2005 (2) TMI 148 - HC - Central Excise

Appeal to Appellate Tribunal - Stay order - Construction of sub-section (2A) of Section 35C of the Central Excise Act, 1944 - HELD THAT - For the period subsequent to the insertion of the Second Proviso the Tribunal should, as a matter of practice, specify the time period during which the stay shall operate after exercising its judicial discretion. The period may be limited or could be co-terminous with disposal of appeal - on consideration of all relevant factors in a given fact situation. Therefore, held by the Apex Court in case of Commissioner of Customs Central Excise, Ahmedabad Kumar . Kumar Cotton Mills (P) Ltd. 2005 (1) TMI 114 - SUPREME COURT an assessee cannot be punished for matters which may be completely beyond the control of the assessee. The situations set out by the Apex Court in its order are only illustrative and not exhaustive. The object of the provision is expressed by the Apex Court to be for the purpose of curbing the dilatory tactics of assessees, who having obtained an interim order in their favour, seek to continue the interim order while delaying the disposal of the proceedings. The observations i.e. the last sentence on which reliance has been placed by the learned Senior Standing Counsel regarding latitude being given to the Tribunal are relatable only in the situation where extension of period of stay is sought. It is not even the case of the respondents that the petitioner was not ready and willing to proceed with the hearing of the appeal. The entire case is built only on interpretation of the provision being mandatory permitting the authorities to initiate action once period of 180 days expired from the date of the order granting stay. As stated hereinbefore such an interpretation is against the plain language of the provision and does not flow from the provision. Such an interpretation is also against the object with which the said provision has been incorporated in the statute. It is necessary to take note of the fact that the decision of the Tribunal on which reliance has been placed as well as subsequent decision of Larger Bench of the Tribunal have been approved by the Hon'ble Apex Court in no uncertain terms. In the result the petition is allowed. The respondent authorities are directed to lift the order of attachment dated 6th September, 2004 and this shall be done forthwith, without waiting for a certified copy of judgment and order of this Court. The action of respondent No. 3 in invoking and encashing Bank Guarantee No. 24/4 is bad in law and is hereby quashed and set aside. The respondent authorities are directed to re-deposit the amount of Rs. 1,00,000/- (Rupees One lac only) with respondent No. 4 Bank within a period of 3 (three) weeks from today so at to enable respondent No. 4 to revive the Bank Guarantee in favour of the Commissioner of Central Excise Customs, Vadodara-I. Rule is made absolute to the aforesaid extent.

Issues Involved:
1. Validity of the order of attachment of goods dated 6th September 2004.
2. Legality of invoking and encashing Bank Guarantee No. 24/4.
3. Applicability of the amended provisions of Section 35C(2A) of the Central Excise Act, 1944.
4. Interpretation of the Second Proviso to Section 35C(2A).
5. The duty of the petitioner to seek an extension of stay from the Tribunal.
6. The discretion of the Tribunal in granting stay orders beyond 180 days.

Detailed Analysis:

1. Validity of the order of attachment of goods dated 6th September 2004:
The petitioner challenged the order of attachment of goods dated 6th September 2004, arguing that it was issued despite an existing stay order from the CESTAT. The court found that the order of attachment was invalid as it contradicted the stay order that was in place.

2. Legality of invoking and encashing Bank Guarantee No. 24/4:
The court also examined the action of respondent No. 3 in invoking and encashing Bank Guarantee No. 24/4 for Rs. 1,00,000/- on the same date as the attachment order. The court ruled this action as "bad in law" and directed the respondent authorities to re-deposit the amount with the bank to revive the Bank Guarantee.

3. Applicability of the amended provisions of Section 35C(2A) of the Central Excise Act, 1944:
The petitioner argued that the amended provisions of Section 35C(2A), particularly the Second Proviso, should not apply retroactively to orders made before 11th May 2002. The court supported this view, stating that the provision operates prospectively and does not apply to orders made prior to the amendment date.

4. Interpretation of the Second Proviso to Section 35C(2A):
The court delved into the interpretation of the Second Proviso, which states that if an appeal is not disposed of within 180 days, the stay order shall stand vacated. The court concluded that this provision should be interpreted as directory, not mandatory, considering the phrase "where it is possible to do so" in the main provision. The court emphasized that the legislative intent was not to curtail the Tribunal's discretion in granting stays beyond 180 days.

5. The duty of the petitioner to seek an extension of stay from the Tribunal:
The respondent argued that the petitioner should have sought an extension of the stay from the Tribunal. The court found this argument misconceived, especially for orders made before 11th May 2002. The court stated that requiring the petitioner to seek extensions in the absence of any change in circumstances would unnecessarily burden the Tribunal.

6. The discretion of the Tribunal in granting stay orders beyond 180 days:
The court highlighted that the Tribunal retains its discretion to grant stay orders beyond 180 days, especially when the delay in disposing of the appeal is not attributable to the assessee. The court referred to the Supreme Court's decision in Commissioner of Customs & Central Excise, Ahmedabad v. Kumar Cotton Mills (P) Ltd., which supports the Tribunal's discretion in such matters.

Conclusion:
The court allowed the petition, directing the respondent authorities to lift the order of attachment and re-deposit the encashed amount to revive the Bank Guarantee. The court rejected the request for a stay of its order, citing the Supreme Court's conclusive decision on the issue. The rule was made absolute to the extent specified, with no order as to costs.

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