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2016 (1) TMI 1101 - PUNJAB & HARYANA HIGH COURT

2016 (1) TMI 1101 - PUNJAB & HARYANA HIGH COURT - TMI - Extension of stay - Whether Hon'ble CESTAT was right in holding that as per the third proviso to Section 35C(2A) of the Central Excise Act, 1944, it has got the power to grant extension of stay beyond 365 days from the initial grant of an order of stay - Demand of Service tax along with interest and penalty - Business auxilliary service - Not disclosed the fact of providing this service - Held that:- in view of the decisions of various High .....

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vocate, Mr. R.K.Hasija, Advocate and Mr. S.J.Singh, Advocate, Mr. Jaiender Saini, Advocate for the respondent JUDGEMENT Ajay Kumar Mittal,J. 1. This order shall dispose of STA Nos. 15, 20 to 22 and 28 of 2015 and CEA Nos.34, 43, 41 and 48 of 2015 as learned counsel for the parties are agreed that the issue involved in all these appeals is identical. However, the facts are being extracted from STA No.15 of 2015. 2. STA No.15 of 2015 has been preferred by the appellant-revenue under section 35G of .....

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of stay beyond 365 days from the initial grant of an order of stay? 3. A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The respondent assessee company was engaged in providing business Auxiliary service w.e.f November 2002 to M/s BSNL. Later on, it got itself registered for the category of business auxiliary service as per Section 65 of the Finance Act, 1994 and was not paying service tax under the service tax provisions. Investigation .....

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he period from April 2007 to March 2008. Hence a Show Cause notice was issued to it on 3.10.2008, Annexure A.1. The case was adjudicated by the Additional Commissioner and vide order dated 29/30.9.2009, Annexure A.2, the demand was confirmed alongwith interest. A penalty of 12 lacs was also imposed. Aggrieved by the order, the respondent-assessee filed appeal before the Commissioner (Appeals) which was rejected vide order dated 16.8.2010, Annexure A.3. The assessee filed appeal before the Tribun .....

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extend the interim order beyond the specified maximum period prescribed under Section 35C (2A) of the Act? 6. Reference is made to the statutory provision contained in Section 35C(2A) of the Act before omission of three provisos by Finance (No.2) Act, 2014 effective from 6.8.2014, which is quoted below:- "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 .....

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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 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 sixty-five days from the date of order referred to in the first proviso, the stay order sh .....

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ich 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 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. 8. Section 98 of the Finance Act, 2013 had f .....

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red 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. 9. On plain reading, Sub section 2A of the Act indicates that it would be the endeavour of the Tribunal to hear and decide the appeal within a period of three years from the date of filing of the appeal. The first proviso to sub section 2A o .....

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ction to the assessee beyond 180 days wherever the delay in disposal of the appeal before the Tribunal was not attributable to the assessee. The stay was not effective beyond the period of 365 days in total. The issue which requires deliberations remains whether the assessee is entitled to interim protection even beyond 365 days where delay in disposal of appeal is not attributable to him . 10. Now with effect from 6.8.2014 by Finance (No.2) Act 2014, all the three provisos in sub section (2A) o .....

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in force unless it is limited by the Tribunal itself. 11. The aforesaid provisions have been subject matter of interpretation by various courts. 12. In Salasar Steel and Power Limited vs. Commissioner of C.Ex. & Customs, 2015(316) ELT 177 (Chhattisgarh), it was observed by the Chhattisgarh High Court that the statutory provision is itself discretionary in nature and its operation would depend upon the facts and circumstances of each case. If despite diligence on the part of the assessee, th .....

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all circumstances, notwithstanding any other issue involved, stay has to be mandatorily vacated. In other words, the statutory provision is itself discretionary in nature and its operation would depend upon the facts and circumstances of each case. If the assessee after obtaining stay plays truant to delay disposal, the statutory provision can certainly be invoked. It cannot be invoked if the respondents play truant to delay disposal so that the statutory period would lapse, stay would have to b .....

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ribunal was vested with the power to extend the stay order beyond the specified maximum time limit prescribed in Section 35C(2A) of the Act and if so, to what extent. After discussing the relevant statutory provision and the case law on the point, it was held by the court that there is no provision for making any further application for extension of stay. The appeal filed by an assessee needs to be disposed of within a period of three years and stay orders which have been passed by the Tribunal .....

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ays. The second proviso stated that if the appeal was not disposed of within 180 days then the stay order would stand vacated upon the expiry of 180 days. The third proviso, which was added by the Finance Act, 2013, further stipulated that when the appeal was not disposed of within 180 days, the appellate Tribunal, if it was satisfied that the delay in disposal of the appeal was not attributable to the assessee, would extend the period of stay for another 185 days and, if the appeal was not disp .....

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, and that, in an appropriate case, the High Court under Article 226 of the Constitution of India could extend the stay order. 12. In L.G. Electronics India Private Ltd. vs. Commissioner of Income Tax, in Writ Tax No.390 of 2015, decided on 22.4.2015, the Writ Court held that Section 35C (2A) of the Act does not prohibit the appellant in filing a second stay application where the appeal was not disposed of within 365 days and that the interim order would stand vacated upon the expiry of 365 days .....

