COERCIVE METHODS TO RECOVER AMOUNT BY REVENUE AUTHORITIES FROM APPLICANTS DURING PENDENCY OF STAY APPLICATION BEFORE TRIBUNAL NOT ALLOWED

[Mr. M. GOVINDARAJAN]

      While filing an appeal before the tribunal, the appellant is used to file application along with the appeal papers, with the prayer before the Tribunal for stay/dispensation of pre deposit of any duty, interest, penalty etc., The appellant has to adduce reasons for his prayer.   The tribunal on considering the reasons put forth by the appellants and after giving a reasonable opportunity of being heard to the Department pass orders for stay/dispensation of pre deposit or it may direct the appellant to deposit part amount or reject the prayer of appellant in toto.

      It is pertinent to note whether the department is entitled to recover the due from the appellant while the stay application is pending before the tribunal.   The tribunals do not allow such a coercive method taken by the department to recover the amount from the appellants during pendency of stay application, the fact of which is substantiated with the aid of the decisions of the tribunals in the following cases:

·  Loyal Super Fabrics V. Commissioner of Central Excise, Pondicherry 2004 -TMI - 53030 - CESTAT, (SOUTH ZONAL BENCH, CHENNAI);

·  Abishek Industries Ltd., V. Commissioner of Central Excise, Ludhiana, 2005 (190) ELT 399 (Tri. Del);

·  Pami Metals Ltd., V. Commissioner of Central Excise, Kolkatta - II 2008(11) STR 540 (Tri. Kolkatta)

In 'Loyal Super Fabrics' case (supra) the appellant submitted that their application seeking waiver of pre deposit and stay or recovery in respect of duty demanded is still pending disposal. In the meantime the department is coercing them for the payment of disputed duty.   In a letter dated 03.08.2004, the Central Excise Range Superintendent addressed to the appellants demanding the duty amount.   The letter points out that coercive action will be taken in the event of non payment within seven days.   The appellant has already submitted to the department in writing for keeping any recovery proceedings in abeyance on certain valid grounds:

The CBEC has noted of the decision of the Hon'ble High Court, Mumbai in W.P. No. 422/88 and 518/88 that during the pendency of stay application no coercive action should be taken to realize the arrears of revenue.   Following this decision the Board issued circular No. 396/29/98-CX, dated 02.06.1998 for the field formation to abide the law laid down by the Mumbai High Court;

·  In  Circular No. 788/21/2004-CX, dated 25.05.2004 the Board has clarified that in respect of stay application pending against the orders of Commissioners before the CESTAT a view similar to the decision of the Mumbai High Court should also be taken;

·  In the case of 'Shree Cement Limited V. Union of India 2001 -TMI - 45978 - (HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR) the Hon'ble High Court, Rajasthan, following the law laid down by the Mumbai High Court has held that no coercive measures of recovery should be taken during the pendency of stay petition before CEGAT and recovery can be effected until that application has been disposed off in accordance with the law.

The tribunal passed an interim order staying the recovery till the stay application is finally disposed.

      In 'Abishek Industries Limited' (supra) the demand has been made on the ground that appellants had been erroneously refunded additional excise duty (AEDTTA) paid on inputs used in the production of exported items.   The contention of the appellant is that AED also is eligible for credit.   During the pendency of the present stay application, lower authorities made recovery by adjustment in the appellant's rebate claims in respect of other exports.  The Revenue submitted that AEDTTA is not attracted on finished products in terms of Rule 5 of CENVAT Credit Rules and refund is not available to the appellant.   The tribunal held that it is quite disturbing that even as the stay application was pending before the tribunal, the Revenue Authorities have resorted to coercive methods to recover the amount from the appellants by making adjustments in their rebate claims in regard to other exports.  Clearly this is not permissible.   It is well settled in 'Rama Vision Limited V. Commissioner of Central Excise, Meerut 2004 (105) ELT 518 that during the appeal period or during the pendency of the stay application before the appeal period or during the pendency of stay application before the Tribunal, the Revenue authorities shall not make any recovery towards the demand made in the impugned orders.  In view of this, the Tribunal directed that any amount recovered from the appellant pursuant to the impugned order shall be restored to them forthwith.

      In 'Pami Metals Ltd., (supra) the appellant submitted that the Revenue Authorities have asked them for paying the duty and penalty amounts immediately and they have sent a copy of the letter dated 25.11.2005 to the Assistant Commissioner for recovery of the same.   The appellants relied on the judgment in 'Shree Cement Ltd., V. Union of India (Supra), 'Loyal Super Fabrics' (supra), 'Abishek Industries Ltd., (Supra) and Board circular dated 02.06.1998 and prayed the tribunal to stay on the recovery proceedings to be initiated by the Assistant Commissioner of Central Excise till the disposal of the stay petition filed by them.  The Central Excise Authorities relief on the Board's circular No. 788/21/2004-CX, dated 25.05.2004.   The tribunal held that the circular referred to by the Board is applicable in the case of first appeal filed before the tribunal against the order of the Commissioner and does not talk about anything on second appeal filed before the tribunal.   The tribunal following the judgments relied on by the appellants held that the Revenue Officers should not take any coercive measures while the stay petition of the applicant/appellant company is pending before the tribunal.