Proverbs are known to be a short cut to wisdom. The wisdom in the following proverbs fit the bill in the background of the recent recovery drive of the In-direct tax department and describes the state of affairs in India’s in-direct tax administration.
- The real danger of democracy is, that the classes which have the power under it will assume all the rights and reject all the duties – that is, that they will use the political power to plunder those who have. William Graham Sumner.
- We don’t know what we want, but we are ready to bite somebody to get it. Will Rogers.
- Many slow & sly deceptions make the justice system skew; due process when thus manoeuvred thwarts justice that is due – Art Buck.
- The real problem with which modern government has to deal with is how to protect the citizen against the encroachment upon his rights and liberties by his own government, how to save him from the repressive schemes born of egotism of public office. William E Borah.
- Things in our country run in spite of government not by the aid of it – Will Rogers.
The last one is the best and sums up how businesses function in India. The deliberation herein was occasioned due to the pressure tactics resorted to by the in-direct tax administration (department for short) given the decision of the Allahabad High Court in CC & CE Vs. J P Transformers, 2013-TIOL-1152-HC-ALL-ST by which an interpretation that the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) does not have the power to extend the operation of their stay order beyond a period of 365 days, came to be sustained. However, what needs consideration is that the order did not lay down any ratio to be followed with such zeal as a dog chases a cat or a cat a mouse, as a precedent in terms of Article 141 of the Constitution of India and was only an order operable inter-se amongst the parties to the lis. The order also did not appreciate the decision of the apex court in Kumar Cotton despite citing it as a referred case, there is no discussion in the decision of the Allahabad High Court why the ratio laid down in the case of CCE Vs. Kumar Cotton Mills Pvt., Ltd., 2005 (180) ELT 434 (SC) would not apply even to the third proviso in sub-section 2A of section 35C of the CEA. The order was hailed by the department as their lord almighty and their saviour granting them a warrant to initiate recovery proceedings in cases where there was a stay order passed by the Tribunal but the same was in force for a period of more than 365 days.
The department’s rise of temperature above all known states of excitement and agitation in recovering purported dues when there exists’ an interim order of the Tribunal directing stay of recovery and operation of an impugned order was unparalleled. The Bhramastra of the department and its ilk was section 35C of the Central Excise Act, 1944 (CEA). What comes to mind in the words of Clarence Darrow (One of the greatest American Lawyers) is – There is no such thing as justice – in or out of court.
Cause – Provisions of section 35 C of the CEA – Abstracted below for ease of reference:
Orders of Appellate Tribunal. SECTION 35C. — (1) The Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against or may refer the case back to the authority which passed such decision or order with such directions as the Appellate Tribunal may think fit, for a fresh adjudication or decision, as the case may be, after taking additional evidence, if necessary.
(1A) The Appellate Tribunal may, if sufficient cause is shown, at any stage of hearing of an appeal, grant time, from time to time, to the parties or any of them and adjourn the hearing of the appeal for reasons to be recorded in writing:
Provided that no such adjournment shall be granted more than three times to a party during hearing of the appeal.].
(2) The Appellate Tribunal may, at any time within [six months] from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1) and shall make such amendments if the mistake is brought to its notice by the [Commissioner of Central Excise] or the other party to the appeal:
Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the other party, shall not be made under this sub-section, unless the Appellate Tribunal has given notice to him of its intention to do so and has allowed him a reasonable opportunity of being heard.
[(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 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.]
(3) The Appellate Tribunal shall send a copy of every order passed under this section to the [Commissioner of Central Excise] and the other party to the appeal.
(4) Save as provided in section 35G or section 35L orders passed by the Appellate Tribunal on appeal shall be final.
The third proviso to sub-section 2A of section 35C of the CEA does not postulate any embargo on the powers of the Tribunal to pass interim orders or to extend the operation of the stay once the same stood vacated. All that the proviso under discussion does is provide that after an expiry of 365 days the order of stay stands vacated. The provision did not postulate any other condition on the powers of the CESTAT to extend stay orders after an expiry of 365 days. The eternal principle of interpreting a provision of a statute by giving words used therein their plain and simple meaning was lost out by the department and with all due respect the Hon’ble High Court of Allahabad.
