By Iype Mathew
One of the important changes made as part of the amendments brought by Finance (No. 2) Act, 2014 is the amendment to the provisions relating to pre-deposit and grant of stay in Customs, Excise and Service Tax laws. Earlier, though pre-deposit of the full disputed amount was prescribed yet the appellate authority was vested with the discretion to waive pre-deposit and to grant stay in deserving situations. This position is now amended by introducing a compulsory pre-deposit of a part of the disputed amount along with no discretion to the appellate authorities to consider any waiver or to grant stay.
A pre-deposit must serve a purpose. It will be worthwhile to try and understand what could be the purpose that is meant to be served. Typically a quasi-judicial process ends with an adjudication order. The different stages leading upto the passing of such an order provide for presentation of facts and evidence, both for and against the issues under consideration. Thus an adjudication order is normally expected to be fair and just in the light of the facts and circumstances of the case. It would therefore be natural to presume that adjudication orders are normally correct and that the parties involved should therefore have no problem in accepting them.
The issues that need to be examined in the context of the above amendment are:
- If pre-deposit of the disputed amount as now prescribed is made, does it mean that recovery action for the remainder is automatically stayed?
- Will the Tribunal still continue to have the power to grant stay of the enforcement of the impugned order?
Payment of a disputed amount of duty or tax is enforceable as a result of an order lawfully passed by a competent authority. Therefore staying enforcement of such an order or waiving pre-deposit of the disputed amount, cannot be seen as two distinctly different reliefs. They are addressing the same concern namely hardship caused by an allegedly wrong order. Therefore when a provision is created to entertain an appeal subject to pre-deposit of a part of the disputed amount, it would certainly imply that the impugned order is automatically stayed till the appeal is disposed of. This position is maintainable in spite of the absence of a direct mention of such a position in the amended Section 129E of the Customs Act and Section 35F of the Central Excise Act. The above view finds support in the judgement of the Kerala High Court in Ashoka Rubber Products
[1989(43) E.L.T. 605(Ker)].
The Tribunal is always vested with the inherent power and authority to grant stay of orders brought before it by aggrieved parties, as part of its natural responsibility to render justice. This position is now well settled vide judgement of the Supreme Court in I.T.O
v. M.K. Mohammed Kunhi
[1969 (71) ITR 815 (SC)]. Therefore the amendments under examination will not make any difference to this settled position.
Let us now understand the ground reality in Union Indirect Taxes viz., Customs, Excise and Service Tax. It is now openly acknowledged that many show cause notices are issued either when there is no case at all or on the basis of wrong interpretation of the provisions of law or on the basis of weak evidence; and that such show cause notices are generally upheld and confirmed by the quasi-judicial adjudicating authorities. This strange phenomenon is endemic and prevalent across the length and breadth of the country. The fact that a vast majority of the orders so passed is set aside or annulled at Tribunal, High Court and Supreme Court levels, is a firm proof of this malady existing at lower levels. In this context therefore compulsory pre-deposit and withdrawal of discretion to grant stay, are steps retrograde in nature, which will result in hardship to the assessees. In other words, the present amendment is not a step aiding and promoting a system for quick and fair dispensation of justice.
Apparently an important reason for making this amendment is - A lot of time of the Tribunal and Commissioners (Appeals) is taken up to dispose of waiver of pre-deposit and stay applications filed by the aggrieved parties. If this time can be used for hearing appeals proper, final orders can be passed faster resulting in quicker rendering of justice. Growth in litigation and steady increase in pendency of cases in Tribunals and Courts are only symptoms and not the causes for this malady. The root causes for the present problem are: complicated tax laws, lack of accountability at the decision making levels, and inadequate number of benches in Tribunals and Courts to handle the heavy inflow of cases. Unless these causes are seriously addressed and tackled there will be no real improvement in the tax justice system. The present amendment is short sighted and adds to the miseries of the assessees.
[The author is a Director, Lakshmikumaran & Sridharan, New Delhi