2010 (3) TMI 235 - HC - Central Excise

Recovery during the pending of stay- the petitioner was engaged in the processing grey fabrics. The officers of the revenue department visited the premises of the petitioner on 18-11-1998 and seized certain private records. It is alleged that some unaccounted grey fabrics and semi- processed finished fabrics were recovered from the premises. On the basis of material found at the time of search, it has been inferred that the petitioner was indulged in removing manufactured goods without payment of duty and, accordingly, a demand had been raised and penalty had been imposed. The Tribunal allowed the application in part and directed the petitioner to deposit a sum of Rupees one crore within a period of eight weeks. Against the order of the Tribunal, the petitioner filed Writ Petition. By the aforesaid order of this Court, the order of the Tribunal was modified and the petitioner was directed to deposit a sum of Rupees twenty lacs and the Tribunal was directed to decide the appeal expeditiously. In pursuance of the order of this Court, the petitioner had deposited a sum of Rupees twenty lacs. Held that- writ petition is allowed.

Summary

Issues:
Challenging impugned demand notice dated 11-1-2010 by Assistant Commissioner, Central Excise Division, Rae Bareli.
Interpretation of Section 35C(2A) of the Central Excise Act, 1944 regarding the duration of stay orders and disposal of appeals within 180 days.
Validity of extending stay order till disposal of appeal by the Tribunal and its binding nature on lower authorities.
Contemptuous behavior of Assistant Commissioner, Central Excise Division, Rae Bareli in challenging the Tribunal's order and issuing demand notice against it.

Analysis:
The petitioner challenged the demand notice issued by the Assistant Commissioner, Central Excise Division, Rae Bareli, dated 11-1-2010, based on the provisions of the Central Excise Act, specifically Section 35C(2A). The Act mandates that if an order of stay is made in an appeal proceeding, the Appellate Tribunal must dispose of the appeal within 180 days, failing which the stay order stands vacated. The petitioner had filed an appeal before the Tribunal and obtained a stay order, which was extended by the Tribunal till the disposal of the appeal. Despite this, the Assistant Commissioner issued the demand notice, justifying it based on the expiry of the 180-day period. The petitioner argued that the demand notice was arbitrary and contrary to judicial norms, citing relevant case laws supporting the Tribunal's authority to extend stay orders beyond 180 days.

The High Court analyzed the provisions of Section 35C(2A) and the Tribunal's authority to extend stay orders, as established in previous judgments like Kumar Cotton Mills Pvt. Ltd. v. CCE, Ahmedabad and IPCL v. Commissioner of Central Excise, Vadodara. The Court affirmed that the Tribunal had the jurisdiction to extend the stay order till the appeal's disposal, and the order dated 14-8-2008 was valid and binding. The Court emphasized that the Assistant Commissioner had no legal authority to circumvent the Tribunal's order and initiate recovery proceedings, deeming the demand notice arbitrary and unauthorized.

The Court further addressed the contemptuous behavior of the Assistant Commissioner in challenging the Tribunal's order and the Court's jurisdiction in issuing the demand notice. Citing Union of India v. Kanilakshi Finance Corporation Ltd., the Court stressed the importance of judicial discipline and the obligation of subordinate authorities to follow higher appellate orders. The Court found the language used in the counter affidavit to be contemptuous and imposed exemplary costs on the respondent-officer as a warning against arbitrary actions in the future. Ultimately, the Court allowed the writ petition, quashing the demand notice with the imposed costs.