Tarun Agarwala, J@mdashIn this group of appeals, the only question of law proposed is, whether the Tribunal is vested with the power to extend the stay order beyond the specified maximum time limit prescribed in Section 35-C(2-A) of the Central Excise Act (hereinafter referred to as the "Act"), If so, to what extent?
2. The Tribunal, in some of the appeals, have extended the interim order for a period of six months. In some other appeals, the Tribunal has extended the interim order till the disposal of the appeal. The Department, being aggrieved, has filed the appeals questioning the power of the Tribunal to extend the stay beyond the period of 365 days.
3. We have heard Sri Ashok Singh, Sri R.C. Shukla, Sri B.K.S. Raghuvansi, Sri Amit Mahajan and Sri Vinod Kant, the learned counsels for the appellant and Sri S.D. Singh, the learned senior counsel along with Sri Nishant Mishra, Devnath, Sri Ashok Kumar and Sri A.P. Mathur, the learned counsel for various assessees.
4. The controversy lies in a very narrow compass. Section 35-F of the Act provides that any person desirous of appealing against an order demanding duty shall pending appeal deposit with the adjudicating authority, the duty demanded or the penalty levied, provided in any particular case, if the appellate authority or the Tribunal is of the opinion that the deposit of duty demanded or penalty levied, would cause undue hardship to such person, the appellate authority or the Tribunal may dispense with such deposit subject to such condition. For facility, the provision of Section 35-F is extracted hereunder:
"35-F 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."
5. Based on the aforesaid provision, the assessee, while filing the appeals under Section 35-B of the Act prayed for dispensation of the requirement of pre-deposit of the duty levied. The Tribunal has passed interim orders.
6. Section 35-C of the Act was amended by Finance Act, 2002 and sub-section (2A) was added. For facility, Section 35C(2A) as amended by the Finance Act 2002 is extracted hereunder:
(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 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.
7. Section 35C(2A) of the Act was further amended by the Finance Act of 2013 wherein a third proviso was added namely:
"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."
8. Upon the insertion of Section 35C(2A) of the Act, a mandate was given to the Tribunal to decide the appeal within a period of three years "where it is possible to do so".
9. The first proviso to sub-section (2-A) of Section 35C of the Act indicates, that if any order of stay was passed by the Tribunal in which case, the appellate tribunal shall dispose of the appeal within 180 days. 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 disposed of within a total period of 365 days, the stay would stand vacated upon the expiry of 365 days.
10. Section 35C(2A) of the Act and its three proviso was interpreted by various courts including this Court.
11. In Writ Tax No. 375 of 2014, M/s. Garg Industries vs. Union of India through Secretary Revenue and two others, decided on 1.7.2014, a Division Bench of this Court held that the Tribunal in an appropriate case can extend the stay order, but not exceeding 365 days, 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. The Court further held, that where a fresh stay application was filed, the Tribunal was competent to dispose of such application.
13. In Central Excise Appeal No. 117 of 2015, Commissioner of Central Excise vs. M/s. Mayank and Company, decided on 2.7.2015, a Division Bench of this Court held that the interim order passed by the Tribunal under Section 35C(2A) of the Act had a limited shelf life and that upon the expiry or immediately before the expiry, it would be open to the assessee to move a fresh stay application, which would be decided by the Tribunal in accordance with law.
14. In
15. Section 35F of the Act and Section 35C(2A) of the Act were amended by Finance (No. 2) Act 2014 w.e.f. 6.8.2014. Section 35F of the Act, as amended by Finance Act 2014, is extracted hereunder:
"[35F. Deposit of certain percentage of duty demanded or penalty imposed before filing appeal.--The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal-
(i) under sub-section (1) of section 35, 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 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 against;
(iii) against the decision or order referred to in clause (b) of sub-section (1) of section 35B, unless the appellant has deposited ten 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 against:
Provided that the amount required to be deposited under this section shall not exceed rupees ten crores:
Provided further that the provisions of this section shall not apply to the 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 Tribunal to waive or impose a condition on the pre-deposit of duty has now being dispensed with. Now if an appeal is preferred, the assessee is required to deposit 7.5% of the duty levied before the appeal could be entertained.