Effect – The assessees’ problems stand compounded due to the spirit shown by the department in enforcing the above underlined proviso given the High Court decision. I have never observed, noticed or seen the department acting with such zeal, spirit or speed in implementing an order of the High Court, when it construes any provision in favour of an assessee. The minions of the Finance Minister (FM) across India serving their master (FM) took upon themselves to issue instructions to recover amounts where the stay order was in operation beyond a period of 365 days. India was exported back to the British raj whence all that the Britishers were required and expected to do and were presumably interested to do was to collect Lagan. The interpretation placed by the department on the above proviso if accepted would result in empowering the CESTAT to grant stay for a **period not exceeding 365 days and if the appeal does not stand disposed of for any reason the disputed demand (either customs or excise duty or service tax) would have to be paid forthwith by the assessees and the process of appealing against the order and obtaining a stay would be effective only for a period of 365 days. In sum, if for any reason an appeal is not disposed off within a period of 365 days (in practice an appeal is not disposed off even after 5 – 6 years) an assessee would necessarily have to pre-deposit the entire demand. In effect this would mean that irrespective of the fact whether a demand proposed is sustainable in law, or fact, or pending disposal before an appellate forum, the demand would have to be paid after expiry of 365 days from the date of passing an order of stay. Such a reading of the proviso is perverse brilliancy at its zenith.
Taking a converse situation where one can look at the duty of the department the same yardstick does not apply and sauce for the goose is not sauce for the gander. I have never seen the department go out of its way in sanctioning refunds where they are due and when belatedly sanctioned I have known departmental officers to take an undertaking (the legality of such an undertaking not being an issue under deliberation herein) from assessees that they would not claim interest when refund is belatedly sanctioned. Such is the state of affairs in our great country that the department would assert only rights and their corresponding duties are lost in the din of their assertion of rights.
This brings us to another question i.e. why does the legislature not legislate on a similar provision in the statute books relating to refunds which are not sanctioned within a period stipulated in section 11BB of the CEA. I hope the department appreciates the fallacy of an interpretation as is canvassed in the decision of the Allahabad High Court. The arrangement of statutory provisions of law which have the effect of manoeuvring and giving impetus to illegal acts in the name of the rule of law ought to be curtailed and the draftsmen ought to show some restraint in drafting such provisions without putting in place the infrastructure which has the capability of disposing of appeals within a period of 365 days. Without first putting in place infrastructure which is capable of disposing appeals within a period of 365 days of passing the stay order, bringing into effect a provision merely for the collection of litigated dues during the pendency of such appeals and where a stay order has been passed before an appellate forum, is nothing short of expecting a sugar factory which has the crushing capacity of 2000 tonnes to crush 20000 tonnes or expecting a vehicle to run 500 kms without adequately fuelling the vehicle. Such an expectation is neither pragmatic nor feasible given the redundancies at ground level.
Background – The intent of inserting the proviso in subsection 2A of section 35C of the CEA would have been godly inasmuch as (and I’m guessing here) appeals would be disposed off expeditiously and there would be no reason for cases to drag on in the CESTAT in perpetuity for reasons attributable to the assessees’. The statement of object and reasons and the explanatory notes on clauses in the Budget of 2013-14 does not shed much light on the intent of the legislature for inserting such a proviso in section 35C of the CEA. Being a practitioner of tax litigation for more than a decade, I found that there exists a similar provision under the Income Tax Act, 1962 (ITA) i.e. section 254. However, the said provision under the ITA is worded differently though at first blush it may seem identical. It is a principle well settled in law, that words in a statute have to be strictly interpreted and there is no scope for reading into the provisions of the statute any intent. It is also well settled that the statute has to be looked at as a whole and not by segmenting the same as per the convenience of the department.
