Commissioner Of Central Excise ... vs Brew Force Machine Pvt. Ltd.
2015 Latest Caselaw 5450 Del

$~
*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+                          CEAC 27/2015
                                         Date of decision: 31st July, 2015

      COMMISSIONER OF CENTRAL EXCISE, DELHI...Petitioner
                  Through  Mr. Satish Kumar, Sr. Standing
                  Counsel.

                  Versus
      BREW FORCE MACHINE PVT. LTD.                      ..... Respondent
                  Through

      CORAM:
      HON'BLE MR. JUSTICE SANJIV KHANNA
      HON'BLE DR. JUSTICE S. MURALIDHAR
      HON'BLE MR. JUSTICE VIBHU BAKHRU

       SANJIV KHANNA, J.

The question referred to this Full Bench pertains to power

of the Customs, Excise and Service Tax Appellate Tribunal

(CESTAT) to grant or extend stay of recovery of demand

beyond 365 days from the date when the stay order was initially

passed, notwithstanding that the delay in disposal of the appeal

was not attributable to an assessee.

2. In CEAC 18/2015, Commissioner of Central Excise,

Delhi Vs. Haldiram India Pvt. Ltd. decided on 5th May, 2015, a

Division Bench of this Court reversed the decision of a larger

Bench of the Tribunal in Haldiram India Pvt. Ltd. Vs.

Commissioner of Central Excise, Delhi 2014 (309) E.L.T.

(Tri.-LB) holding that an identically phrased provision in the

Income Tax Act, 1961 (IT Act) was interpreted by a Division

Bench of this Court in CIT Vs. Maruti Suzuki (India) Ltd. 2014

(362) ITR 215 to hold that the Income Tax Appellate Tribunal

did not have power and jurisdiction to extend an interim stay

order beyond 365 days, even if the assessee was not at fault.

3. A Division Bench of this Court while hearing arguments

in CEAC 27/2015, Commissioner of Central Excise, Delhi Vs.

Brew Force Machine Pvt. Ltd., prima facie, felt that the

observations in Haldiram India Pvt. Ltd. (supra) may not be

correct and appropriate as Section 35C of the Central Excise

Act, 1944 (CE Act) is not identically worded and pari materia to

the third proviso to Section 254(2A) of the IT Act, as substituted

by Finance Act, 2008 with effect from 1st October, 2008. The

amendments/substitution by the Finance Act, 2008 had not been

incorporated and enacted in Section 35C (2A) of the CE Act.

The reference order takes on record the legal ratio of the

judgment dated 19th May, 2015 in W.P.(C) 1334/2015, Pepsi

Foods Pvt. Ltd. Vs. Assistant Commissioner of Income Tax and

the judgment of the Bombay High Court in Narang Overseas P.

Ltd. Vs. Income Tax Appellate Tribunal, Mumbai 2007 (217)

ELT 497 (Bom.) to observe that CEGAT in terms of Section

35C (2A) is not denuded of the power to extend the stay beyond

365 days, when the appellant-assessee is not at fault.

4. In order to appreciate the controversy, we would like to

reproduce Section 35C (2A) of the CE Act and Section 254 (2A)

of the IT Act, which read as under:-

"35C (2A) The Appellate Tribunal shall, where it is possible to do so, hear 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 proceeding relating to an appeal filed under sub-section (1) of section 35B, 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.

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 respondent and on being satisfied that the delay in disposing of the appeal is not attributable to such respondent, 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 sixty-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."

xxxx

"254(2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-section (1) [or sub- section (2)] [or sub-section (2A)] of section 253:

Provided that the Appellate Tribunal may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal filed under sub-section (1) of section 253, for a period not exceeding one hundred and eighty days from the date of such order and the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order:

Provided further that where such appeal is not so disposed of within the said period of stay as specified in the order of stay, the Appellate Tribunal may, on an application made in this behalf by the assessee and on being satisfied that the delay in disposing of the appeal is not attributable to the assessee, extend the period of stay, or pass an order of stay for a further period or periods as it thinks fit; so, however, that the aggregate of the period originally allowed and the period or periods so extended or allowed shall not, in any case, exceed three hundred and sixty-five days and the Appellate Tribunal shall dispose of the appeal within the period or periods of stay so extended or allowed:

Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, which shall not, in any case, exceed three hundred and sixty-five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee."

