Stay by CESTAT beyond 365 days - Identical Provisions under Income Tax Act
DDT's remarks yesterday that, "PERHAPS, nowhere in the civilised world, you will have a law which says that if the Government fails to do something, the citizen will be punished.", evoked strong response from a senior officer of the Customs and Excise Department. He writes in,
"I was as much horrified when this provision was introduced in the Central Excise Act last year; But, since I couldn't believe that our Department can actually be so unfair, I did some research and to my horror, I found that similar provisions had already existed in Income Tax Act, and our Department had actually caught up with Income Tax Department in this unfair provision of law.
So, my request is to highlight this fact on the Direct Tax side ALSO, so that our Department ALONE is not painted as a carnivore."
Yes, Sir - You are right - It was the Income Tax Department, which first brought this unfair, illogical draconian law, and the CBEC simply followed.
A peep into history:
By Finance Act 2001, in Section 254 of the Income Tax Act, in sub-section (2A), the following provisos were inserted with effect from the 1st day of June, 2001:-
"Provided that where an order of stay is made in any proceedings relating to an appeal filed under sub-section (1) of section 253, 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 so disposed of within the period specified in the first proviso, the stay order shall stand vacated after the expiry of the said period.".
The very next year in the Finance Act of 2002, the CBEC got an identical amendment to the Customs Act: It was stipulated that:
"Provided that where an order of stay is made in any proceedings relating to an appeal filed under sub-section (1) of section 129A, 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 .".
Similar amendment was made in Section 35C of the Central Excise Act.
In March 2002, TIOL had organised a post budget seminar in New Delhi, which was attended by the Revenue Secretary and the Chairmen of both the Boards. Chairman, CBEC, KL Verma was asked how he could justify such a draconian illogical law. He replied, "you ask the CBDT Chairman - last year he introduced it in the Income Tax Act; he is my elder brother; I simply follow him."The CBDT Chairman who was present did not volunteer to answer and before somebody could ask him, as it often happens in meetings where many press reporters are present, somebody else was in a hurry to get his question through and this question did not get the attention it deserved.
It must also be mentioned that when the draconian provisions were introduced in the Income Tax Act in 2001 and when they were replicated in the Customs and Central Excise Acts, there was hardly any protest, any dissent or challenge. Tyrannical laws get passed not because of the power of the tyrants but because of the meekness of the victims. Blessed are the meek, for they shall inherit the Earth, but their properties will be attached by the tax departments, if the Tribunals are not able to decide their cases because the Government will not post enough judges in these Tribunals.
It was in 2008 that the Income Tax Department made the 180 days to a maximum of 365 days. The Finance Act 2008 amended Section 254 of the Income Tax Act to provide for:
"Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, which shall not, in any case, exceed three hundred and sixty-five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee.".
The Memorandum to the Finance Bill explained this provision as:
The intention behind these provisions have been very clear that the ITAT can not grant stay either under the original order or under any subsequent order, beyond the period of 365 days in aggregate.
To make this intention clear, it is proposed to amend section 254 of the Income-tax Act and further provide that the aggregate of the period originally allowed and the period or periods so extended or allowed shall not, in any case, exceed three hundred and sixty-five days, even if the delay in disposing of the appeal is not attributable to the assessee.
This was toning down draconianism but at the same time a vulgar exhibition of legislative arrogance. How on earth can you punish an assessee if the delay was not attributable to him? I shave your head and say, because I don't like your shaven head, I am going to cut it off!
This time it took five years for CBEC to follow the big brother CBDT. The 2013 Finance Act inserted a new proviso in Section 35C(2A) of the Central Excise Act as:
"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 .".
And the JS(TRU) clarified:
Section 35C (2A) of the Central Excise Act, 1944 and the corresponding provisions under section 129B (2A) of the Customs Act, 1962 are being amended to provide for a maximum ceiling of 365 days up to which the Tribunal can grant stay of recoveries. By inserting a proviso in the abovementioned sections, it is being stipulated that after 365 days from the stay order, this stay shall stand vacated even if the disposal of the case is pending for no fault of the assessee.
Fortunately in this country, we still have Courts, which see reason and fairness and not every draconian dream of the babu is approved at the peril of the assessee.
It is barbaric that a State passes a law that it will punish the taxpayers for the fault of the State machinery. The Government has ensured that Tribunals don't function properly, they are not provided basic infrastructure, posts are not filled up, new benches are not created and when the Tribunals are not able to decide appeals within a year, they want to punish the assessees. Can there be a more unfair law?
You know who brought in this dreaded law? Yashwant Sinha. And who perpetuated it? Chidambaram. It seems stock markets in India are rising after hearing the news that neither of them will be the next Finance Minister! The Finance Minister does not really matter - the babu will have his way.