Can CESTAT extend Stay beyond 365 days - YES, holds Larger Bench
AS reported in DDT 2397 16.07.2014, the issue referred to the Larger Bench of the CESTAT was
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 an appeal is occasioned not on account of any conduct of the appellant?
As per Section 35C, the CESTAT is expected to decide an appeal within three years. If a Stay is granted, the appeal has to disposed of within 180 days. The controversial third proviso under dispute inserted in Section 35C(2A) with effect from 10.05.2013 reads 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 eight-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."
As per the Statute, the Tribunal can grant Stay for a maximum period of 365 days. Tribunal takes about 5 to 10 years to decide a case. In such a situation should the Stay granted be vacated after 365 days for no fault of the appellant? Government, at least Board thinks so. The Courts are vertically divided on the issue, in spite of the decision of the Supreme Court in the case of Kumar Cotton Mills Pvt. Limited - 2005-TIOL-42-SC-CESTAT.
Any way without referring to the multitude of case law, DDT is happy to report that the Larger Bench of the CESTAT headed by the President has held that:
Even in a case where the period of 365 days has passed from the date of initial grant of stay but the appeal could not be disposed of for reasons not attributable to the appellant/ assessee (in whose favour the stay was granted); and where the Tribunal is satisfied that the appellant/ assessee was ready and willing for disposal of the appeal and/ or had not indulged in any protractive strategies, extension of stay could be granted (beyond the period of 365 days) by passing a speaking order disclosing the satisfaction of the Tribunal as to absence of any delay/ protractive stratagems by the appellant/ assessee resulting in non disposal of the appeal or that the appeal could not be disposed of on account of pendency of several appeals or other reasons attributable to the structure and context of the Tribunal or other appropriate reasons.
An assessee/ appellant in whose favour an order of stay earlier granted stood vacated on expiry of 180 days or 365 days as the case may be, may present an application seeking extension of stay by pleading the necessary facts as would authorise the exercise of discretion by this Tribunal for grant of such extension.
This means that:
1. The appellant has to apply for extension of Stay beyond 180 days and 365 days.
2. The Tribunal has to be convinced that the appeal could not be disposed of for reasons not attributable to the appellant/ assessee.
3. The Tribunal has to pass a speaking order.
All the Stay orders will now have to be got extended by separate applications followed by hearings and orders. All this avoidable work happens just because the Department has no respect for the Tribunal or its inherent power to grant extension of Stay. Even when the Tribunal orders that recovery is stayed during the pendency of the appeal, the Department resorts to recovery proceedings after 180 days and 365 days and the assessee is forced to knock at the doors of the Tribunal and is often dragged to the High Court by the Department. This huge unproductive work costs the Department and the assessees a bomb. Revenue officers are perhaps the biggest enemy to revenue collection. They ensure that precious time is spent in litigation and not production.
Fortunately, the scene has changed after 5.8.2014 and now there is a mandatory pre-deposit and there is no Stay - but for the old cases, the process of filing Stay applications will have to be gone through.
Can't the Board simply accept the fact that a Stay is a Stay till the appeal is disposed of? Then CESTAT can do better things than hearing Stay applications.
The larger Bench Order is technically binding on all other Benches of the CESTAT and now the assessees can be sure of getting extension of Stay.
We bring you this important order today.