(emphasis supplied)

5. The difference in the language of the third proviso is

apparent and striking. The words "even if the delay in disposing

of the appeal is not attributable to the assessee" are missing and

not incorporated in CE Act. Thus, the bar and prohibition

created by enactment of the Finance Act, 2008 to the third

proviso to Section 254 (2A), would not be applicable to appeals

preferred under Section 35C (2A) of the CE Act before CEGAT.

6. In Maruti Suzuki (India) Ltd. (supra) the precise

question, which arose for consideration was the legal effect of

the amended third proviso to Section 254 (2A) of the IT Act.

The Division Bench noticed several judicial authorities and

decisions of the Tribunal in which it was held that the Income

Tax Appellate Tribunal in terms of earlier third proviso i.e.

before the Finance Act, 2008, had the power and jurisdiction to

grant stay beyond the period of 365 days from the date when

stay was first granted if the assessee was not at fault. Taking

notice of the amendment and substitution made by inserting the

expression "even if the delay in disposing of appeal is not

attributable to the assessee" it has been held as under:-

"17. In these circumstances, we have examined whether we can read down the third proviso, by applying principles of equity, justice and fair play and also the principle that the court should interpret a provision in a manner that it does not lead to arbitrary results or make it violative of Article 14 or would render it unconstitutional. However, it is clear to us that the legislative mandate has to be respected and the courts do not legislate but interpret the statute as a legislative edict. The third proviso after amendment, undoubtedly bars and prohibits the tribunal from extending interim stay order beyond 365 days. It stipulates deemed vacation and imposes no fault consequences in strict terms. The language is clear and therefore has to be respected. However, the provision does not bar or prohibit an assessee from approaching the High Court by way of writ petition for continuation, extension or grant of stay. Fairly, the standing counsel for Revenue accepts and admits that in spite of Section 254(2A), the High Court has power to grant and extend stay where the appeal is pending before the tribunal. The constitutional

power and right is available and has not and cannot be curtailed. The powers of the High Court under Articles 226 and 227 form a part and parcel of the basic structure of the Constitution and cannot be over written and nullified as held by the Constitutional Bench in L. Chandra Kumar versus Union of India, (1997) 3 SCC

261. Thus, the High Court in appropriate matters can grant or extend stay even when the tribunal has not been able to dispose of an appeal within 365 days from the date of grant of initial stay. This perhaps appears to be and apparently is the intention of the Parliament. High Court while granting or rejecting the writ petition will examine the factual matrix, record reasons as to who is to be blamed and is responsible for the default and can also issue appropriate directions or orders for expeditious and early disposal of the appeal. The provision will propel and ensure that the tribunal will try and dispose of and decide appeals within 365 days of the grant of stay order. The Bombay High Court in Jethmal Faujimal Soni vs. Income Tax Appellate Tribunal [2011] 333 ITR 96, had occasion to deal with a similar situation and entertained the writ petition. In the said case constitutional validity of the third proviso inserted in Section 254(2A) of the Act by Finance Act, 2008, w.e.f. 1st October, 2008 was challenged It was observed that the proviso enacted a stringent provision as a result of which even if the delay in disposing of the appeal was/is not attributable to the assessee, the stay stands vacated after 365 days. Thus, the tribunal was/is under binding duty and obligation to dispose of the appeal within the said time, particularly when the fault was not on the part of the assessee. In the said case, directions were issued for expeditious disposal of the appeal and it was also directed that the Revenue shall not take coercive steps for enforcing demand subject matter of the appeal."

