TIOL-DDT 2389
04.07.2014
Friday

STAY and waiver of pre-deposit is a complicated affair in central tax matters. If the FM can do something to do away with these draconian provisions, it would be the greatest gift to the taxpayers.

As per Section 35C(2A):

If the appeal is not disposed of within 180 days by the Tribunal, the Stay order shall be stand vacated.

The Tribunal can extend the stay for 185 days and if the appeal is not decided within 365 days, the Stay order stands vacated.

Recently, the Bangalore Bench of the CESTAT had on a day more than 100 applications listed for extension of stay.

The Tribunal considered the provisions of Section 35C over the past. In the year 2002, provisions requiring the Tribunal to decide the appeals within three years if possible and where stay has been granted against recovery, to decide the appeal within 180 days and where there is a failure to decide the appeal within 180 days where stay has been granted, the provision that stay was automatically vacated were introduced. In the absence of specific legal provisions in the Act providing for staying of the orders, the conclusion that emerges is that even the legislature accepted the fact that the power to grant stay is an inherent power. In this connection, the decision of the Hon'ble Supreme Court in the case of Kumar Cotton Mills 2005-TIOL-42-SC-CESTAT is to be taken note of where the Supreme Court also made an observation that power to grant stay is an inherent power of the Tribunal.

In view of the specific provision in the law that the stay granted against recovery shall stand vacated if the appeal is not decided within 180 days and whether the Tribunal in such cases can extend the stay beyond the period of 180 days was considered by the apex court in the case of Kumar Cotton Mills. The apex court upheld the decision of the Larger Bench of the Tribunal in the case of IPCL vs. CCE, Vadodara - 2004-TIOL-556-CESTAT-MUM-LB wherein the Tribunal had taken the view that the Tribunal had power to extend the stay beyond 180 days.

Thereafter even though the Tribunal Benches have been passing orders that the recovery of dues is stayed during the pendency of appeal, in some of the Benches there is a practice of filing applications for extension of stay after 180 days and in some cases, there is no such practice. For example in Karnataka, there is no such practice of filing of extension of stay application after 180 days in all the cases.

While this practice is continuing for more than 10 years, the Section 35C was amended in the Budget of 2013 and another proviso was added to Section 35C which reads as under:-

"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 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."

After the amendment, one of the decisions of the Tribunal granting extension of stay beyond the period of 180 days was appealed against before the High Court of Allahabad in the case of J P Transformers reported in - 2013-TIOL-1152-ALL-ST and the High Court held as under:-

Though we are conscious of the pendency of the appeals and workload assigned to the Principal Bench as well as various Benches of CESTAT, we are of the view that entire object and purpose of insertion of sub-section 2A in Section 35C by Section 140 of the Finance Act, 2002 (20 of 2002) w.e.f. 11.5.2002 and third Proviso by Finance Act, 2013 will stand defeated, if the waiver of pre-deposit is granted indefinitely. The judgment in Kumar Cotton Mills Pvt. Ltd cannot be interpreted to give powers to the Tribunal to extend the order of waiver of pre-deposit indefinitely.

This decision of the High Court is cited by the Revenue before the Tribunal with the plea that the Tribunal has no power to grant extension of stay beyond the period of one year under section 35C Central Excise Act, 1944.

The Tribunal considered the various arguments and judgements cited in detail and decided to lay down certain guidelines with regard to applications for extension of stay.

1. In future, the stay and waiver granted in the first instance will be followed for 180 days and second extension and thereafter extensions will be granted for a limited period in accordance with law as and when applications are filed after ensuring that delay in decision on the appeal is not caused by the appellant.

2. The appellants should ensure that they file application for extension of stay within the period prescribed under the law without fail.

3. While filing the application for extension of stay, a copy should be submitted to the officers who enforce the adjudication orders and initiate recovery proceedings so that they are aware that an application for extension of stay has been filed before the Tribunal.

4. Once an application has been filed within the period of stay already granted, the Department should not enforce the recovery till the application for extension is decided. Needless to state, the Department is free to make a mention if any application for extension of stay does not come up for consideration or if there is any undue delay in consideration of application for extension of stay causing damage to the interest of the Revenue.

5. If an appellant has not filed application for extension of stay even after the period of stay is over, if recovery action has not been initiated by the Revenue, the fact that application was filed beyond the period of earlier stay order, should not lead to enforcement of demand. In such cases also if the appellant informs the Revenue before initiation of recovery action that he has filed an application for extension of stay before the Tribunal, the officers should allow the stay extension application to be considered by the Tribunal before initiating coercive steps.

