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Allahabad High Court · body

2010 DIGILAW 816 (ALL)

GALAXY INDO FAB. LIMITED v. UNION OF INDIA

2010-03-12

RAJES KUMAR, S.C.NIGAM

body2010
JUDGMENT By the Court.—By means of the present petition, the petitioner is challenging the impugned demand notice dated 11.1.2010, issued by the Assistant Commissioner, Central Excise Division, Rae Bareli. 2. The brief facts giving rise to the present writ petition are that the petitioner was engaged in the processing grey fabrics. The officers of the revenue department visited the premises of the petitioner on 18.11.1998 and seized certain private records. It is alleged that some unaccounted grey fabrics and semi-processed finished fabrics were recovered from the premises. On the basis of material found at the time of search, it has been inferred that the petitioner was indulged in removing manufactured goods without payment of duty and, accordingly, a demand had been raised and penalty had been imposed. Against the order of the Adjudicating Authority, the petitioner filed appeal before the Customs, Excise & Service Tax Appellate Tribunal (hereinafter referred to as “Tribunal”) alongwith an application under Section 35-F of the Act for waiver of pre-deposit and stay of the demand till the disposal of the appeal. It was pleaded before the Tribunal that the demand was wholly unjustified. The Tribunal vide order dated 17.8.2005 allowed the application in part and directed the petitioner to deposit a sum of Rupees one crore within a period of eight weeks. Against the order of the Tribunal, the petitioner filed Writ Petition No. 1296 of 2005 which was disposed of on 20.9.2005. By the aforesaid order of this Court, the order of the Tribunal was modified and the petitioner was directed to deposit a sum of Rupees twenty lacs and the Tribunal was directed to decide the appeal expeditiously. In pursuance of the order of this Court, the petitioner had deposited a sum of Rupees twenty lacs. 3. The first proviso to Section 35-C (2A) of the Central Excise Act, 1944 (hereinafter referred to as “Act”) provides that where an order of stay is made in any proceeding relating to an appeal filed under sub-section (1) of Section 35-B the Appellate Tribunal shall dispose of the appeal within a period of 180 days from the date of such order. The second proviso to Section 35-C (2A) of the Act provides 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. 4. The second proviso to Section 35-C (2A) of the Act provides 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. 4. It appears that since the appeal could not be decided within a period of 180 days, the petitioner moved a miscellaneous application for extension of the stay order. The Tribunal vide order dated 14.8.2008 extended the stay order, already granted, till the disposal of the appeal. The aforesaid order of the Tribunal has neither been challenged by the Revenue before higher Court nor it has been vacated. The aforesaid order of the Tribunal exists till date. Despite the aforesaid order of the Tribunal granting stay till the disposal of appeal, the respondent- Assistant Commissioner, Central Excise Division, Rae Bareli has issued the impugned notice of demand dated 11.1.2010 for recovery of Rupees 652.16 lacs. 5. Heard Sri Pankaj Bhatia, learned counsel appearing on behalf of petitioner and Sri Subodh Kumar, learned Standing Counsel appearing on behalf of respondents. 6. Learned counsel for the petitioner submitted that the impugned demand notice is patently arbitrary and contrary to the judicial norms and discipline. He submitted that the order of the Tribunal is binding upon the Assistant Commissioner, Central Excise Division, Rae Bareli, and cannot be violated by any reason. He submitted that in the case of Kumar Cotton Mills Private Limited v. CCE, Ahmedabad, 2002 (146) E.L.T. 438, a two Member Bench of the West Zonal Bench, took the view that even though the period of the order of stay initially passed, would come to an end on expiry of 180 days in view of the amended provisions, the jurisdiction of the Tribunal to extend the period of stay by passing a fresh order is not affected. He submitted that against the said order of the Tribunal, the Commissioner of Customs and Central Excise, Ahmedabad filed an appeal before the Apex Court, inasmuch as the matter has also been referred to a larger Bench of the Tribunal. The larger Bench of the Tribunal in the case of IPCL v. Commissioner of Central Excise, Vadodara, 2004 (169) E.L.T. 267 has affirmed the view taken by the two Member Bench in