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TMI Blog2015 (5) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... not misuse the stay orders granted in their favour by adopting delaying tactics is not at all achieved by the provision as it stands. On the contrary, the clubbing together of ‘well behaved’ assesses and those who cause delay in the appeal proceedings is itself violative of Article 14 of the Constitution and has no nexus or connection with the object sought to be achieved. The said expression introduced by the Finance Act, 2008 is, therefore, struck down as being violative of Article 14 of the Constitution of India. This would revert us to the position of law as interpreted by the Bombay High Court in Narang Overseas (2007 (7) TMI 5 - BOMBAY HIGH COURT ), with which we are in full agreement. Consequently, we hold that, where the delay in disposing of the appeal is not attributable to the assessee, the Tribunal has the power to grant extension of stay beyond 365 days in deserving cases. The writ petitions are allowed as above. - Decided in favour of assessee. - W.P. (C) Nos. 1334 of 2015 and 1934,1935,2326,2465,3650 & 4280 of 2014, CM Nos. 2337 of 2015 and 4053,4054,4885,5130,7417 & 8604 of 2014 - - - Dated:- 19-5-2015 - MR. BADAR DURREZ AHMED AND MR. SANJEEV SACHDEVA, JJ. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntroducing the words even if the delay in disposing of the appeal is not attributable to the assessee . It was urged on the part of the petitioners that the right of appeal is not inherent, but once it has been granted, it has to be construed as one which effectively redresses the grievances. It was further contended that the right to obtain a stay of demand/ penalty was integral and cardinal to an effective right of appeal. It was also contended that the introduction of the above mentioned words by virtue of the amendment of 2008 has made the right of appeal illusory and the amendment is, therefore, clearly arbitrary and contrary to the provisions of the Article 14 of the Constitution of India. It was also contended that the said amendment introduces a classification which has no nexus with the object sought to be achieved. In the first place, it clubs assessees belonging to two different categories as one class. It was contended that the assessees, who are not responsible for any delay in the hearing of the appeal, have been clubbed together with those assessees to whom the delay was attributable. Therefore, the persons belonging to different groups/ classes have been clubbed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-section (1) or sub-section (2) or sub-section (2A) of section 253: Provided that the Appellate Tribunal may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal filed under sub-section (1) of section 253, for a period not exceeding one hundred and eighty days from the date of such order and the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order: Provided further that where such appeal is not so disposed of within the said period of stay as specified in the order of stay, the Appellate Tribunal may, on an application made in this behalf by the assessee and on being satisfied that the delay in disposing of the appeal is not attributable to the assessee, extend the period of stay, or pass an order of stay for a further period or periods as it thinks fit; so, however, that the aggregate of the period originally allowed and the period or periods so extended or allowed shall not, in any case, exceed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portion of the third proviso, which reads as even if the delay in disposing of the appeal is not attributable to the assessee , were substituted for the provisos which had earlier been inserted by the Finance Act of 2001. Thereafter, by virtue of the Finance Act, 2008, the third proviso was substituted by the existing proviso with effect from 01.10.2008, the difference being that the expression even if the delay in disposing of the appeal is not attributable to the assessee was now added by virtue of the amendment of 2008. 8. Prior to the amendment of 2008, the provisos clearly stipulated that, in the first instance, a stay order could be passed for a period, not exceeding 180 days from the date of said order, and that the Tribunal was required to dispose of the appeal within that period. The second proviso stipulated that in case the appeal was not so disposed of within the period initially stipulated by the Tribunal, the Tribunal could, on an application made on this behalf by the assessee and on being satisfied that the delay in disposing of the appeal was not attributable to the assessee, extend the period of stay for a period or periods, provided that the aggregate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tton Mills (P) Ltd. (supra). There would be power in the Tribunal to extend the period of stay on good cause being shown and on the Tribunal being satisfied that the matter could not be heard and disposed of for reasons not attributable to the assessee. 9. From the above extract, it is evident that the Bombay High Court was of the view that if it were to be held that the Tribunal, while it had the power to pass an order in an appeal, did not have the power to continue the grant of interim relief for no fault of the assessee, the result would be rendered unreasonable or violative of Article 14 of the Constitution. In other words, the Bombay High Court took the view that the Tribunal had the power to extend the stay beyond the period of 365 days, provided the delay in disposal of the appeal was not attributable to the assessee. The Bombay High Court also took the view that if the third proviso to Section 254(2A) were not interpreted in such manner and it was to be held that the Tribunal had no power to extend the period of stay beyond a period of 365 days even though the delay was not attributable to the assessee then, the provision would run afoul of Article 14 of the Constituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in aggregate. To make this intention clear, it is proposed to amend section 254 of the Income-tax Act and further provide that the aggregate of the period originally allowed and the period or periods so extended or allowed shall not, in any case, exceed three hundred and sixty five days, even if the delay in disposing of the appeal is not attributable to the assessee. This amendment will take effect from 1st October, 2008. From the above, it is evident that the object behind the introduction of the words even if the delay in disposing of the appeal is not attributable to the assessee was to make it clear that the aggregate of the period originally allowed and the period or periods so extended or allowed was not to, in any case, exceed 365 days, even if the delay in disposing of the appeal was not attributable to the assessee. 