JULY 10, 2014

By B N Gururaj, Adv.

At present, regrettably, Hon'ble CESTAT has become a judicial forum for passing stay orders. Disposal of appeals on merits has become a secondary function. Anyone may see the cause list of any Bench of the CESTAT to notice the predominance of stay applications and miscellaneous applications. If regular matters reach at all, they would reach at the tail end of the day.That is the time at which important appeals, which need time to argue cannot be gone into. Further, barring cases involving refund claims, almost all appeals are accompanied by stay applications. Thus, every appeal filed in the CESTAT adds to the pendency of appeals, even when the stay application has been disposed off.

The Finance (No.2) Bill, 2014 contains two provisions that will reduce the pending litigation significantly, especially at CESTAT stage.  The proposed substitution of Section 35F dispenses with the discretion conferred on the appellate authorities to grant waiver/dispensation of pre-deposit. Instead, every appellant (barring the cases of refund claim) is required pre-deposit 7.5% of the adjudged due before the first appellate authority (be it appellate Commissioner of the CESTAT) and further 10% of the adjudged dues when a second appeal lies to the CESTAT.   The consequence of this amendment would be that in future, there will be no need to file stay applications at all. At the stage of filing the appeal, the appellant would be required to deposit aforesaid sums and produce proofs therefor. Once this is done, the only other stage is to list the appeal for regular hearing for disposal of appal itself, unless of course there are miscellaneous applications for condonation of delay, or for urging additional grounds, or for adducing additional evidence.  Since the proposed amendment is prospective, it would seem that once the stay applications filed until the Finance (No.2) Act 2014 comes into force are disposed of, there will be no stay hearings.  The list of short matters would indeed be short list of RoMs, RoAs, CoD applications.  This is definitely a development which is in larger public interest, though disadvantageous to the counsels!

The second amendment is found in the second proviso to section 35B(1). Hitherto, under this provision, the pecuniary floor limit for filing appeal before the CESTAT was Rs.50,000, be it duty in dispute or penalty imposed, in all cases other than those involving valuation disputes or disputes of taxability, classification, exemption claims etc.  Now, this limit has been enhanced to Rs. 2 lakhs. As a consequence, minor cases involving Cenvat credit disputes, penalties imposed for procedural violations, personal penalties under provisions such as rule 26, or rule 27 of the Central Excise Rules, 2002, might not reach the CESTAT, especially, if the position of law is settled against the appellant including the Revenue). Thus, assessees who are compulsively litigious have to consider the possibility of ending up paying the  adjudged dues, after the first appellate authority dismisses their appeals (which is usually the case where the assessees are the appellants!). The increased floor limit will eliminate god number of petty appeals reaching the CESTAT.

 Sometime back, TIOL had proposed doing away with the provisions relating to pre-deposit and grant of stay, so that the misery to the appellants and waste of judicial time would be avoided. That wish has come true in a different manner.  One cannot rule out the possibility that some perverse officer might still contend that he is entitled to recover balance 92.5% or 82.5% adjudged dues, as there is no stay against recovery of such dues!