6. It is made clear that this does not mean that the Tribunal will not consider application for extension of stay if filed after the period of stay granted in the earlier order is over. If the Department is initiating the recovery proceedings after the period of stay is over and if no stay extension application has been filed, the Department cannot be found fault with for such steps being taken.

The Tribunal has clarified that these guidelines apply to Customs, Central Excise and Service Tax.

Don't forget to file that extension of Stay application within that six months' time and in the meantime pray that somebody would tell Mr. Jaitley that these provisions are draconian and waste huge amounts of money and time.

Please see 2014-TIOL-1204-CESTAT-BANG

Also see 2013-TIOL-553-CESTAT-BANG

Customs - New Exchange Rates from Today

CBEC  has notified new exchange rates for Imported Goods and for Export Goods with effect from 4th July 2014. The US Dollar is 60.10 rupees for imports and 59.10 rupees for exports.

The Exchange rates were last notified on 19th June, 2014.

Notification No.49/2014-Cus (N.T.), Dated: July 03, 2014

FTP - Import Policy for 'foiegras'

GOVERNMENT has prohibited the import of 'foiegras'.

Foiegras - French for "fatty liver" - is the diseased and enlarged liver of a duck or goose, produced through force-feeding.

Two to three times a day, a worker grabs each bird, shoves a long, thick metal tube all the way down his throat, and an air pump shoots up to two pounds of corn mush into his oesophagus. The industry always refers to the dry weight of the feed, which is about one pound per feeding. Adding oil and water doubles this weight, making it 20-30% of the bird's healthy body weight.

A duck's liver naturally weighs around 50 grams. However, to qualify as foiegras, the industry's own regulations require ducks' livers to weigh an absolute minimum of 300 grams.

The Israeli Supreme Court ruled that foiegras production violates the country's cruelty-to-animals laws, and the practice is now banned in Israel. Germany and other European nations have prohibited the production of foiegras, and force-feeding birds is prohibited in the U.K. and in Switzerland, where foiegras packages are required to carry labels to inform consumers that the birds were force-fed. The European Union is working to phase out the force-feeding of birds entirely in its member countries by 2020.

California has banned the production and sale of foiegras from force-fed birds in that state.

DGFT Notification No. 87(RE-2013)/2009-2014, Dated: July 03, 2014

DDT Cartoon

Jurisprudentiol – Monday's cases

Service Tax

Appellant providing rooms to service receiver who booked Conference/Banquet Hall - details about number of rooms provided, whether on complimentary basis is not forthcoming - addition of room rent in value of service provided as Mandap Keeper is proper: CESTAT

The appellants are running Hotel along with Banquet Hall and Conference Hall for social functions. When Banquets Hall or Conference Hall is booked, the appellants are also providing rooms.

By taking into consideration the room rent for arriving at the assessable value as provider of Mandap Keeper service, the lower authority confirmed the demand and which was upheld by the Commissioner(A).

Income Tax

Whether mere disallowance of legal claim can be made basis for levy of penalty u/s 271(1)(c) - NO: ITAT

The assessee has paid a sum of Rs.42.00lacs to Court Receiver as per direction of the High Court for calling bids from the partners for the purpose of fixing royalty and the higher bidder would be appointed agent of Receiver who shall carry on the business of Blood Bank which was being carried on by erstwhile partnership firm. The licence to operate the Blood Bank was obtained by the Assessee in his individual capacity as agent of the Court Receiver and there was no user of such licence of the erstwhile partnership firm by the assessee. On the plea that assessee has not deducted tax at source u/s. 194J on the payment of royalty by invoking provisions of section 40(a)(ia), AO disallowed payment for non deduction of TDS.

The issue before the Bench is - Whether mere disallowance of legal claim can be made the basis for levy of penalty u/s 271(1)(c). And the answer is NO.

Central Excise

Dept. seeking reversal of CENVAT credit contained in finished goods destroyed in fire and appellant paying same with interest - denial of benefit of remission on ground that godown not registered is contrary to facts obtaining on records - appeal allowed: CESTAT

Vide an order dated 28/05/2008 the CCE, Thane-I denied remission of CE duty of Rs.11,70,405/- on cotton grey fabrics destroyed in fire on 23/05/2004 in the premises of the appellant. The ground adduced for rejection of remission application is that the godown of the appellant situated at the 1 st floor of the appellant's premises at H. No. 1286, Shankeshwar Compund, Narpoli, Bhiwandi was not part of the registered premises of the appellant.

See our Columns Monday for the judgements

Until Monday with more DDT

Have a nice weekend.

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