Customs, Excise and Gold Tribunal - Mumbai
Kumar Cotton Mills Pvt. Ltd. vs Commr. Of Cus. & C. Ex. on 28 October, 2002
Equivalent citations: 2002(146)ELT438(TRI-MUMBAI)
ORDER J.H. Joglekar, Member (T)
1. The Commissioner of Central Excise, Ahmedabad vide his Order-in-Original No. 21/COMMR/200 confirmed duty of Rs. 17,06,211/- as payable by M/s. Kumar Cotton Mills Pvt. Ltd. He also imposed a penalty of equal amount on them. He also imposed a penalty of Rs. 1.7 lakhs on Shri P.D. Patel, Director of the Mills. Against this order two appeals were filed and also applications for waiver of pre-deposit. Tribunal vide Order Nos. C-I/1396-97/WZB/2001, dated 23-3-2001 directed the manufacturer mills to deposit 6 lakhs and Shri Patel was directed to deposit Rs. 20,000/-. Compliance was reported and noted by the Tribunal on 9-8-2001.
2. On 3-7-2002 the appellant Mills received a communication from the jurisdictional Superintendent of Central Excise. The operative portion of this communication reads as under :
"In this connection, it is brought to your notice that after the introduction of Sub-section (2A) in Section 35C of CEA, 1944 in the recent Budget, any stay including a partial stay if granted by the Hon'ble CEGAT in any appeal, the same should be disposed of within a period of 180 days from the date of such order if such appeal is not disposed of within the specified period the stay order shall, on expiry of that period stand vacated.
In view of the above, it is requested to let this office know whether your aforesaid appeal is disposed of or not, if not, please pay up the Govt. dues outstanding within two days failing which action under C.Ex. provisions will be taken against you".
3. The present miscellaneous application has been filed seeking orders for continuation of the stay order notwithstanding the amendment made in Section 35C of the Act.
4. Since the issue has substantial consequences and since the amendments would give rise to a number of similar situations the application was posted for disposal and advocates and consultants not representing the applicants were also permitted to contribute their views on the coverage and the implication of the amendments. For ease of reference the concerned provision, namely, Section 35C(2A), is reproduced below :
"(2A) The Appellate Tribunal shall, where it is possible to do so, hear and decide every appeal within a period of three years from the date on which such appeal is filed :
Provided that where an order of stay is made in any proceeding relating to an appeal filed under Sub-section (1) of Section 35B, the Appellate Tribunal shall dispose of the appeal within a period of one hundred and eighty days from the date of such order :
Provided further that if such appeal is not disposed of within the period specified in the first proviso, the stay order shall, on the expiry of that period, stand vacated."
5. Shri Vipin Kumar Jain, Chartered Accountant was representing the applicants. He submitted that the amendment was dated 11-5-2002. In the absence of any specific clause in the amendment it could not have retrospective effect. As a result this amendment could not adversely affect any stay order made prior to the date of amendment. In making this statement he relied upon the Bombay High Court judgment in the case of Universal Drinks Pvt. Ltd. v. UOI - 1984 (18) E.L.T. 207. He also relied upon the Supreme Court judgment in the case of Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh - 1983 (13) E.L.T. 1277. He also placed reliance on the Delhi High Court judgment in the case of UK Paints Industries v. UOI - 2002 (144) E.L.T. 255.
6. Shri Jain then referred to the Supreme Court judgment in the case of Garikapatti Veeraya v. N. Sitbbiah Choudhury [1957 (44) AIR 540 (SC) = 1957 (1) SCR 488 SC]. The Supreme Court in this case had held as follows :
"From the decisions cited above the following principles clearly emerge :
(i) That the legal pursuit of a remedy, suit, appeal and second appeal are really but steps in a series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceeding.
(ii) The right of appeal is not a mere matter of procedure but is a substantive right.
(iii) The institution of the suit carries with it the implication that all rights of appeal then in force are preserved to the parties thereto till the rest of the carrier of the suit.
(iv) The right of appeal is a vested right and such a right to enter the superior Court accrues to the litigant and exists as on and from the date the lis commences and although it may be actually exercised when the adverse judgement is pronounced such right is to be governed by the law prevailing at the date of the institution of the suit of proceeding and not by the law that prevails at the date of its decision or at the date of the filing of the appeal.