11. It is evident that the amendment introduced by virtue of the Finance Act, 2008 had nullified the effect of the decision of the Bombay High court in Narang Overseas (supra). The said provision, after its amendment by virtue of the Finance Act, 2008, came up for consideration before this Court in Maruti Suzuki (India) Limited (supra). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of the provisos, as they stood. There was no challenge to the constitutional validity of the third proviso to Section 254(2A) of the said Act after the amendment introduced by the Finance Act, 2008. No decision of any High Court has been brought to our notice by the learned counsel for the parties, wherein the constitutional validity of the third proviso to Section 254(2A) of the said Act has been examined. 13. At this point, we may also refer to certain other observations of the Division Bench in Maruti Suzuki (India) Limited (supra). The Court had examined various data with regard to the filing of appeals, pendency of appeals and stay orders granted by the Tribunal etc.. Paragraphs 21, 22 and 23 are of material importance and they are reproduced herein below:- 21. Information/data in this regard was received vide letter dated 30th January, 2014 written by Assistant Registrar, Tribunal. The relevant portion of the said letter reads as under:- a) Number of appeals filed before the Tribunal by the assessee and the revenue is as under:- Year Assessee Revenue Total 2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordance with law. 23. We do not have figures or data on whether the demands raised, which was subject matter of stay, was sustained/upheld or were deleted by the tribunal. Merits and justification of additions is examined by the appellate forums and demands raised have relevance when they are sustained by the tribunal/High Court and the Supreme Court. 14. From the above data, it is evident that the number of stay orders granted by the Tribunal in the years 2011, 2012 and 2013 do not even amount to 10% of the appeals filed by assessees before the Tribunal. Furthermore, even a fewer number of appeals, in which stay orders have been passed, remain pending beyond the period of 365 days. It is in this light that the Division Bench observed that most of the appeals in which stay had/has been granted were/are being disposed of within 365 days. The Division Bench also observed that the grant of stay by the Tribunal was not a matter of right but was decided by a speaking order, recording the prima facie view on merits. Furthermore, in case there was an error, the revenue was not without remedy and could approach the High Court in accordance with law. From the above figures, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try and dispose of and decide appeals within 365 days of the grant of stay order. The Bombay High Court in Jethmal Faujimal Soni vs. Income Tax Appellate Tribunal [2011] 333 ITR 96, had occasion to deal with a similar situation and entertained the writ petition. In the said case constitutional validity of the third proviso inserted in Section 254(2A) of the Act by Finance Act, 2008, w.e.f. 1st October, 2008 was challenged It was observed that the proviso enacted a stringent provision as a result of which even if the delay in disposing of the appeal was/is not attributable to the assessee, the stay stands vacated after 365 days. Thus, the tribunal was/is under binding duty and obligation to dispose of the appeal within the said time, particularly when the fault was not on the part of the assessee. In the said case, directions were issued for expeditious disposal of the appeal and it was also directed that the Revenue shall not take coercive steps for enforcing demand subject matter of the appeal. (underlining added) 16. At this juncture itself, we may reiterate that the decision of the Division Bench in Maruti Suzuki (India) Limited (supra) was based on an interpretation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate jurisdiction. This is particularly so when Section 220(6) deals expressly with a situation when an appeal is pending before the Appellate Assistant Commissioner, but the Act is silent in that behalf when an appeal is pending before the Appellate Tribunal. It could well be said that when Section 254 confers appellate jurisdiction, it impliedly grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution and that the statutory power carries with it the duty in proper cases to make such orders for staying proceedings as will prevent the appeal if successful from being rendered nugatory. 