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According to officials, the review may happen post budget incorporating view of the high courts after a concrete view emerges from the high court decisions. At present most of the companies have appealed against the recovery proceeding order in various high courts -- Chennai, Hyderabad, Ahmedabad and Mumbai and obtained stay against the immediate recovery orders. In fact the application of the recovery orders have virtually been put to rest by the stay orders, said officials.
The CBEC has clarified through this circular that a confirmed demand remains an order in operation till it is stayed and mere filing of an appeal dones not negate the recovery proceedings.
The circular issued last month has sent shock waves across industry which termed it draconian since it enforced recovery even when the stay application is pending with court or appellate, said industry sources. The industry appealed that hearing in appellate tribunals and courts take time and it is not upon the assessee to direct the judicial or quasi judicial bodies to take up the case. Therefore it is not the fault of the tax assessee that his appeal has not been granted hearing and is pending, said sources.
The circular rescinded seven prior circulars to proceed recovery proceedings against companies. As per the circular, recovery proceedings will start against the company within 30-60 days of the company filing appeal with commissioner appeals with or without stay application respectively. Similarly, the recovery has to be started within prescribed time frame even if the appeal is filed with tribunal or high court or supreme court. The said Circular has brought about a significant shift in the timing of recovery of confirmed demands, where the stay applications are not disposed off by the appellate authorities, within a period of 30 days of filing thereof.
Officials explained the review may prescribe some guidelines to categorise cases so that recovery may either start or stop once an appeal is filed. On the basis of such guidelines, cases can be sorted out so that appeal will be entertained or rejected, said an official source. Even when the appeal is entertained for stay, the tax assessee will be entitled to pay up part of the demand money.
Earlier, the recovery proceedings used to stop once an assessee files appeal against the confirmed order.
In 2010, the CBEC has notified elaborate measures for recovery of tax arrears by jurisdictional commissioners. Among the measures, the commissioners were directed to expedite and vacate stay of courts and tribunals, to appeal for early hearing in tribunals and courts for cases involving significant amount, follow up cases pending before Board of Industrial Financial Reconstruction (BIFR), Debt recovery tribunal, tribunal, official liquidator, or committee of dispute.
Recovery of tax arrears has been a primary agenda for the revenue authorities given the large fiscal deficit. In 2010-11 and 2011-12, tax arrears from customs, central excise work out to around Rs 4,581 crore.
The circular of the CBEC draws inspiration from Supreme Court order in case of Krishna Sales where it was observed that mere filing of an appeal does not operate as a stay or suspension of the order appealed against. However this order was in favour of the assessee where the customs was delaying release of goods since the revenue authorities have gone on appeal.