7. The third proviso to Section 254 (2A) was substituted by

Finance Act, 2008 with effect from 1st October, 2008 and prior to its

insertion was as under:-

"Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, the order of stay shall stand vacated after the expiry of such period or periods."

Referring to the statutory provisions as they existed prior to

substitution of third proviso by Finance Act, 2008, in Maruti Suzuki

(India) Ltd. (supra), it has been observed:-

"7. The effect of the added provisos as they then existed was considered by the Bombay High Court in Narang Overseas P. Ltd.v. ITAT and others (2007) 295 ITR 22 (Bom) and it was held that the provisos and the Section did not exclude or negate the power of the tribunal to grant relief after the period of 180 days. The intent of the Parliament was not to denude the tribunal of its incidental power to continue the interim reliefs and the mischief which the amendment sought to curtail was long delay and disposal of the proceedings where interim relief was obtained by the assessee. The second proviso read in a reasonable manner was to avoid and check this mischief and not an arbitrary mandate to deny an assessee continuation of interim relief beyond 180 days, when he was not at fault. Amendment of 2007 had extended the period of interim relief to 365 days with the intent that the tribunal should take note of the delay and it was not with the objective to defeat the rights of the assessee when the appeal could not be disposed of even when there was no omission or failure on the assessee's part but either for failure of the tribunal or acts of the Revenue.

8. Revenue did prefer an appeal against the said judgment but the same was disposed of as infructuous, leaving the question of law open. However, we find that the ratio of the said decision was acceptable and in accordance with law, as identical and pari materia provision of the CE Act was examined by the Supreme Court in Commissioner of Customs and Central Excise, Ahmedabad v. Kumar Cotton Mills Pvt. Ltd. (2005) 180 ELT 434 (SC) and approving the decision of the Larger Bench of the Tribunal in IPCL's case (supra), it was observed as under:-

"3. The provision has clearly been made for the purpose of curbing the dilatory tactics of those assesses who, having got an interim order in their favour, seek to continue the interim order by delaying the disposal of the proceedings. Thus, depriving the revenue not only of the benefit of the assessed value but also a decision on points which may have impact on other pending matters.

Xxxxx

6. The sub-section which was introduced in terrorem cannot be construed as punishing the assesses for

matters which may be completed 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 asessee cannot be held liable, the stay applications are not disposed of 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 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."

9. We are aware that the Karnataka High Court in CIT vs. Ecom Gill Coffee Trading (P) Ltd. [2012] 252 CTR 281 (Kar.) has dissented from the view taken by Bombay High Court in Narang Overseas Pvt. Ltd. (supra). However, the said decision was dealing with and interpreting provisos to Section 254 (2A) after amendment by way of Finance Act, 2008 w.e.f. 1st October, 2008. The said amendment has made substantial difference and has to be duly noted as reflecting a different legislative intent consequent to the amendment. At this stage, we would like to take notice of the decision of Punjab and Haryana High court in PML Industries Ltd. vs. Commissioner of Central Excise 2013 (30) STR 113 (P&H), relating to provisions of Section 35(2A) of the CE Act. In the said decision after extensively referring to the case law on the subject and applying the doctrine of reading down, the High Court has held that the circular in question, which stipulated that the demand if not stayed by the tribunal within 30 days would be recovered, should be struck down. It was observed:-

"52. The assessee having preferred appeal and that Tribunal being satisfied that condition for dispensing with the pre-deposit of duty demanded and penalty levied is made out, is compelled to pay the duty demanded and penalty levied, if the appeal is not decided within 180 days. The assessee has no control in respect of matters pending before the Tribunal; in the matter of availability of infrastructure; the members of the Tribunal and the workload. Therefore, for the reason that the Tribunal is not able to decide appeal within 180 days, the vacation of stay is a harsh and onerous and unreasonable condition. The condition of vacation of stay for the inability of the Tribunal to decide the appeal is burdening the assessee for no fault

of his. Such a condition is onerous and renders the right of appeal as illusory. An order passed by a judicial forum is sought to be annulled for no fault of assessee. Therefore, in terms of judgments in Anant Mills Ltd. and Seth Nandlal cases (supra), such condition of automatic vacation of stay on the expiry of 180 days, has to be read down to mean that after 180 days the Revenue has a right to bring to the notice of the Tribunal the conduct of the assessee in delay or avoiding the decision of appeal, so as to warrant an order of vacation of stay. If the provision is not read down in the manner mentioned above, such condition suffers from illegality rendering the right of appeal as redundant."

