Extension of Stay - Whether CESTAT can grant extension beyond 365 days - Matter referred to Larger Bench
DDT had reported on 07 07 2014 - that the issue has been referred to a Larger Bench of the CESTAT. Today we bring you that order of the Tribunal.
In Rajasthan State Industrial Development & Investment Corporation Limited case - 2014-TIOL-1218-CESTAT-DEL, a Division Bench of the CESTAT consisting of the President and Technical Member Mr.R K Singh, held that CESTAT had no jurisdiction to extend operation of a stay beyond the period of 365 days of the initial grant, in view of provisions of the 3rd proviso to Section 35C(2A) of the Central Excise Act, 1944 and rejected the application for extension of stay. The bench relied on the decisions of the High Courts of Karnataka and Delhi in Commissioner of Income Tax, Bangalore vs. Ecom Gill Coffee Trading Pvt. Ltd. - and CIT-II vs. Maruti Suzuki Limited -, respectively in coming to the conclusion. The same Bench had rejected extension of Stay in two other cases, while some other Benches had been routinely extending the Stay beyond one year. In fact the Bangalore Bench gave a General Order stipulating guidelines applicable to all cases - 2014-TIOL-1204-CESTAT-BANG
Now, the issue is before the same Bench of the President and the same Technical Member in another application.
It was submitted that the third proviso to Section 254(2A) of the Income Tax Act, 1961, as amended by the Finance Act, 2008 w.e.f. 01.05.2008 and the third proviso to Section 35C (2A) of the Central Excise Act, 1944, as amended w.e.f. 10.05.2013 are not identical; that the expression "even if the delay in disposing of the appeal is not attributable to the assessee", occurring in the third proviso to Section 254(2A) of the Income Tax Act does not find place in the third proviso to Section35C(2A) of the 1944 Act, and that this difference in the phraseology of the two provisions has clear legal consequences, relying on the judgment of the Bombay High Court in Narang Overseas (P) Limited vs. ITAT- 2007-TIOL-487-HC-MUM-IT. It was urged that the third proviso to Section 254(2A) of the Income Tax Act as amended by the Finance Act, 2007 (a provision which is in pari materia provisions of the third proviso to Section 35C(2A) of the 1944 Act) was considered by the Bombay High Court and the Court ruled that the principle enunciated by the Supreme Court in Commissioner of Central Excise, Ahmedabad vs. Kumar Cotton Mills Pvt. Ltd.- would continue to be applicable and the Tribunal (ITAT) is not denuded the power to grant extension of stay after the sunset period enacted in the third proviso to Section 254 (2A) of the 1961 Act. It is also contended that judgments of the Karnataka and the Delhi High Courts in Ecom Gill Coffee Trading Pvt. Ltd. (supra) and Maruti Suzuki Limited (supra) do not provide appropriate guidance for interpretation of the distinct provision of Section 35C (2A) of the 1944 Act as amended in 2013.
These arguments appealed to the Bench and it found prima-facie case warranting reconsideration of the conclusion recorded in Rajasthan State Industrial Development & Investment Corporation Limited case - 2014-TIOL-1218-CESTAT-DEL.
So the Tribunal referred the following issue for consideration to a Larger Bench:
Whether the third proviso to Section 35C(2A) of the Central Excise Act, 1944 disables CESTAT of the power to grant extension of stay beyond 365 days from the initial grant of an order of stay, notwithstanding that the delay in disposal of a appeal is occasioned not on account of any conduct of the appellant?
The Revenue DR took strong objection to reconsideration of the earlier order in Rajasthan State Industrial Development & Investment Corporation but the Bench was not impressed.
Since the matter is referred to a Larger Bench and since the referring Bench discerned a strong prima-facie case in support of the proposition that the Tribunal has the power to grant extension of stay beyond the period of 365 days from the initial grant of stay, Revenue was directed not to take any steps to realize the stayed demands.
Now what will happen? Will the other Benches of the Tribunal routinely extend the Stay beyond 365 days or will they bar the Revenue from recovering the demands? And what will be the effect of the amendments proposed in the recent Finance Bill?
Can't the Government give a direction to its officers that once CESTAT grants Stay till the disposal of the appeal, it means TILL DISPOSAL and not 365 days? The officers should be directed not to take any coercive action for recovery till the appeal is finally disposed of. Otherwise the CESTAT Benches will be fully engaged in dealing with Stay and extension of Stay matters for the next few years.
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