(v) This vested right of appeal can be taken away only by a subsequent enactment, if it so provides expressly or by necessary intendment and not otherwise."
7. The Supreme Court in the cited judgment held that where the "lis" arose the right to pursue the appeal to the higher forum was vested in the person where the value was Rs. 10,000/-. It was held that the right would continue to exist even if by subsequent amendment the limit of value was raised. Shri Jain cites this case and submits that following the ratio of the judgment not only will the amendment to the Section not cover the orders in stay made prior to that date; but also where the "lis" arose before the amendment, the stay orders passed by the Tribunal even subsequent to the date of the amendment of the Section would not be hit by the bar of the amended Section. He submitted that the date of such lis arising would have to be determined. He submitted that it could be the date of assessment or the date of payment of duty. In the case where the assessee was subjected to compounded levy it could be a difficult proposition to determine as the date on which the "lis" arose.
8. Shri V.S. Nankani submitted that the amendment was an Act of the Parliament. It must be therefore presumed that the words were used consciously and literal interpretation must be placed on the wording of the amended section. He also submitted that the interpretation must be harmonious with the scheme of the Act and any interpretation which did harm to the scheme of the Act must be discarded. He stated that the amendment must be interpreted so as to fit in scheme of the parent section. He refers to the Supreme Court judgment in the case of Navin Chandra Chhotelal v. Central Board of Excise & Customs and Ors. - 1981 (8) E.L.T. 679. In this judgement the Supreme Court had acknowledged the discretion of the Tribunal to waive the pre-deposit or to reduce the quantum of duty or penalty and had noted that this proviso reduced the rigorous of the provision making it obligatory for the appellant to pre-deposit the entire duty and/or penalty as a precondition to hearing of his appeal. Shri Nankani claims that once the order on such an application is passed by the Tribunal it cannot be done away with as far as the right of the Tribunal to pass such an order continues to be given by the law. He also refers to the Supreme Court judgement in the case of Vijay Prakash D. Mehta v. Collector of Customs - 1989 (39) E.L.T. 178. In this judgment the Supreme Court has acknowledged the Tribunal's discretion in dispensing with the obligation to make the pre-deposit.
9. Shri Nankani adopted the arguments made by Shri Jain. He stated that on plain reading the power given by the proviso was to waive the pre-deposit of duty. The grant of stay of recovery was an incidental exercise of power. There could be a situation where a bar under Section 35F of the Act may not exist but an application is made for stay of operation of an order. It is that kind of an order which could be taken to be covered by the amendment as having a life span of six months. Such orders would include those where the department's proposal to auction certain goods is stayed. It may also include those orders which stay the issue of future action such as issue of show cause notices. In this respect he cites the Delhi High Court in the case of ITC Ltd. v. U.O.I - 1983 (12) E.L.T. 1 (Del.) which was followed by the Tribunal in the case of CCE v. Kama Industries Ltd. - 1991 (53) E.L.T. 566. It is stated that the Tribunal's right to grant waiver of pre-deposit in terms of Section 35F of the Act was not disturbed by the present amendment. In the absence of non-abstante clause the amendment could not be called to be retrospective in application. In this statement he relied upon the Supreme Court judgement reported in AIR 1960 SC 980 (State of Bombay v. Supreme General Films Exchange Ltd.). As regards the arising of "lis" it was his impression that it could be said to arise from the date of issue of show cause notice.
10. Shri K.M. Mondal, Consultant submitted that the expression "stay order" was not a fresh expression but that it was implied in the scheme of Section 35F. He stated that the orders staying recovery was a corollary of an order granting waiver of pre-deposit either wholly or partly. He stated that the Kerala High Court in the judgement in the case of Rubicon v. CCE -1989 (44) H.L.T. 401 had held that in dealing with an application under Section 35F the Tribunal was not dealing with an application for stay. The Court observed that in considering the waiver the Tribunal was required to consider the aspect of hardship alone whereas the legality or otherwise of the duty would be relevant in considering the application for stay. It is his submission that the effect of the amendment is that after the elapsing of the prescribed period even though the waiver of pre-deposit portion of the order would continue to subsist, stay of recovery was lifted leaving the department free to recover the amount due. For this argument he draws support from Rule 58A of the CEGAT (Procedure) Rules, 1982 which uses the word stay petitions.
