss the appeal for non-compliance of section 35F of the Central Excise Act, 1944 read with section 83 of the Finance Act, 1994. The appellants were given liberty to apply for restoration but, that was also conditional. The condition was that the stay order should be complied with within eight weeks from 18 September 2013.

It is reported that a such compliance could not be made and therefore, the Appeal stood dismissed without any adjudication on merits.

Mr. Shroff learned senior counsel appearing on behalf of the Appellant invited our attention to the above provisions of the enactment to submit that there is no power in the Tribunal to dismiss an Appeal either for want of prosecution or for non-compliance with the conditional order. The appeal must be adjudicated on merits irrespective of such non-compliance is the statutory mandate. According to Mr. Shroff, learned senior counsel, the law laid down by the Hon''ble Supreme Court in the case of Balaji Steel Re-Rolling Mills Vs. C.C.E. and Customs, (2014) 272 CTR 205 : (2014) 310 ELT 209 : (2015) 1 RCR(Civil) 436 concludes this issue.

Mr. Rao learned counsel appearing on behalf of the revenue on the other hand would submit that the Tribunal''s order requires no interference as it raises no substantial question of law.

After having heard both sides the Appeal requires to be admitted as it raises following substantial questions of law:

(a) "Whether Tribunal was right in law dismissing the Appellant''s Appeal under Section 35F of Central Excise Act, read with Section 83 of Finance Act, when modification of Application which was pending for hearing for modifying the order of the pre-deposit of Service Tax liability with interest;

(b) Whether the Tribunal was right in dismissing the Appellant''s Appeal under section 35F of Central Excise Act, read with Section 83 of Finance Act, without considering the financial hardship pleaded by the Appellant in the stay Application, Appeal as well as in a Modification Application.

(c) Whether the impugned order dated 18.9.2013 is prima facie sustainable in law when the Appellant had deposited the huge service tax amount of Rs. 1,52,08,411/- in the facts and circumstances of the case."

Since we have heard the parties extensively, we dispose of this Appeal with their consent finally.

We have perused the Paper Book including the impugned order. We have perused also the relevant statutory provisions and the judgment of the Hon''ble Supreme Court. Equally, we have also perused the common order delivered by us on 9th June 2015 in Central Excise Appeal No. 57 (RAJESH H.ARORA VS UNION OF INDIA & ors) and 58 of 2014 (M/s. RAVI RAJ PROCESSORS PVT.LTD vs. UNION OF INDIA & ors). We have also perused the order passed on 29th June, 2015 by us in Writ Petition No. 1319 of 2015 (M/s. SUPER LABEL MFG.CO VS THE UNION OF INDIA & anr). We have also noted that during the pendency of the present Appeal, the Appellant''s senior counsel submitted before the Court that the revenue has issued garnishee notices to the customers/clients of the appellants and have recovered certain amounts payable by the appellants. The recovery is effected directly from the clients/customers by the revenue. Mr. Rao learned counsel was given time by this Court''s order dated 23rd March 2015 to seek instructions.

Thereafter two affidavits have been filed one by Mr. Rao learned counsel and other in rejoinder by the appellants. Compliance is reported by the Appellant of the order passed by the Tribunal while granting a conditional stay. However, the revenue insists that such a compliance will not in any manner mean that further recurring liability is effaced or wiped out. The argument that neither the liability nor recovery of the sums in relation thereto can be stopped or interfered with merely because, an Appeal and for earlier period is pending.

We are not required to go into these contentions or any wider controversy simply because in this statutory Appeal, we are only concerned with the correctness of the order passed by the Tribunal dated 18th September 2013 and re-produced above. We find that in the light of the law laid down by the Hon''ble Supreme Court which we have reproduced in the two orders noted above, the impugned order of the Tribunal cannot be sustained. The statutory mandate is clear. So long as the Parliament has not intervened and to take any steps to amend or clarify the legal position, we are obliged to hold that the Tribunal could not have dismissed the appeal preferred by the appellants without adjudication on merits.

Additionally, we find that the Tribunal''s order granting conditional stay has been complied with albeit belatedly. We also find that presently the Appellant is facing difficulties on account of the attachment of their bank accounts. They have also found that certain recoveries and from their customers are effected by the revenue directly.

In these circumstances, without deciding the legal issue or questions in further details, we quash and set aside the impugned order. The Appeal of the Appellants shall stand restored to the file of the Tribunal for being decided on merits and in accordance with law. The Tribunal shall give opportunity of being heard to both sides.

Our order expresses no opinion on the merits of the controversy. Needless to clarify that for further duty liability, if there is a recovery and by coercive means, it would be open to the appellant to adopt such proceedings as are permissible in law in the event they feel aggrieved by the process initiated and undertaken. All contentions of both sides in that regard are kept open.

Ordinarily in such matters, we would have imposed costs but, bearing in mind the difficulties pointed out by Mr. Shroff learned senior counsel, we do not impose any costs.