17. Section 35C(2A) was amended by the provision of Section 103 of the Finance Act (2) of 2014 as under:
"103. In the Central Excise Act, in Section 35C, in sub-section (2A) the first, second and third proviso shall be omitted."
18. Section 35C(2A) of the Act as amended in 2002 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 instance, failing which, the stay order would stand vacated also has to be read as directory in nature. If the main provision cannot be treated as mandatory, the first, second and third proviso also cannot be treated as mandatory.
19. We are, therefore, of the opinion, that if the Tribunal would not dispose of the appeal within 365 days under the first, second and third proviso of Section 35C(2A) of the Act which was not attributable to the assessee, it would not mean that the Tribunal was divested with its incidental powers in not extending the interim order. The three proviso, in our view, cannot be read as mandatory in nature.
20. Order VIII Rule 1 and Order VIII Rule 10 was amended by the Amendment Act No. 22 of 2002. By the said amendment, the upper limit of filing the written statement within 90 days became mandatory on account of the use of the word "shall". The Supreme Court, while interpreting the said provision in
21. In the instant case Section 35C(2A) gave a mandate to the Tribunal to decide the appeal within three years "where it was possible to do so". These words indicate the intention of the legislation, namely, that the appeal should be decided as far as possible within three years and therefore, the provision is not conclusive to be determined as mandatory in nature.
22. In view of the aforesaid, the use of the word "shall" in the first, second and third proviso though indicative of the mandatory nature of the proviso, has to be construed as directory in consonance with the main provision. The three proviso have to advance the cause of justice and not to defeat it. The rules of procedure are made to advance the cause of justice and not to defeat it. We are of the view, that the proviso has to be read in the aforesaid manner which will not only promote justice what would prevent miscarriage of justice, inasmuch as, if the stay order stands vacated after 365 days and the appeal is not decided, the appellant would be put to irreparable loss and harm especially where the fault in not disposing off the appeal was not attributable to him. We are, therefore, of the view that strict interpretation of the three provisos to section 35C(2A) of the Act would defeat justice and would lead to a miscarriage of justice.
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 omission of the first, second and third proviso to Section 35C(2A) of the Act in effect means that there is no provision for making any further application for extension of stay. The omission of the first, second and third proviso would mean that 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 would continue to remain in force unless it is limited by the Tribunal itself.
25. The contention that the appeals filed before 6.8.2014 would continue to be governed by first, second and third proviso to Section 35C(2A) of the Act in view of the second proviso contained in Section 35F of the Act which came into effect from 6.8.2014 is patently erroneous. The second proviso which was inserted in Section 35-F of the Act w.e.f. 5.8.2014 provides that the provision of Section 35F of the Act would not apply to the stay applications and the appeals pending before any appellate authority prior to the commencement of Finance Act 2 of 2014. The second proviso indicates that the Parliament has exempted the requirement of complying with the pre-deposit as mandated by Section 35-F(1) of the Act as amended only in the case of those stay applications and appeals which were pending before any appellate authority prior to the commencement of Finance Act (2) of 2014. The appeals which are filed on or after enforcement of the amended provision w.e.f. 6.8.2014 would be governed by the requirement of pre-deposit as indicated therein.
26. The provisos to Section 35C(2A) of the Act has no relevance to the pre-deposit of amount under Section 35F of the Act. Once the proviso to Section 35C(2A) of the Act has been omitted, the embargo upon the Tribunal to limit the stay order for a limited period has now been removed. Consequently, the incidental power of the Tribunal to grant interim relief pending disposal of the appeals is now not confined to a limited period.
27. It may be mentioned at this stage that the Tribunal has the power to grant stay as incidental or ancillary to the appellate jurisdiction as held by the Supreme Court in
28. In the light of the aforesaid, we are of the view that no substantial question of law arises for consideration.
29. All the appeals fail and are dismissed.
30. In the circumstances of the case, there shall be no order as to cost.