Income Tax Act, 1962 – The purpose of section 254 under the ITA, if looked at and the machinery in place for disposal of appeals at the ground level if ascertained would show that the Income Tax Appellate Tribunal (ITAT) has branches in Mumbai, Delhi, Agra, Ahmedabad, Allahabad, Amritsar, Bangalore, Chandigarh, Chennai, Cochin, Cuttack, Guwahati, Hyderabad, Indore, Jabalpur, Jaipur, Kolkata, Lucknow, Nagpur, Panaji, Patna, Pune, Rajkot, Raipur (Bilaspur), Ranchi and Visakhapatnam. This makes a total of 26 Benches across India with adequate infrastructure and bandwidth to dispose of cases within a period of 365 days. These figures would lead a man of ordinary prudence to conclude that under the ITA there exists infrastructure which is capable of disposing of appeals within a period of 365 days and that the proceedings are not in a state of inertia in perpetuity as in the case of CESTAT, which in comparison has Benches at 6 places. The adoption of provision from the ITA and making the same applicable to in-direct taxes is not justifiable nor is expecting that appeals would be disposed of within a period of 365 days from the date of passing the stay order legitimate in law or in fact.
New Year Gift – A pertinent observation is that at the start of 2013 the department gifted to the assessees’, circular dated 1.1.2013. This ensured that many lawyers were gainfully employed given the exigency of the situation and also the zeal of the department. Some Courts were quick in reprimanding such an act of the department and granting relief till the disposal of the appeal while some were sceptical and directed that the cases be expeditiously disposed. One case which stands out amongst many is the decision in KIADB order dated 25.03.2013 in W.P.No.14181 of 2013 (T-TAR) wherein it was pointed out that there existed a chasm, a deep one when it came to the number of benches of the CESTAT. The Court accordingly directed that co-ordinate benches be set-up for expeditious disposal of appeals and to reduce redundancies at the limited number of Benches at Delhi, Mumbai, Calcutta, Ahmadabad and Bangalore. The decision was dated 25.03.2013. The Court had also directed the UOI to report compliance and the UOI had indicated that it required 6 months to set up the requisite number of CESTAT benches. It is however more than a year and the status of the action taken by the UOI (with or without Zeal) is unknown and remains a mystery. I have been given to understand from reliable sources that a Bench at Hyderabad would be functional from June. How far this is true remains to be seen.
This paper in essence communicates that the law and ground realities are a world apart and what is sauce for the goose under the ITA cannot be made the sauce for the gander in the context of in-direct taxes. The wherewithal and infrastructure is in place with ample number of functional Tribunals to dispose of appeals and ensure disposal of appeals within a period of 365 days under the ITA whereas the same is absent in the context of excise, customs and service tax appeals before the CESTAT.
Discussion on Section 35C & 35F of the CEA – Reverting to the deliberation on hand, what assumes importance is that section 35C deals with orders of Appellate Tribunal and the promulgation on the scope of such orders stands stipulated in the said section. The said section does not postulate that the Tribunal shall not have the power to extend the stay granted on an examination of the prima-facie nature of a case. There is nothing in the section which brings out a reading that there is a fetter cast on the power of the Tribunal to grant extension of stay. All that the proviso under deliberation does is that it stipulates that the stay granted shall on the expiry of 365 days stand vacated. Now reading into the said proviso that the Tribunal does not have the power to extend the stay already granted would be doing injustice to the principle of strict interpretation of tax statutes. It is elementary that there is scope for interpretation only when there is ambiguity in any provision, where there is none the question of bringing into aid the interpretative skills of a person does not arise. There are scores of decisions which have held that no word in a statute can be omitted and at the same time no word can be added in the provision of a statute.
SECTION 35F. Deposit, pending appeal, of duty demanded or penalty levied. — Where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of Central Excise authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied :
Provided that where in any particular case, the [Commissioner (Appeals)] or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the [Commissioner (Appeals)] or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue.
