2010 (8) TMI 212 - HC - Central Excise

Assessee filed an application for stay of the order - Tribunal granted stay of recovery vide Stay Order - subject to the assessee making a pre-deposit of 1/5th of the total amount of duty - after the amendment the stay order granted comes to an end at the expiry of 180th day from the date of the stay order. Rightly the assessee filed an application for extension. The Tribunal ought to have considered the application on merits and then should have passed the appropriate orders - order passed by the Tribunal is ex facie illegal and is liable to be set aside - matter remanded back to the Tribunal - appeal is allowed

Issues Involved:

1. Whether the Tribunal has the power to grant a stay of the impugned order in the absence of any express provision in the Act.
2. Whether the Tribunal has the power to extend the period of stay granted after the expiry of 180 days in view of the amendment Act 20 of 2002 introducing Section 2(A) to Section 35(C) of the Act.

Detailed Analysis:

Issue 1: Tribunal's Power to Grant Stay

Before the introduction of Section 2(A) and its provisos, there was no express provision in Section 35C of the Act for granting a stay of the impugned orders. However, the Tribunal was granting such stay orders based on its inherent powers. The Supreme Court in the case of Income Tax Officer v. M.K. Mohammed Kunhi (1969) held that the absence of express provisions in the Act does not preclude the Tribunal from granting stay orders during the pendency of an appeal. The Court reasoned that the right of appeal is a substantive right and the Tribunal has wide powers under Section 254(1) to pass such orders as it thinks fit, including granting stay orders to prevent the appeal from being rendered nugatory.

The Tribunal's inherent power to grant interim relief was also recognized in the case of Kumar Cotton Mills Private Limited v. Commissioner (2002), where it was held that the appellate authority has inherent power to grant interim relief in the exercise of its appellate jurisdiction. This principle was further supported by the judicial view that an express grant of statutory power carries with it by necessary implications the authority to use all reasonable means to make such a grant effective.

Accordingly, it was concluded that the appellate Tribunal has the power to grant stay as incidental and ancillary to its appellate jurisdiction, even in the absence of a specific provision conferring such power.

Issue 2: Tribunal's Power to Extend Stay

With the introduction of Section 2(A) by the Amendment Act 20 of 2002, a time limit of 180 days was prescribed for the disposal of appeals where an order of stay had been granted. The second proviso to Section 2(A) explicitly states that if the appeal is not disposed of within 180 days, the stay order shall stand vacated.

The Supreme Court in Commissioner of Cus. & C.Ex., Ahmedabad v. Kumar Cotton Mills Private Limited (2005) clarified that this provision was aimed at curbing dilatory tactics by assessees who, having obtained an interim order, seek to delay the disposal of proceedings. However, the Court also recognized that the Tribunal retains the power to extend the stay beyond 180 days if the delay in disposing of the appeal is not attributable to the assessee.

The Income Tax Appellate Tribunal in Centre for Women's Development Studies v. Deputy Director of Income Tax held that the Tribunal has the power to grant further stay beyond six months if the facts and circumstances so demand. This view was affirmed by a Larger Bench in IPCL v. Commissioner of Central Excise, Vadodara (2004), which noted that the Tribunal must have the power to extend stay to prevent prejudice to the assessee due to delays beyond their control.

Thus, it was concluded that the Tribunal has the power to extend the stay order beyond 180 days, provided the delay in disposing of the appeal is not due to the assessee's conduct. The absence of an express provision for extending the stay does not negate this power, which flows from the Tribunal's inherent appellate jurisdiction.

On Facts:

In this case, after the expiry of 180 days from the order of stay, the revenue initiated recovery proceedings, compelling the assessee to file an application for extension of stay. The Tribunal erroneously held that the stay order would remain in force till the disposal of the appeal, relying on a pre-amendment judgment. This misreading led to an incorrect conclusion.

The High Court held that the Tribunal should have considered the application for extension on its merits. The order passed by the Tribunal was deemed illegal and was set aside. The matter was remanded back to the Tribunal for fresh consideration in light of the observations made.

Order:

1. The appeal was allowed.
2. The impugned order passed by the Tribunal was set aside.
3. The application for stay filed by the assessee was remanded back to the Tribunal for fresh consideration.
4. The exercise was to be completed within three months from the date of receipt of the order.
5. The stay order granted earlier would remain in force until the application was disposed of on merits.
6. Parties were to bear their own costs.

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