DISPOSAL OF APPEAL AT THE STAY STAGE BY THE TRIBUNAL

[Mr. M. GOVINDARAJAN]

In appeal proceedings in indirect tax matters before the Commissioner (Appeals) or Tribunal, Section 35F of the Central Excise Act, 1944 provides that the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied. Where in any particular case, the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue. For this purpose the appellant is to file stay petition along with the appeal in the prescribed format.

If stay petition is filed along with the appeal the appellate authority is to dispose of the stay petition first. The time for disposal of appeal by Commissioner (Appeals) is fixed.   Section 35F provides that where an application is filed before the Commissioner (Appeals) for dispensing with the deposit of duty demanded or penalty levied, the Commissioner (Appeals) shall, where it is possible to do so, decide such application within thirty days from the date of its filing.

The issue to be discussed in this article is whether it is proper to disposal of the appeal by the Tribunal at the stay stage itself with reference to decided case law.

In ‘TVS SKY Shop Limited V. Union of India’ – 2013 (4) TMI 531 - BOMBAY HIGH COURT the appellants filed the present appeal against the order of Tribunal.   The appellants had sought a stay of the recovery of the dues before the Tribunal.   The appellants filed appeal before the Tribunal against the order of Commissioner (Appeals). The Tribunal fixed the hearing date for the stay petition on 21.02.2011. The Tribunal delivered its decision on 13.05.2011. In that order the Tribunal held that the appeal itself could be disposed at the stay stage. Therefore after allowing the stay petition, the Tribunal took up the appeal for disposal.

Against this order the appellants filed a writ petition before the High Court.   The grievance of the appellants is that in the proceedings before the Tribunal submissions were made only in the stay application seeking waiver of pre deposit of duty, interest and penalty.   The Tribunal did not indicate anything that the Tribunal would take up the appeal on that date itself and dispose the same.

The appellants submitted the following contents before the High Court:

• What was heard by the Tribunal on 21.02.2011 was an application under Section 35F of the Central Excise Act, 1944 seeking waiver of pre-deposit of dues, interest and penalty;
• No indication was given by the Tribunal that it proposed to dispose off the appeals finally;
• The appellants were never given an opportunity to make submissions for the hearing of the appeals;
• The Tribunal reserved the order after hearing the appellants and the Department on 21.02.2011 on the stay petition;
• It is only when the order was communicated to the appellants, the appellants realized that the Tribunal has finally disposed off the appeals and rejected all the contentions of the appellants except entitlement to the credit of input and input services;
• The order of the Tribunal is clearly in breach of the principles of Natural Justice.

The Department accepted the factual position that the Tribunal had heard only the stay application and not the appeal on the hearing date. However the Department raised a preliminary objection to the maintainability of the petition under Article 226 of the Constitution on the ground that since the appeals have been disposed of by the Tribunal, an alternative remedy of an appeal is available against the decision of the Tribunal.

The High Court held that it would normally excise its jurisdiction where an alternative remedy is available. However an alternative remedy would not operate as a bar in at least three contingencies-

• Where the petition has been filed for an enforcement of fundamental right;
• Where there has been a failure of the principles of natural justice; or
• Where the order or proceeding is wholly without jurisdiction or the vires of an enactment are challenged.

In the present case, the High Court held that it is evident from the record that the proceedings which were listed before the Tribunal on 21.02.2011 consisted of the applications for waiver of pre-deposit.   The Tribunal itself observed that while allowing the said petition, it was of the view that the appeal could be disposed of at that stage.   If the Tribunal was inclined to dispose of the appeal, parties ought to have been placed on notice of this in order to enable them to make submissions on the merits of the appeals.   That evidently has not been done. The impugned order of the Tribunal therefore suffers from a fundamental breach of the principles of natural justice.

The High Court set aside the impugned decision of the Tribunal purely on the ground that there was a breach of the principles of natural justice and restore both the stay application and the appeals to the file of the Tribunal. It would be open to the Tribunal to pass fresh orders on the applications for stay.   In the event that the Tribunal is included in take the appeals for hearing and final disposal, parties may be placed on notice of the aforesaid fact before the Tribunal proceeds to a final disposal.  

Discussions to this article

[CA. Surender Gupta]

Dear Govindarajan Ji, your contribution is laudable.

[MARIAPPAN GOVINDARAJAN]

Thanks you,  Sir.   It is all with your support.

 

M. GOVINDARAJAN