[Provided further that where an application is filed before the Commissioner (Appeals) for dispensing with the deposit of duty demanded or penalty levied under the first proviso, the Commissioner (Appeals) shall, where it is possible to do so, decide such application within thirty days from the date of its filing.]
[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 57CC of Central Excise Rules, 1944;
(iv) amount payable under rule 6 of Cenvat Credit Rules, 2001 or Cenvat Credit Rules, 2002 or Cenvat Credit Rules, 2004;
(v) interest payable under the provisions of this Act or the rules made thereunder.]
The department failed to realise that the power to grant stay is not stipulated under any of the provisions of the CEA, CA or the FA. Some learned brethren may argue that section 35F of the CEA grants the power to the Tribunal. However, what stands missed out is the aspect that section 35F merely stipulates that the Tribunal has the discretion to grant unconditional stay of recovery and operation of any challenged order. What has been missed out is that the power to grant stay is inherent in the establishment of the Tribunal as an appellate authority. The Tribunal has exceptional powers in this regard which is not stipulated or controlled by any provision under any of the three enactments referred to supra. Such powers are called inherent powers i.e. such powers exist in the body established by law by its very establishment and such power cannot be conferred or controlled. Section 35F only stipulates the general rule that deposit has to be made of the dues and carves out an exception to this general rule that where there is undue hardship to a person the Tribunal may (discretion vested) grant stay subject to further conditions as it may determine. What follows is that the power to grant stay is therefore inherent and not conferred under any of the provision of the three statutes. It is for this plain and simple reason that none of the sections under any of the three enactments grant any power to the CESTAT to grant a stay and section 35C postulates that the stay would stand vacated and by using such words does not imply directly, indirectly or by any degree of imagination that the Tribunal is divested of their powers to extend the operation of the stay where it decides on the undue hardship caused to any person. When such is the case, the inherency of powers of a Tribunal to grant stay cannot be impugned. Section 35F of the CEA is abstracted for ready reference.
Otiose interpretation to be avoided – The department in its haste to grind assessees to paste by mandating payment of disputed levies failed to appreciate that if the interpretation canvassed by the department is to be upheld the provisions of section 35F of the CEA would be rendered redundant and a mere embellishment. An interpretation which renders another provision of a statute is to be avoided and an interpretation which would further the object of all provisions and make them workable is to be adopted. This is again elementary.
On Inherent Powers of the CESTAT
The issue whether the CESTAT has inherent powers is a vexed question because there exists no precedent and no Bench of the tribunal is willing to enter into an issue of whether it has the power to determine vires of the provisions of the statute under which it was created. Be that as it may, the findings of the seven member bench of the Supreme Court in L. Chandra Kumar Vs. UOI, 1997 (92) ELT 318 (SC) are relevant, wherein it was held at para “64 In Minerva Mills v. Union of India, a five-Judge Constitution Bench of this Court had to consider the validity of certain provisions of the Constitution (42nd Amendment) Act, 1976 which, inter alia, excluded judicial review. The judgment for the majority, delivered by Chandrachud, C.J. for four Judges, contained the following observations (at p. 644, para 21): “…Our Constitution is founded on a nice balance of power among the three wings of the State, namely, the Executive, the Legislature and the Judiciary. It is the function of the Judges, nay their duty, to pronounce upon the validity of laws. If courts are totally deprived of that power, the fundamental rights conferred upon the people will become a mere adornment because rights without remedies are as writ in water. A controlled Constitution will then become uncontrolled.”