the case of Kumar Cotton Mills Private Limited v. CCE, Ahmedabad (supra). The larger Bench of the Tribunal in the case of IPCL v. Commissioner of Central Excise, Vadodara, 2004 (169) E.L.T. 267 has affirmed the view taken by the two Member Bench in the case of Kumar Cotton Mills Private Limited v. CCE, Ahmedabad (supra). He submitted that in the case of Commissioner of Customs & Central Excixe, Ahmedabad v. Kumar Cotton Mills Pvt. Ltd., 2005 (180) E.L.T. 434 (SC), the Apex Court has upheld the view taken by the Division Bench of the Tribunal as well as the Full Bench of the Tribunal. Therefore, the stand taken by the respondents that after expiry of 180 days, the stay order stood vacated and, therefore, the demand notice was justified is patently illegal. He submitted that 180 days expired in the year 2006 itself and the Tribunal has passed the order extending the stay till the disposal of the appeal on 14.8.2008, therefore, there was no occasion to issue the impugned notice of demand on 11.1.2010. He submitted that the demand notice is arbitrary and full of malafide. He submitted that the respondent-Assistant Commissioner, Central Excise Division, Rae Bareli has no authority to challenge the power of the Tribunal and of this Hon’ble Court by stating in paragraph-6 of the counter affidavit that the order of the Tribunal granting stay till the disposal of appeal is erroneous and the Hon’ble CESTAT is not empowered to give such a blanket stay order. Further in the said paragraph-6 it has been stated that the Hon’ble High Court has no jurisdiction to pass orders on the writ petition of the petitioner as alternative remedy was available to it, which the assessee availed by way of appeal to Tribunal is contemptuous and for these averments the respondent-Assistant Commissioner, Central Excise Division, Rae Bareli is liable to be punished and in any case the writ petition be allowed with heavy costs. 7. Sri Subodh Kumar, learned Standing Counsel submitted that in view of Section 35-C (2A) of the Act the stay order stood vacated after expiry of 180 days and, therefore, the demand notice is in accordance to law. 8. We have heard learned counsel for the parties and have gone through the record. 7. Sri Subodh Kumar, learned Standing Counsel submitted that in view of Section 35-C (2A) of the Act the stay order stood vacated after expiry of 180 days and, therefore, the demand notice is in accordance to law. 8. We have heard learned counsel for the parties and have gone through the record. Section 35C (2A) of the Act has been inserted on 11.5.2002 by the Finance Act, which reads as follows : “(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.” 9. The above provision came up for consideration before the two Members’ Bench of the Tribunal. The Bench in the case of Kumar Cotton Mills Private Limited v. CCE, Ahmedabad (supra) has held that even though the period of the order of stay initially passed, would come to an end on expiry of 180 days in view of the amended provisions, the jurisdiction of the Tribunal to extend the period of stay by passing fresh order is not affected. 10. In the case of IPCL v. Commissioner of Central Excise, Vadodara (supra), the above view of the two Members’ Bench has been affirmed. The Full Bench of the Tribunal has held that the Tribunal has a jurisdiction to grant stay order even after expiry of 180 days from the date of initial order of stay. Against the order of the two Members’ Bench of the Tribunal in the case of Kumar Cotton Mills Private Limited v. CCE, Ahmedabad (supra), the department had filed appeal before the Hon’ble Supreme Court. The said appeal was decided on 13.1.2005. The Apex Court upheld the view of the larger Bench of the Tribunal in the case of IPCL v. Commissioner of Central Excise, Vadodara (supra). The said appeal was decided on 13.1.2005. The Apex Court upheld the view of the larger Bench of the Tribunal in the case of IPCL v. Commissioner of Central Excise, Vadodara (supra). The Tribunal held as follows : “The sub-section which was introduced in terrorem cannot be construed as punishing the assessee for matters which may be completely beyond their control. For example, many of the Tribunals are not constituted and it is not possible for such Tribunals to dispose of matters. Occasionally by reason of other administrative exigencies for which the assessee cannot be held liable, the stay applications are not disposed within the time specified. The reasoning of the Tribunal expressed in the impugned order and as expressed in the Larger Bench matter, namely, IPCL v. Commissioner of