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fresh stay application, which would be decided by the Tribunal in accordance with law. 14. In Commissioner of Customs and Central Excise, Kanpur vs. J.P. Transformers, 2014 (307) E.L.T. 436 (All.) another Division Bench of this Court held that the Tribunal did not have the power to extend the interim order after the expiry of 365 days inasmuch as such order could be misused by the assessee. 15. Section 35F of the Act and Section 35C (2A) of the Act were amended by Finance (No.2) Act 2014 w.e.f. .....

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pursuance of a decision or an order passed by an officer of Central Excise lower in rank than the (Principal Commissioner of Central Excise or Commissioner of Central Excise); (ii) against the decision or order referred to in clause (a) of sub-section (1) of section 35B, unless the appellant has deposited seven and a half per cent. of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed agai .....

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e stay applications and appeals pending before any appellate authority prior to the commencement of the Finance (No. 2) Act, 2014. Explanation. - For the purposes of this section "duty demanded" shall include,- (i) amount determined under section 11D; (ii) amount of erroneous Cenvat credit taken; (iii) amount payable under rule 6 of the Cenvat Credit Rules, 2001 or the Cenvat Credit Rules, 2002 or the Cenvat Credit Rules, 2004. 16. By the aforesaid amendment the power given to the Trib .....

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2 and 2013 makes it apparently clear that the Tribunal was mandated to hear every appeal within a period of three years where it is possible to do so . These words indicate that though a mandate was given to the Tribunal to decide the appeal within three years, it was not a mandatory provision, but, only a directory provision. Consequently, the first, second and third proviso directing the Tribunal to decide the appeal within 180 days in the first instance or within 365 days in the second instan .....

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ith its incidental powers in not extending the interim order. The three proviso, in our view, cannot be read as mandatory in nature. xxxxxxxxxxxxxxxxxxxxxxxxxxxxx 23. In any case, the three provisos in sub section (2A) of Section 35C of the Act has now been omitted w.e.f. 6.8.2014 and the bar which was upon the Tribunal to grant limited stay orders has now been removed even though the mandate to decide the appeal within three years, as far as possible, still continues to operate. 24. The omissio .....

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Delhi vs. Brew Force Machine Pvt. Limited, 2015 TIOL-1873-HC-DEL-CX-LB, the question before the Full Bench of Delhi High Court was with regard to the power of the Tribunal 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. After considering the relevant case law on the point, the answer was given in the affirmative. It was recorded as und .....

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ys. 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, ever 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 3 .....

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esaid 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) [2015-TIOL-1306-HC-DEL, has struck down the amendments inserted/substituted by Finance Act, 2008 as being violativ .....

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f the stay after expiry of 365 days even though the appeals filed by the assessee before the Tribunal were pending and the delay in the disposal of the appeals was not on account of any conduct attributable to the assessee. After considering the relevant statutory provisions and the case law on the point, it was held that the Tribunal has the power to grant extension of stay beyond 365 days in deserving cases. The relevant observations recorded read thus:- 23. Keeping in mind the principles set .....

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ear that the power granted to the Tribunal to hear and entertain an appeal and to pass orders would include the ancillary power of the Tribunal to grant a stay. Of course, the exercise of that power can be subjected to certain conditions. In the present case, we find that there are several conditions which have been stipulated. First of all, as per the first proviso to Section 254 (2A), a stay order could be passed for a period not exceeding 180 days and the Tribunal should dispose of the appeal .....

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365 days, then the order of stay shall stand vacated, even if the delay in disposing of the appeal is not attributable to the assessee. While it could be argued that the condition that the stay order could be extended beyond a period of 180 days only if the delay in disposing of the appeal was not attributable to the assessee was a reasonable condition on the power of the Tribunal to the grant an order of stay, it can, by no stretch of imagination, be argued that where the assessee is not respo .....

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ed, is snatched away simply because the Tribunal has, for whatever reason, not attributable to the assessee, been unable to dispose of the appeal. Take the case of delay being caused in the disposal of the appeal on the part of the revenue. Even in that case, the stay would stand vacated on the expiry of 365 days. This is despite the fact that the stay was granted by the Tribunal, in the first instance, upon considering the prima facie merits of the case through a reasoned order. 24. Furthermore .....

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ble. It is for this reason that we find that the insertion of the expression - even if the delay in disposing of the appeal is not attributable to the assessee - by virtue of the Finance Act, 2008, violates the non-discrimination clause of Article 14 of the Constitution of India. The object that appeals should be heard expeditiously and that assesses should not misuse the stay orders granted in their favour by adopting delaying tactics is not at all achieved by the provision as it stands. On the .....

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295 ITR 22 (Bom.)] with which we are in full agreement. Consequently, we hold that, where the delay in disposing of the appeal is not attributable to the assessee, the Tribunal has the power to grant extension of stay beyond 365 days in deserving cases. The writ petitions are allowed as above. 16. The Apex Court in Commissioner of Customs & Central Excise, Ahmedabad vs. Kumar Cotton Mills Pvt. Limited, (2005) 180 ELT 434, interpreting sub section 2A of Section 35C of the Act as introduced on .....

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e Tribunal expressed in the impugned order and as expressed in the Larger Bench matter namely IPCL vs. Commissioner of central Excise, Vadodara (surpa) 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. 17. In view of .....

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d others vs. Union of India and others, (2014) 211 DLT 15, while dealing with a case of land acquisition, it was held by a Full Bench of Delhi High Court that the deeming provision of section 24(2) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (in short, the 2013 Act ) is a legal fiction which is created and an imagined situation. Once the state of affairs is imagined as real, the consequences and instances would also have to be .....

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