14. A certain apprehension may legitimately arise in the minds of the authorities administering the Act that if the Appellate Tribunals proceed to stay recovery of taxes or penalties payable by or imposed on the Assessees as a matter of course the revenue will be put to great loss because of the inordinate delay in the disposal of appeals by the Appellate Tribunals. It is needless to point out that the power of stay by the Tribunal is not likely to be exercised in a routine way or as a matter of course in view of the special nature of taxation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven in reply to the proviso to sub-section (2) of Section 17, according to which the Tribunal has power to waive or reduce the amount. While waiving the condition of depositing the amount or reducing it, the Tribunal is required to record reasons for the same. It is submitted for the respondents that in an appropriate case, DRT which is presided over by a Member of a Higher Judicial Service, would exercise its discretion and may waive or reduce the amount required to be deposited in deserving cases. It is, therefore, not an absolute condition which must in all cases and all circumstances be fulfilled irrespective of the special features of a particular case. xxxx xxxx xxxx xxxx 61. In the case of Seth Nandlal (supra), while considering the question of validity of pre-deposit before availing the right of appeal the Court held: right of appeal is a creature of the statute and while granting the right the legislature can impose conditions for the exercise of such right so long as the conditions are not so onerous as to amount to unreasonable restrictions rendering the right almost illusory. (emphasis supplied). While making said observation this Court referred to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rower to file an appeal (petition) under Section 17 of the Act before the Debts Recovery Tribunal. 3. That the Tribunal in exercise of its ancillary powers shall have jurisdiction to pass any stay/interim order subject to the condition as it may deem fit and proper to impose. 4. In view of the discussion already held in this behalf, we find that the requirement of deposit of 75% of amount claimed before entertaining an appeal (petition) under Section 17 of the Act is an oppressive, onerous and arbitrary condition against all the canons of reasonableness. Such a condition is invalid and it is liable to be struck down. 5. As discussed earlier in this judgment, we find that it will be open to maintain a civil suit in civil court, within the narrow scope and on the limited grounds on which they are permissible, in the matters relating to an English mortgage enforceable without intervention of the court. 20. The learned counsel for the petitioners had also referred to a decision of the Division Bench of the Punjab and Haryana High Court in PML Industries Limited (supra). Although that decision pertained to Section 35C (2A) of the Central Excise Act, 1944, the provision unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dundant. xxxx xxxx xxxx xxxx 54. Consequently, the second proviso in sub-section (2A) of Section 35C is ordered to be read down to mean that after 180 days, the Revenue has a right to seek vacation of stay on proof of the fact that the assessee is the one, who is defaulted or taken steps to delay the ultimate decision. The said Court read down the provision in question in much the same manner as did the Bombay High Court in the case of Narang Overseas (supra). The object being that, if the provision were to be read strictly, it would render the right of appeal to be illusory and for no fault of the assessee. 21. The decision in Wire Netting Store, Delhi (supra) was relied upon by the learned counsel for the petitioners for the proposition that the availability of a constitutional remedy would not remove the lacuna of a provision which was inherently unconstitutional. There can be no dispute with this proposition. The provision which is challenged, as being violative of Article 14 of the Constitution, would have to be tested on its own without recourse to the availability of the remedy of judicial review under Article 226 of the Constitution. 22. In Dr Subramanian Sw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles must be shown. The fundamental nature and importance of the legislative process needs to be recognized by the Court and due regard and deference must be accorded to the legislative process. Where the legislation is sought to be challenged as being unconstitutional and violative of Article 14 of the Constitution, the Court must remind itself to the principles relating to the applicability of Article 14 in relation to invalidation of legislation. The two dimensions of Article 14 in its application to legislation and rendering legislation invalid are now well recognized and these are (i) discrimination, based on an impermissible or invalid classification and (ii) excessive delegation of powers; conferment of uncanalised and unguided powers on the executive, whether in the form of delegated legislation or by way of conferment of authority to pass administrative orders-if such conferment is without any guidance, control or checks, it is violative of Article 14 of the Constitution. The Court also needs to be mindful that a legislation does not become unconstitutional merely because there is another view or because another method may be considered to be as good or even more eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tend the stay for a period not exceeding 365 days in aggregate. Once again, the Tribunal is directed to dispose of the appeal within the said period of stay. The third proviso, as it stands today, stipulates that if the appeal is not disposed of within the period of 365 days, then the order of stay shall stand vacated, even if the delay in disposing of the appeal is not attributable to the assessee. While it could be argued that the condition that the stay order could be extended beyond a period of 180 days only if the delay in disposing of the appeal was not attributable to the assessee was a reasonable condition on the power of the Tribunal to the grant an order of stay, it can, by no stretch of imagination, be argued that where the assessee is not responsible for the delay in the disposal of the appeal, yet the Tribunal has no power to extend the stay beyond the period of 365 days. The intention of the legislature, which has been made explicit by insertion of the words even if the delay in disposing of the appeal is not attributable to the assessee renders the right of appeal granted to the assessee by the statute to be illusory for no fault on the part of the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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