2013 (4) TMI 102 - HC - Central Excise

Initiation of recovery proceedings relying on Circular No.967 /01/2013-CX dated 1.1.2013 - as per dept. assessee had availed cenvat credit of service tax paid on different services in relation to maintenance and repair works of its residential colony which did not appear to be eligible input services - assessee contested against recovery as not only the appeal is pending, its prayer for stay of realization of the cenvat credit alongwith Interest and penalty has not yet been considered and disposed of on merits - Held that - A plain perusal of the circular dated 1.1.2013 would unequivocally demonstrate that it is in the form of administrative instructions issued by the CBEC New Delhi obligating the concerned authorities to initiate recovery proceedings against the confirmed demands in the eventualities narrated therein fixing periods therefore. Broadly, three situations have been contemplated (1) where no appeal has been filed against a confirmatory order in original (2) where an appeal has been filed without stay application against a confirmatory order in original and (3) where an appeal has been filed with a stay application against such order. Assertive plea made on behalf of the petitioners that the office of the Commissioner (Appeals) Jaipur-I is lying vacant for which there is no possibility in near future that the appeals and interim applications would be heard and disposed of, has not been refuted. Having regard to the statutory obligations past for timely disposal of the appeals and the interim applications, its is constrained to conclude that the contemplated recovery of the demands in this factual scenario even otherwise, if approved, would be grossly unfair, unjust and unreasonable and would amount to allowing the respondents-authorities to take advantage of their own lapses and failings. The petitioners- assessees , whose appeals alongwith interim applications are pending without any decision for no fault of theirs, can by no means be left exposed to the megrim of the departmental authorities test the statutory guarantee engrafted in Chapter VIA of the Act is rendered illusory. The plea that the power of issuing earlier circulars on the same issue with some protective features vis -a- vis the assesses now recalled envisages permissibility to withdraw the same lacks persuasion. In absence of any legal endorsement of the impugned circular dated 1.1.2013, it, flies in the face of the provisions contained in Chapter VIA of the Act testifying a contrary legislative enjoinment and thus, cannot be sustained vis -a- vis the contingencies where the appeals with stay and interim applications for dispensing with the deposit of duty demanded or penalty levied are pending without being attended to or in which no final orders have been passed. See Larsen Toubro Ltd. V/s The Union of India and ors. 2013 (2) TMI 188 - BOMBAY HIGH COURT - in favour of assessee.

Summary

Issues Involved:
1. Validity of Circular No. 967/01/2013-CX dated 1.1.2013.
2. Legality of initiating recovery proceedings against confirmed demands while appeals and stay applications are pending.
3. Compliance with statutory provisions under Chapter VIA of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Validity of Circular No. 967/01/2013-CX dated 1.1.2013:
The impugned circular directed the initiation of recovery proceedings against confirmed demands in various situations, including when appeals and stay applications are pending. The petitioners argued that the circular is "wholly repugnant to the letter and spirit" of the statutory provisions under Chapter VIA of the Central Excise Act, 1944. The respondents contended that the power for realization of confirmed demands is traceable to Sections 11 and 11A of the Act and that the circular is valid. However, the court found that the circular lacks statutory sanction and is inconsistent with the legislative scheme of Chapter VIA of the Act. The court held that "the impugned circular is conspicuously dissentient" to the statutory framework and thus cannot be sustained.

2. Legality of Initiating Recovery Proceedings Against Confirmed Demands:
The court examined the scenarios outlined in the impugned circular where recovery proceedings are to be initiated. The circular mandates recovery in three main situations:
1. No appeal filed against a confirmatory order.
2. Appeal filed without a stay application.
3. Appeal filed with a stay application but no stay granted within 30 days.

The petitioners argued that the directions for recovery are "patently unfair, unjust and unreasonable" as they penalize the assessees for delays not attributable to them. The court agreed, stating that the assessees should not be penalized for the failure of the appellate forums to dispose of appeals or stay applications. The court emphasized that "no amount ought to be recovered before the application for exemption is disposed of."

3. Compliance with Statutory Provisions Under Chapter VIA of the Central Excise Act, 1944:
The court outlined the statutory provisions under Chapter VIA, which include the right to appeal and the power of appellate forums to dispense with the deposit of duty demanded or penalty levied. The court noted that these provisions are designed to ensure fairness and prevent undue hardship to the assessees. The court held that the impugned circular, by mandating recovery without considering pending stay applications, "flies in the face of the provisions contained in Chapter VIA of the Act." The court concluded that the circular is non est (null and void) concerning situations where appeals with stay applications are pending and no stay has been granted due to reasons not attributable to the assessees.

Conclusion:
The court allowed the petitions to the extent that the impugned circular dated 1.1.2013 is invalid concerning situations where appeals with stay applications are pending. The court directed that no coercive steps for recovery of demands be initiated in such cases and that the appeals and interim applications be heard expeditiously, preferably within three weeks. The court clarified that it did not comment on the merits of the appeals or interim applications, which should be decided independently by the concerned forums.