11.. Shri V. Sridharan, Advocate adopted the arguments on the effect of the amendment to be prospective only. He submitted that the Tribunal would grant waiver of pre-deposit on the ground of hardship. The hardship of the assessee would continue even after the period of 6 months. If the Tribunal, for any reason, is unable to dispose of the appeal within the time frame, it is the assessee who would suffer on account of this amendment. He stated that it has been laid down that no party should suffer for the fault of the Court. (1987 4 SCC 398) (Rajkumar Dey and Ors. v. Tarapada Dey and Ors.). In respect of the claim that the amendment was not retrospective in nature he relied upon the Supreme Court judgment in the case of Govinddas v. Income-tax Officer (1976) 103 ITR 123.
12. Shri Pundir, the Chief Departmental Representative stated that in the absence of specific provisions to that effect it would appear that the amendment would be retrospective and would apply to all appeals filed after 11-5-2002. He submitted that even if the stay order stood vacated the appellant would still be within his right to re-file an application and since the Tribunal's power of waiver under Section 35F has not been circumvented the Tribunal was competent to grant another order to the same effect.
13. We have carefully considered the various submissions made and have seen the case law relied upon. Considerable arguments were made before us as to the interpretation of the two phrases namely "order of stay" and "stay order" appearing in Sub-section (2A) of Section 35C It was argued that the phrase does not appear in connection with the orders made by the Tribunal in terms of Section 35F. It was therefore argued that this provision and the time limit set thereunder would apply only in those cases where the Tribunal's order did not deal with waiver of pre-deposit of any sums, but dealt with prayers for stay of operation of the impugned order. Shri Mondal, however, referred to the provisions of CEGAT (Procedure") Rules, 1982, Rule 28A thereof has the following wording :
"Procedure for filing and disposal of stay petitions :
(1)(a) Every application preferred under the provisions of the Acts stay of requirement of making deposit of any duty demanded or penalty levied --"
14. Delhi High Court in the judgment in the case of ITC Ltd. - 1983 (12) E.L.T. 1 (Del.) had observed that the powers of the Tribunal contained in the proviso to Section 35F were of vide amplitude. It is observed that the Tribunal had inherent power of granting relief in exercise of their appellate jurisdiction. In making this observation the Court had relied upon the observation of the Supreme Court in the case of ITO v. Mohammed Kunhi - 1992 ITR 341.
15. The two phrases used in the amended provision, therefore, must be interpreted to mean the orders made by the Tribunal in terms of Section 35F of the Act and would cover both aspects of the order, namely, the waiver of pre-deposit and also the stay of recovery of the amount waived. Therefore at the end of the period prescribed the entire order would cease to exist, and no part thereof would survive.
16. The principal question for determination is as to whether the amended provisions would apply retrospectively or not.
17. The Supreme Court in their judgment in the case of Govinddas v. Income-tax Officer [1976] 103 I.T.R. 123 (SC) were dealing with the situation where an additional personal liability was sought to be imposed upon members of a Hindu Undivided Family on account of an amendment made in the income-tax law. On examination of the wording of the amended provision, the Supreme Court held that it was not retrospective in nature. The law was summed up by the Court in the following words :
"Now, it is a well-settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in volume 36 of the Laws of England (third edition) and reiterated in several decisions of this court as well as English courts is that "all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective" and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only."
18. On perusal of the wordings of the amended section it becomes clear that there is no intend expressed therein to make it retrospective in application.
19. There are instances where under the same Act, an amendment is made retrospective in application. Section 11B of the Act was amended vide Central Excise and Customs Laws (Amendment) Act, 1991. Sub-section (3) of the amended section reads as follows :
"Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the appellate Tribunal or any Court or in any other provision of this Act or the Rules made thereunder or any other law for the time being in force, no refund shall be made except as provided in Sub-section (2)."
20. The effect of this amendment was that it superseded all previous actions made under the unamended law and substituted another provision of the amended law under which the refund claims were required to be processed. In the absence of any such clause in the amended Section 35F of the Act it has to be held that the amendment is not retrospective in nature. It would therefore follow that all those orders made by the Tribunal in terms of Section 35F of the Act before 11-5-2002 would remain operational until the disposal of the respective appeals and would not be hit by the bar of the second proviso to Sub-section (2A) of Section 35C.
