Board's Draconian Circular 967 - Madras HC clarifies that Circular is directory and not mandatory
A bunch of Writ Petitions were filed in the Madras High Court challenging the Board Circular No. , dated 1.1.2013 and the consequential recovery notices although the stay applications were pending before the Commissioner of Customs (Appeals).
The High Court found it relevant to refer to the earlier circulars/instructions that were issued on the subject and rescinded by the present Circular and observed that the Board was of the view that, as a general principle, recovery should be resorted to in cases where no appeal is filed or where there is a failure on the part of the assessee to obtain interim orders and that if appeal and stay/waiver applications are filed, a reasonable time should be given.
The High Court thereafter took note of the provisions of Section 37-B of the CEA, 1944 and s. 151A of the Customs Act, 1962 and noted that the same do not strictosensu apply to the circulars/instructions under challenge but may be covered under rule 31 of the CER, 2002 and the Circular 967 could, therefore, be at best termed as instructions by the Board. At best it is persuasive in character and consequently, it is directory in nature and not mandatory.
The High Court then adverted to the provisions of s. 35, s. 35C, 35F of the CEA, 1944 and observed that if the circular attempts to defeat the object of Section 35-F of the Central Excise Act and Section 129-E of the Customs Act in whatever manner, it cannot be justified, as it would amount to overreaching the provisions of the respective Acts.
Noting that the instruction in Serial Nos.3, 6, 9 and 10 employs the words "if no stay is granted" and "whichever is earlier" and gives the department a right to proceed and take coercive steps after the time limit of 30 days, the High Court held that the same is arbitrary.
Taking cognizance of the letter dated 1.11.2012 (DDT 1975 02 11 2012) addressed to the Hon'ble Finance Minister by the Indirect Taxes Bar Association in the matter of filling up the vacancies in the posts of Member (Judicial) and Member (Technical), in the Chennai Bench (CESTAT), the High Court observed that it is evident that the non consideration of the stay/waiver applications is because of lack of members to constitute the coram for a bench.
The High Court further held -
+ it is clear that the present circular/instruction, which though not relatable to Section 37-B of the Central Excise Act, 1944 or Section 151-A of the Customs Act, 1962 can at best be taken as an instruction to the field formations to initiate proceedings for recovery of revenue dues which the assessee or the importer has failed to pay having suffered an order passed by the adjudicating authority and is pending in appeal before the Commissioner (Appeals) or the CESTAT, as the case may be.
+ It is not mandatory to effect recovery immediately after 30 days as mentioned, as such an intention is not there in the statute.
+ There is no doubt that for recovery of dues payable to the revenue, proceedings can be initiated thirty days after filing of the appeal or any time thereafter and the same cannot be found fault with. But the action of the department in resorting to coercive recovery proceedings at an early date without taking into consideration the pendency of the stay/waiver application before the Commissioner (Appeals) or the Tribunal would necessarily work hardship to the petitioners/assessees.
+ in the absence of proper functioning of the Tribunal due to non availability of members and when the Commissioner (Appeals) does not provide dates for hearing of the stay/waiver application within the time specified, it is not clear as to how the petitioners/ assessees can be found fault with. The Department cannot, under this circular, take away the substantial right granted under the statue to the petitioners/assessees.
+ In cases where appeals are filed along with applications for stay/waiver and intimation of the same has been given to the department, the Officers of the respondent/department should not proceed for recovery as a matter of course, unless and until it is found that the petitioners/assessees in the case are deliberately prolonging the issue under one pretext or the other.
+ If no order is passed in the stay/waiver application by the Commissioner (Appeals) or the Tribunal for some reason not attributable to the assessee, the authorities shall refrain from initiating coercive action. The circular/instruction stands clarified as above. The assessee is also required to show to the authorities that he is diligent in prosecuting the appeal along with the stay/waiver application.
+ The circular/instruction is accordingly clarified to state that while there is a power to initiate recovery proceedings on an erring assessee, the department should refrain from taking coercive steps if due diligence is shown by the assessee in prosecuting the appeal and the stay/waiver application.