(Emphasis supplied) Para 65 The majority judgment held the impugned provisions to be unconstitutional. While giving reasons in support, Chandrachud, C.J. stated as follows: “…It is for the courts to decide whether restrictions are reasonable and whether they are in the interest of the particular subject. Apart from other basic dissimilarities, Article 31-C takes away the power of judicial review to an extent which destroys even the semblance of a comparison between its provisions and those of Clauses (2) to (6) of Article 19. Human ingenuity, limitless though it may be, has yet not devised a system by which the liberty of the people can be protected except through the intervention of courts of law.” The proper approach for a Judge who is confronted with the question whether a particular facet of the Constitution is part of the basic structure, is to examine, in each individual case, the place of the particular feature in the scheme of our Constitution, its object and purpose, and the consequences of its denial on the integrity of our Constitution as a fundamental instrument for the governance of the country. (supra at pp. 751-752). This approach was specifically adopted by Bhagwati, J. in Minerva Mill’s case (supra at pp. 671-672) and is not regarded as the definitive test in this field of Constitutional Law. Para 91 – Before moving on to other aspects, we may summarise our conclusions on the jurisdictional powers of these Tribunals. The Tribunals are competent to hear matters where the vires of statutory provisions are questioned. However, in discharging this duty, they cannot act as substitutes for the High Courts and the Supreme Court which have, under our constitutional set-up, been specifically entrusted with such an obligation. Their function in this respect is only supplementary and all such decisions of the Tribunals will be subject to scrutiny before a Division Bench of the respective High Courts. The Tribunals will consequently also have the power to test the vires of subordinate legislations and rules. However, this power of the Tribunals will be subject to one important exception. The Tribunals shall not entertain any question regarding the vires of their parent statutes following the settled principle that a Tribunal which is a creature of an Act cannot declare that very Act to be unconstitutional. In such cases alone, the concerned High Court may be approached directly. All other decisions of these Tribunals, rendered in cases that they are specifically empowered to adjudicate upon by virtue of their parent statutes, will also be subject to scrutiny before a Division Bench of their respective High Courts. We may add that the Tribunals will, however, continue to act as the only courts of first instance in respect of the areas of law for which they have been constituted
This decision in clear terms clarifies that the Tribunal is vested with the powers to determine the vires of provisions of the statute but not the vires of the statute under which it was established and that such orders would be liable to scrutiny by the High Courts. This in effect means that the approach that the Tribunal does not have the power to examine the vires of provisions of statute is erroneous as explicitly stated by the apex court in the above decision. This would in turn imply that the Tribunal is vested with immense powers all of which are not specifically conferred under the statute under which it was created.
The decision of the Karnataka High Court in CCE Vs. IOCL, 2010 (258) ELT 504 (Kar.), before the introduction of Section 2(A) and the provisos, there was no express provision in Section 35C of the Act providing for grant of an order of stay of the impugned orders. However, on an application filed for such stay order, the Tribunal was granting such stay orders. Similar situation was in existence in the appeal provisions under the Income Tax Act. The Apex Court in the case of Income Tax Officer v. M.K. Mohammed Kunhi reported in 1969 (71) ITR 815, in those circumstances held as under: “the arguments advanced on behalf of the appellant before us that, in the absence of any express provisions in Sections 254 and 255 of the Act relating to stay of recovery during the pendency of an appeal, it must be held that no such power can be exercised by the Tribunal, suffers from a fundamental infirmity inasmuch as it assumes and proceeds on the premises that the statute confers such a power on the Income-tax Officer who can give the necessary relief to an assessee. The right of appeal is a substantive right and the question of fact and law are at large and are open to review by the appellate Tribunal. Indeed, the Tribunal has been given very wide powers under Section 254(1), for it may pass such orders as it thinks fit after giving full hearing to both the parties to the appeal. If the Income-tax Officer and the Appellate Assistant Commissioner have made assessments or imposed penalties raising very large demands and if the Appellate Tribunal is entirely helpless in the matter of stay of recovery, the entire purpose of the appeal can be defeated if ultimately orders of the departmental authorities are set aside. It is difficult to conceive that the legislature should have left the entire matter to the