21. A consistent claim has been made that where the existing law provided for safeguarding of the interests of an assessee at the time when the dispute arose, the safeguard so provided shall continue to exist even where the law is subsequently changed. Citation is made on the Supreme Court judgement delivered by five judges in the case of reading Garikapatti Veeraya v. N. Subbiah Choudhury [1957 (44) AIR 540 (S.C.) = 1957 (1) SCR 488 SC]. In this case the value of the disputed property was Rs. 11,400/-. When the dispute arose i.e., when the suit was filed on 22-4-1949 the right of the parties to pursue the suit up to the Privy Council was granted by the existing law provided the value of the property was above Rs. 10,000/-. The proceedings travelled to the High Court who issued the judgement on 4-3-1955. Leave to appeal to the Supreme Court was not granted by the High Court on the ground that under the Constitution of India, only those matters could travel to the Supreme Court where the value of the property was more than Rs. 20,000/-. In dealing with the application for special leave the Supreme Court culled out the principles earlier cited by us above. It was ruled that the Article 133 could not be given retrospective operation in the absence of express provision or necessary intend. It was ruled that a large number of litigants had a vested right of appeal from judgements concerning property of the value of over Rs. 10,000/- but below Rs. 20,000/- who would be deprived of their vested right if the Article was to be interpreted in this manner. It was held that where the suit was instituted before the date on which the Constitution came into effect, the right of the parties to pursue the matter in the highest Court would subsist even in the face of the amendment made by the Constitution. It has therefore been argued that where the cause of action arose before the amendment, and where in due course the matter reached the Tribunal and where the Tribunal passed an order in terms of Section 35F, that order, made even subsequent to 11-5-2002 could not be hit by the bar of 180 days.
22. The Bombay High Court in their judgement in the case of Universal Drinks Pvt. Ltd. v. UOI - 1984 (18) E.L.T. 207 in dealing with the amended Rule 11 of the Central Excise Rules made the following observation:
"11. In these petitions, it is clear that the payment of the excise duty, of which refund is claimed, is made and a right to refund thereof arose prior to 6-8-1977 i.e. the date on which the new Rule 11 has come into force. The said right to claim refund is a vested right which has accrued to the petitioner prior to new Rule 11, or at any rate is an existing right. It is a settled principle of interpretation of statutes that a vested right or even an existing right, including a right of action is not affected or allowed to be taken away unless it is so affected or taken away by the enactment expressly or by necessary implication. It is only a declaratory or a procedural enactment which is normally held to be retrospective. A remedial Act, on the contrary, is not necessarily retrospective, it may be either enlarging or restraining and it takes effect prospectively, unless it has retrospective effect by express terms or necessary intentment. [See AIR 1960 S.C. 12 (para 29) - The Central Bank of India and Ors. v. Their Workman and also AIR 1973 S.C. 1227 - The Workmen of Firestone Tyre and Rubber Co. of India P. Ltd. v. The Management and Ors.]. It is, therefore, necessary to be seen whether the provisions of new Rule 11 can be held to be retrospective so as to affect the existing or the vested right which has accrued to the petitioner prior to the said rule."
23. The Supreme Court in the case of Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh (supra) played down the effect on the assessees of an amendment being made in the law. In this case the assessment to Sales Tax was made on 8-4-1950. The assessees filed an appeal. Initially the relevant provision required satisfaction of the appellate authority that the amount of tax or penalty as admitted to be due by the assessee had been paid. The amended provision required pre-payment of the tax or penalty as had been assessed. The Court of Revenue in their appellate capacity held that since assessment was made after amendment the appeal could be entertained if the tax as assessed had not been paid. The Supreme Court framed the question as under :
"The question is whether the imposition of such a restriction by amendment of the section can affect the assessee's right of appeal from a decision in proceedings it commenced prior to such amendment and which right of appeal was free from such restriction under the section as it stood at the time of the commencement of the proceedings?"
24. The Supreme Court after reviewing earlier decisions answered the question in the negative. It was ruled that the old law would continue to exist for the purpose of supporting the pre-existing right of appeal, that the old law must govern the exercise and enforcement of that right of appeal and there can be no question of the amended provision preventing the exercise of that right. The ratio of the judgment is that where the cause of action arose during the pendency of the old law, those cases would continue to be governed by the old law even when they reached the appellate forum after the commencement of the new law.