10. The third proviso to section 254(2A) after the amendment in 2008 vide Finance Ac, 2008 for the sake of convenience, is again reproduced below:

"Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, which shall not, in any case, exceed three hundred and sixty-five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee."

The relevant portion of the proviso has been underlined for the purpose of clarity and appreciation.

11. We have quoted above, relevant portion of the decision of the Supreme Court in Kumar Cotton Mills Pvt. Ltd. (supra). The said decision had drawn distinction and held that the proviso did not prohibit the tribunal from extending the interim order beyond 365/180 days if the assessee was not at fault or the delay in disposal was not attributable to him. This aspect was also highlighted in Narang Overseas Pvt. Ltd. (supra). It was held that the provisos as they existed did not bar or prohibit the tribunal from extending the stay order. However, the Legislature in view of the said judgment and keeping in view the language of the existing provisions and the reasoning given in the said judgments has specifically introduced and added the words "not attributable to the assessee". This amendment/substitution made to the third proviso is significant. The said words are not redundant or inconsequential and in fact have been added in view of the ratio and the reasoning given in the aforesaid two decisions. This clearly underscores and highlights the intention of the

Legislature."

Thus, it is clear that in Maruti Suzuki (India) Ltd., the Division

Bench was of the opinion that as per the earlier provisions before

substitution of the third proviso by Finance Act, 2008, Income Tax

Appellate Tribunal had power and authority to extend stay of

demand beyond 365 days and the provisions as they then existed

were to curtail long delays and ensure expeditious disposal of the

appellate proceedings, but without curtailment of power to grant stay

beyond 365 days. Reliance was placed on the observations of the

Supreme Court in Commissioner of Customs and Central Excise

Vs. Kumar Cotton Mills Pvt. Ltd. [2005] 180 ELT 434 (SC), the

relevant portion of which was quoted.

8. It is, therefore, clear that the legislature had by Finance Act,

2008 inserted the words „even if the delay in disposing of the appeal

is not attributable to the assessee‟ in the third proviso to Section 254

(2A) of the IT Act, but no such amendment or substitution was made

in Section 35C (2A) of the CE Act. The ratio and decision in the

case of Maruti Suzuki (India) Ltd., therefore, would not be

applicable to CEGAT while dealing with an application for stay or

their power and jurisdiction to grant stay beyond 365 days, when the

assessee is not responsible, under Section 35C (2A) of the CE Act.

Therefore, we are unable to agree with the reasoning of the Division

Bench of this Court in Haldiram India Pvt. Ltd. observing that the

ratio of the aforesaid decision in Maruti Suzuki (India) Ltd. would

apply even to Section 35C(2A) of the CE Act. The decision of the

Division Bench in Haldiram India Pvt. Ltd. is hereby overruled.

9. In view of the limited question involved, we are not examining

other aspects. However, for the purpose of record, we note that a

Division Bench of this Court in the case of Pepsi Foods Pvt. Ltd.

(supra) has struck down the amendments inserted/substituted by

Finance Act, 2008 as being violative of Article 14 of the Constitution

of India. The question raised before us, however, is different. The

reference is accordingly answered. The appeal will be listed before

the Division Bench for consideration and orders on 25th August,

2015.

(SANJIV KHANNA) JUDGE

(S. MURALIDHAR) JUDGE

(VIBHU BAKHRU) JUDGE JULY 31, 2015 NA