administrative authorities to make such orders as they choose to pass in exercise of unfettered discretion. The assessee, as has been pointed out before, has no right to even move an application when an appeal is pending before the Appellate Tribunal under Section 220(6) and it is only at the earlier stage of appeal before the Appellate Assistant Commissioner that the statute provides for such a matter being dealt with by the Income-tax Officer. It is a firmly established rule that an express grant of statutory power carries with it by necessary implications the authority to use all reasonable means to make such grant effective. The powers which have been conferred by Section 254 on the Appellate Tribunal with widest possible amplitude must carry with them by necessary implication all powers and duties incidental and necessary to make the exercise of those powers fully effective”. The Supreme Court ultimately held “Section 255(5) of the Act does empower the Appellate Tribunal to regulate its own procedure, but it is very doubtful if the power of stay can be spelt out from that provision. In our opinion, the Appellate Tribunal must be held to have the power to grant stay as incidental or ancillary to its appellate jurisdiction. This is particularly so when Section 220(6) deals expressly with a situation when an appeal is pending before the Appellate Assistant Commissioner, but the Act is silent in that behalf when an appeal is pending before the Appellate Tribunal. It could well be said that when Section 254 confers appellate jurisdiction, it impliedly grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution and that the statutory power carries with it the duty in proper cases to make such orders for staying proceeding as will prevent the appeal if successful from being rendered nugatory”. The right of appeal is a substantive right, and the question of fact and law are at large and are open to review by the Appellate Tribunal. It is firmly established rule that an express grant of statutory power carries with it by necessary implications the authority to use all reasonable means to make such grant effective. One such authority is the duty in proper cases to make such orders for staying proceedings as will prevent the appeal, if successful from being rendered nugatory. Therefore, the appellate Tribunal has the power to grant stay as incidental and ancillary to its appellate jurisdiction. When the parliament introduced the amendment restricting the operation of the stay order, they recognized this settled legal position that the appellate Tribunal has the power to grant an order of stay even in the absence of a specific provision conferring such power, and such power flowing from the appeal provision itself. What they intended by the amendment is to restrict the duration of the stay order which is passed by virtue of such power, In the light of the aforesaid law, prior to amendment even in the absence of an express provision, the Tribunal in exercise of its power under Section 35(C) is entitled to grant an order of stay of the impugned order. That is how, the stay orders were being granted, which was well accepted.
The decision of the Hon’ble High Court if appreciated would bring out the aspects that when the power of stay is not expressly granted it ought to be presumed that the power to grant stay is inherent in the Tribunal by its very establishment as an appellate authority and all incidental and ancillary powers in the exercise of its functioning ought to be, by necessary implication, be presumed to be inherent in the Tribunal to carry out its duties and obligations under the statute and such inherent power includes the power to grant stay and also extent it where there is no express prohibition and when there is an express prohibition and the appeal drags on for no fault of the assessee, the Tribunal will nevertheless have the power to grant stay and also extend the same in the light of its inherent power.
Another decision which has elucidated this principle, amongst many, is the decision of the Supreme Court in the case of Commissioner of Cus. & C.Ex., Ahmedabad v. Kumar Cotton Mills Private Limited reported in 2005 (180) E.L.T. 434 (S.C.) dealing specifically with the amended provision prior to insertion of the third proviso to sub-section 2A of section 35C of the CEA, held as follows: The provision has clearly been made for the purpose ofcurbing the dilatory tactics of those assessees 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. The Tribunal which was then know as Customs, Excise Gold(Control) Appellate Tribunal (CEGAT) came to the conclusion that the amendment did not affect stay orders which were passed prior to the date of coming into force of the amendment and also held that the amendment did not in any way curtail the powers of the Tribunal to grant stay exceeding six months. During the pendency of the appeal before this Court, the matter was conferred to a Larger Bench of the Tribunal. The Larger Bench has by its decision reported in 2004 (169) E.L.T. 267 upheld the view impugned in this case. The decision of the Larger Bench has not been challenged by the Department being of the view that repeated special leave petition raising the same issue was unnecessary”.