25. There was a vide variation in speculating the date on which such right would rise. The date claimed farthest back in time was the date of assessment or filing of a declaration. The latest dates were the date of passing of the order.
26. The task of determining the date of the "lis" arising is indeed complex, which we do not wish to undertake at this stage. This is because the present application can be disposed of without touching this question. The issue is, however, left open by us.
27. Now we come to those stay orders which are passed after 11-5-2002. Their validity, in terms of the amended provision would be of 180 days from the date of their being made and the earliest date of expiry of the very first order would be 10-11-2002 and that date is not too far. The question arise would is as to the remedy available for the assessees who are covered by a stay order which is nearing expiry.
28. It was argued that the power of the Tribunal to grant waiver and stay under the provisions of Section 35F, is not circumscribed by an amendment putting a time frame on such orders. In fact, Shri Pundir, Chief Departmental Representative, very fairly concedes that the Tribunal could make the same order once again at the end of the period of its validity or may simply extend the validity thereof.
29. When Section 254 of the Income Tax Act was amended vide Finance Bill, 2001, the measure was termed as one for "reducing litigation". The amendment to stipulate the life span of 180 days for a stay order was declared to apply "in relation to stay granted on or after that date". Curiously, there is no such clarification in the Finance Bill, 2002. However, as we have observed above, the Sub-section (2A) of Section 35C of the Central Excise Act, 1944 and Section 254 of the Income Tax Act, 1961 being identical the prospective application of the provision in the Central Excise Act, 1944 stands established.
30. We find that the Income-tax Appellate Tribunal had occasion to deal with the very same issue. The appeal was filed by an assessee before the ITAT along with an application for stay of the outstanding demand of Rs. 40,54,368/-. The Tribunal directed payment of Rs. 5 lakhs and subject to such payment stayed the recovery of the outstanding demand till 30-6-2002 vide order dated 23-1-2002. Before the expiry of the period the assessee moved an application on the observation that the stay order stood vacated. The Tribunal observed that there was no bar imposed on the powers of the Tribunal to reconsider the grant of stay beyond 180 days if the appeal had not been disposed of within that period. It was held that the effect of the stay order being negated on expiry of 180 days it could be open to the Tribunal to consider the appellant's request for further extension and to pass an appropriate order thereon on the facts and circumstances of the case. The Tribunal cited the Supreme Court's judgment in the case of ITO v. M.K. Mohammed Kunhi - 1969 (71) ITR 815 in which the Supreme Court observed that the relevant section had conferred on the Appellate Tribunal powers of the widest amplitude in dealing with the appeal before it. The Tribunal in the cited judgment in the case of Centre for Women's Development Studies v. Deputy Director of Income-tax - 2002 (257) ITR 60 held as follows:
"On a careful perusal of the relevant new provisions in the law and aforesaid judicial pronouncements, we are of the considered opinion that Sub-section 2A was inserted in Section 254 to curtail the delays and ensure the disposal of the pending appeals within a reasonable time frame. There is no intention of the Legislature to curtail or withdraw the powers of the Tribunal for granting a stay exceeding a period of six months. Had it been the intention of the Legislature, there would be a specific amendment in the Act to this effect because if the powers of the Tribunal for granting the stay exceeding six months are withdrawn by this amendment, the object of imparting justice by the Tribunal cannot be achieved even in those cases where the assessee has co-operated with the Tribunal to its full extent and the hearing is in progress. We, therefore, are of the considered view that the Tribunal has power to grant a further stay on the expiry of six months of earlier stay if the facts and circumstances so demand."
31. Since the relevant provisions of the law are identical we adopt this view of the Income-Tax Appellate Tribunal.
32. We summarise the findings as follows :
(1) Where the Tribunal has made an order of stay prior to the amendment under Section 35C i.e., 11-5-2002, the order would have validity until the disposal of the appeal and would not be hit by the second proviso to Section 35C(2A).
(2) Where the order on the stay application is made after 11-5-2002 the Tribunal's power to continue protection so given is not circumscribed and the Tribunal on an application being made by the applicant, is competent to extend the date of coverage of the stay order.
33. Since in the case of the present applicant the order was made on 23-3-2001 the order falls in category (1) above and would remain in effect until the disposal of the appeal by the Tribunal.
34. The application is so disposed of.