Central Excise, Vadodara (supra) cannot be faulted. However, we should not be understood as holding that any latitude is given to the Tribunal to extend the period of stay except on good cause and only if the Tribunal is satisfied that the matter could not be heard and disposed of by reason of the fault of the Tribunal for reasons not attributable to the assessee.” (Emphasis supplied) 11. In view of the above, we are of the view that the Tribunal was competent to extend the stay order till the disposal of appeal. The order dated 14.8.2008, passed by the Tribunal, extending the stay till the disposal of appeal, is valid till date. It has neither been challenged before any of the higher Court nor it has been vacated. Needless to say that the order of the Tribunal is binding upon the lower authority, including the Assistant Commissioner, Central Excise Division, Rae Bareli-respondent No. 3. Once there was a stay order in existence, respondent No. 3 has no legal authority to circumvent the said order and initiate the recovery proceeding. Therefore, in the circumstances of the case, we are of the view that the impugned notice of demand is patently arbitrary and without authority of law. It would be appropriate to refer paragraph-6 of the counter affidavit: “That in response to contents of paragraph Nos. Therefore, in the circumstances of the case, we are of the view that the impugned notice of demand is patently arbitrary and without authority of law. It would be appropriate to refer paragraph-6 of the counter affidavit: “That in response to contents of paragraph Nos. 12 to 15 of the writ petition it is submitted that the two proviso of Section 35-C (2A) of the Act provides that the order No. 745 of 2008 dated 1.5.2008 passed by the Hon’ble Tribunal granting stay TILL DISPOSAL OF THE APPEAL is erroneous and the Hon’ble CESTAT is not empowered to give such a blanket stay order. Further, the Hon’ble Tribunal has to decide the matter within three years. Thus, Hon’ble CESTAT has erred in passing stay order dated 14.8.2008 and not deciding appeal of the party pertaining to year 2005. This Hon’ble High Court has no jurisdiction to pass orders on the writ petition of the petitioner as alternative remedy was available to it which the assessee availed by way of appeal to Tribunal. Petitioner has also filed a Misc. Application No. E/M/48-51/21/2010 dated 20.1.2010 on the present issue.” 12. The aforesaid averments made in paragraph-6 of the counter affidavit are contemptuous in nature. The Assistant Commissioner, Central Excise Division, Rae Bareli has no authority to say that the order of the Tribunal is erroneous and this Court has no jurisdiction to pass the order. 13. In the case of Union of India v. Kamlakshi Finance Corporation Ltd., 1991 (55) E.L.T. 433 (S.C.), the Apex Court while dealing with the situation wherein the Assistant Collector has not followed the order of the Appellate Authority. The Apex Court observed as follows: “The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not acceptable to the department-in itself an objectionable phrase-and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws.” 14. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws.” 14. In the present case it is admitted case that the order of the Tribunal has not been challenged by the revenue in any higher Court and the same holds good till date. The said order of the Tribunal was binding upon the revenue authority. Revenue authority cannot refuse to obey the order on any pretext. The refusal to obey the order amounts to violation of judicial discipline. In the present case, knowingly there is an order of Tribunal staying the demand till the disposal of appeal, the demand notice has been issued. Not only that in paragraph-6 of the counter affidavit, the authority of the Tribunal and this Court has been challenged by breaking all judicial norms and discipline. We are of the view that the language used in paragraph-6 of the counter affidavit is contemptuous in nature. However, having regard to the facts and circumstances, instead of taking a contempt proceeding against the officer concerned, we propose to impose an exemplary costs of Rupees one lac on the respondent-officer, which will be payable to the petitioner within two months by a account payee cheque or draft with a further warning to the officer not to act in haste and arbitrarily in future. 15. The writ petition is allowed and the demand notice dated 11.1.2010 issued by the Assistant Commissioner, Central Excise Division, Rae Bareli is hereby quashed with the cost stated above. ————