It is also useful to refer to a decision of the Income Tax Appellate Tribunal, while considering an identical issue relating to the power of the Tribunal to grant further stay after the expiry of six months since passing the first order of say, in Centre for Women’s Development Studies v. Deputy Director of Income Tax, which reads as follows: “On a careful perusal of the relevant new provisions in the law and aforesaid judicial pronouncements, we are of the considered opinion that sub-section (2A) was inserted in Section 254 to curtail the delays and ensure the disposal of the pending appeals within a reasonable time frame. There is no intention of the Legislature to curtain or withdraw the powers of the Tribunal for granting a say exceeding a period of six months. Had it been the intention of the Legislature, there would be a specific amendment in the Act to this effect because if the powers of the Tribunal for granting the stay exceeding a period of six months are withdrawn by this amendment, the object of imparting justice by the Tribunal cannot be achieved even in those cases where the assessee has co-operated with the Tribunal to its full extent and the hearing is in progress. We, therefore, are of the considered view that the Tribunal has power to grant a further stay on the expiry of six months of earlier stay if the facts and circumstances so demand”. Affirming the said view, a Larger Bench in the case of IPCL v. Commissioner of Central Excise, Vadodara – 2004 (169) E.L.T. 267 observed as under: “We find that in Themis Pharmaceuticals the Bench has taken note of the fact that it is practically not possible to dispose of the appeals pending before the Bombay Bench of the Tribunal within 180 days. The Bench has also suggested some remedy for the problem. In this connection, we may observe that similar situation can arise in other Benches also where an appeal posted within 180 days could not be taken up for different reasons. It may be due to non-availability of time for the Bench or due to non-availability of the Bench itself. Unless the Tribunal has the power to extend stay beyond 180 days, the assessee’s interest will be in jeopardy for no fault of his. Even the order granting exemption from pre-deposit will be rendered nugatory as the assessee will be compelled to satisfy the demand during dependency of the appeal. It has been always the judicial view that no party should be prejudiced due to action or inaction on the part of the Court (Rajkumar Dey and Others v. Tarapada Dey) 1987 (4) S.C.C. 398.
What is clear is that the sub-section though was introduced in terrorem cannot be construed as punishing the assessee for matters which may be completely beyond their control. The sole object behind the amendment is to ensure speedy disposal of the appeals where orders of stay were granted and duty payable to the revenue are with-held. The said provisions act in terrorem preventing the assessee from delaying the disposal of the appeal. But if the assessee is not at fault and the Tribunal for reasons beyond its control is unable to dispose of the appeal within 180 days from the date of the grant of order of stay, the Tribunal cannot be held to be powerless to extend the order of stay granted on an application being made for extension of stay by the assessee. Merely because there is no express provision provided for extending stay granted earlier, it cannot be said that the appellate Tribunal has no power to extend the time. Prior to amendment in the absence of any specific provision it was granting stay. If the Tribunal is held to possess the power to grant stay, on the same analogy, the Tribunal is held to possess power to extend the order of stay granted, if the appeal is not disposed of within 180 days from the date of the stay order. In such circumstances, if an application is made by the assessee, the Tribunal has the power to extend the order of stay. The order of stay is not automatic. Therefore, even an order of extension of stay need not be automatic. When an application is filed for extension of stay, the Tribunal has to apply its mind to find out for what reasons, the appeal is not disposed within statutory period of 180 days. If the assessee conduct is not the cause for the appeal not being disposed of, then the assessee cannot be denied the benefit of extension of the stay order. Expressly they have not taken away the power of the Tribunal to extend the period of stay granted. To extend the period of stay granted no express provision is required. Once the power to grant stay exists and is conceded, the power to extend the period of stay follows from such power. It is settled law that no party should be prejudiced due to action or inaction on the part of the Court. In those circumstances, the contention of the revenue that in the absence of express provision conferring the power of the Tribunal to extend the stay order, the Tribunal cannot extend the stay is without any substance.
