2015 (5) TMI 290 - HC - Central Excise

Validity of Tribunal s order - Tribunal decided issue on merit instead of deciding the stay application - Denial of CENVAT Credit - Wrongful availment of CENVAT Credit - Held that - When there is a attempt by the assessee and to demonstrate as to how a arguable case exists and in that process the assessee places reliance on a decision of a High Court and having a bearing of the issue, then, the attempt to not only distinguishes but disregard it cannot be sustained particularly when the Appeal is yet to be heard finally. In that regard, we find that the Tribunal s observations are ex-facie contrary to the settled canons and principles of law. Tribunal s understanding of the principle of per incuriam or stare decisis leaves a lot to be desired. This understanding is completely and totally inaccurate and erroneous. A decision can be said to be per incuriam only when it is rendered disregarding a statutory provision or a binding precedent. Such is not a case which is found. If the Tribunal was of the view that the High Court of Punjab and Haryana s decision was appealed against by the Revenue to the Hon ble Supreme Court, but though the decision was not interfered with, that Judgment will not bind it because the question of law is kept open by the Hon ble Supreme Court, then, that is plainly and simply not per incuriam. Tribunal was aware of this settled test namely whether there is a prima facie point or arguable case and whether the appellant assessee or party before the Tribunal had established that there was a financial hardship. However, the Tribunal lost sight of the fact that the tests, as are evolved by the Hon ble Supreme Court, cannot be taken to such ridiculous extreme or viewed with such rigor that would make it impossible for anybody to obtain an interim stay or a waiver, partial or full, in his favour of the condition of pre-deposit. - Tribunal in reaching the conclusion that the Appellant has not made out any prima facie case extensively dealt with the arguments as if it is called upon to decide the Appeal finally. That it was not called upon by the parties to do so nor was it expected of the Tribunal at the interlocutory or interim stage. All these observations and the entire attempt, is unsustainable in law. - If that right is to be meaningful or purposeful and must be preserved and saved unless there are compelling circumstances, then, imposition of such conditions would vitiate the exercise of the discretionary power by the Tribunal. It lost sight of the fact that the power to grant a stay or waiver of the condition of pre-deposit is discretionary. The discretion must be exercised judiciously and not arbitrarily or capriciously. The Tribunal should not act as per its whims and fancies, but apply settled principles of law even at the interlocutory stage. The Tribunal has completely lost sight of all this, which is evident from the impugned order. It cannot be sustained. It accordingly is quashed and set aside. - Decided in favour of assessee.

Issues Involved:
1. Justification of the Tribunal's detailed order at the stay application stage.
2. Tribunal's application of the prima facie test.
3. Applicability of Explanation to Rule 3(7)(b) of Cenvat Credit Rules, 2004.
4. Utilization of AED (GSI) credit for payment of BED on final products.

Issue-wise Detailed Analysis:

1. Justification of the Tribunal's Detailed Order at the Stay Application Stage:
The appellant argued that the Tribunal erred in passing a detailed order at the stage of considering a stay application, effectively concluding the issue prematurely. The Tribunal's role at this stage should have been limited to determining whether there was a prima facie case or an arguable point without rendering elaborate findings that could prejudice the final appeal. The Court noted that the Tribunal's approach was overly rigorous and not in line with the principles laid down by the Supreme Court, which require only a cursory reference to the submissions and relevant material at the interlocutory stage.

2. Tribunal's Application of the Prima Facie Test:
The appellant contended that the Tribunal wrongly concluded that there was no prima facie or arguable case. The Tribunal's task was to establish whether there was a bona fide contention or a serious question to be tried, not to conclude the issue. The Court agreed, emphasizing that the Tribunal should have considered whether the appellant had demonstrated financial hardship and whether a balance of convenience favored granting a stay. The Tribunal's stringent application of the prima facie test was deemed excessive and not in line with judicial discretion principles.

3. Applicability of Explanation to Rule 3(7)(b) of Cenvat Credit Rules, 2004:
The Tribunal held that the appellant was not entitled to utilize the credit of AED (GSI) for payment of BED on tyres, as the Explanation to Rule 3(7)(b) of the Cenvat Credit Rules, 2004, applied only to AED (GSI) levied after 1.4.2000. The Court found that the Tribunal's interpretation was overly restrictive and failed to consider the broader context and legislative intent behind the amendments to the Cenvat Credit Rules. The Tribunal's reliance on certain larger bench decisions without adequately addressing the appellant's arguments and relevant High Court decisions was criticized.

4. Utilization of AED (GSI) Credit for Payment of BED on Final Products:
The Tribunal concluded that the appellant could not utilize AED (GSI) credit for payment of BED on final products because the AED (GSI) pertained to a period before 1.4.2000, even though it was paid after 1.4.2000. The Court disagreed, noting that the Tribunal's interpretation of the term "paid" and its reliance on previous decisions were flawed. The Court emphasized that the Tribunal should have given due regard to the Punjab and Haryana High Court's decision in Goodyear India Ltd., which supported the appellant's position. The Tribunal's dismissal of this decision as non-binding was found to be incorrect.

Conclusion:
The Court quashed and set aside the Tribunal's order, granting a waiver of the pre-deposit condition and a stay against the recovery of the demanded sum. The Tribunal's detailed and conclusive findings at the interlocutory stage were deemed inappropriate, and the Court emphasized the need for judicial discretion to be exercised judiciously and not arbitrarily. The appeal was allowed, and the appellant's right to a meaningful appeal was preserved.

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