It is well settled that deciding on whether there is a prima-facie case in any given appeal before the CESTAT is a substantive right and is cannot be curtailed in a circumstance where undue hardship is established. However, the question which arises for our consideration is whether the operation of the period of such a stay though statutorily provided can be construed in a manner which curtails the power of the tribunal to extend the stay or to be construed in a manner which presupposes inherent power in the Tribunal to grant extension of the stay where the Tribunal is of the opinion that there is unde-hardship given the prima-facie nature of the case. It is well settled that the Tribunal on procedural matters have discretion to adopt a procedure which they are of the opinion is just and fair. This is because the establishment of any Court, judicial or quasi judicial is for dispensation of justice and not for perpetrating injustice. Tribunal has the flexibility and can adopt a procedure which is fair and adheres with the principles of natural justice. Every such procedure adopted will be acceptable and permissible until it is shown to be prohibited by law. Refer Hansraj Harjiwan Bhate Vs. Emperor, AIR 1940 Nag 390 wherein the court followed the decision in Narasingh Das Vs. Mangal Dubey 1882 ILR (5) All 583. In Suresh Jindal Vs. BSES Rajdhani Power Ltd., 2008 1 SCC 341, the apex court entered a finding that a statutory authority while exercising its statutory powers may do all things which are necessary for giving effect thereto. The oft quoted passage that rules of procedure are the handmaids of justice and not its mistresses comes to mind which establishes that procedural mandates ought not to come in the way of dispensing substantive justice more-so when the fault is not attributable to assessees. This is because procedural rules ought to serve the scheme and object of the enactment for the purposes of which they have been formulated and not otherwise because it is always that the dog wags its tails and not the tail it’s dog. In Kailash Vs. Nankhu, AIR 2005 SC 2441 and Salem Bar Association Vs. UOI, AIR 2005 SC 3353 it has been held that non grant of extension would amount to failure of justice. The object of procedural rules is not to promote failure of justice. Procedural rules ought to be read down to mean that where sufficient cause exists or events are beyond the control of the assessee, the Court would have inherent powers to extend that time. It ought to be appreciated that when for the purposes of the Constitution of India fair and just procedure is one of the basic structures of the Constitution of India, no law under the Constitution ought to be permitted to adopt a procedure which is not just or fair and even if a procedure is so perpetrated i the statute, as in the present case the same must be subservient to the objects of the creation of the CESTAT which in broad lines is to dispense justice and not to perpetrate in-justice.
Observations for future – The department would do well to appreciate the following before it embarks, in future, with great zeal to recover dues without appreciating whether a decision can be said to be a binding precedent in terms of Article 141 of the Constitution of India the following:
- That India is governed by rule of law and not rule of executive fiats or ukases.
- That the entire machinery set up to collect revenue for India is to serve the law abiding public.
- That India became independent and a republic 67 years ago and after 1947 there was, is and will not be a requirement for the administrative machinery to act as vasool rajas who are concerned only with recovery and no other aspect of the law. Lagan was abolished long ago.
- That the department and assessees have to work together as partners and not as adversaries, one trying to overdo the other.
- That all litigation is not to hoodwink the UOI.
- That merely because of a few rotten apples all assessees cannot be seen with a colored eye.
- That ultimately the UOI works, functions and is able to project so called growth compared to previous years only because of the lagan paid by law abiding assessees.
- That what is legitimately due to Ceaser ought to be recovered under due process of law and not by adopting arm twisting tactics to project growth figures for successive Governments.
- That all Government servants owe their allegiance to the general public and not to their administrative superiors because such administrative superiors also owe their allegiance to the public and as such the entire machinery serves one master.
- That the statute needs to fix accountability on the executive in the discharge of quasi judicial functions.
- That there needs to be a time limit prescribed for adjudication of cases.
- That the trend of fixing targets for the department, like insurance agents, needs to be abolished.
- That irrespective of the letter of law it is the spirit of law which needs to be upheld.
In the words of Auribondo in Bande Matram India should strive to be free, that she can be free and that she will be, by the impulse of her past and present, be inevitably driven to the attempt and the attainment of national self-realisation. A section has no right to lay down a law by which the whole will be bound and if they persist in the attempt they will only be inviting a permanent secession.