In a belated but welcome move, the Central Board of Excise and Customs (CBEC) has withdrawn its controversial circular regarding recovery of a confirmed demand during pendency of a stay application. A lot of damage has, however, already been done.
On January 1, 2013, its New Year gift was a circular asking its field formations to initiate recovery proceedings in all cases of confirmed demand where a stay had not been had from the commissioner (appeals) or tribunal within 30 days of filing the appeal. Even this 30 days was not available in the case of stay applications before a high court (HC) or Supreme Court. In all cases where commissioner (appeals) confirmed the demand, recovery proceedings were required to be initiated immediately on issue of the order-in-appeal.
CBEC justified this on the ground that mere filing of an appeal does not operate as a stay or suspension of the order appealed against. The Board also rescinded its seven previous circulars on the subject, issued between 1988 and 2004.
There were many representations to CBEC, pleading that the grant of stay was not within the power of the aggrieved party. The best one can do is to file an application but with so many cases pending before them, the commissioner (appeals) or the tribunals might not be in a position to decide within 30 days. However, the Board preferred to ignore these representations.
So, many aggrieved parties rushed to the commissioner (appeals), tribunals and HCs, with requests to expedite a decision on their stay applications, and got their orders stayed. The circular mainly benefited the lawyers and standing counsels of the government. According to Vijay Kumar of taxonline.com, 'a rough estimate shows CBEC must be spending about Rs 60 crores to defend these writs and the assessees must be spending around Rs 300 crore. This circular has generated Rs 360 crore of business - and with the government not getting a single paisa.' Even many commissioner (appeals) were said to have been benefited for quickly granting a stay.
The sting from this circular was taken out substantially when the law was amended to prescribing a mandatory pre-deposit as a percentage of the duty and penalty demanded, for appeals filed after August 6, 2014. However, this relief was not applicable where the appeals were filed earlier and stay applications were pending.
The latest CBEC Circular, 1035/23/2016-CX dated July 4, 2016, says where an application for stay is pending before commissioner (appeals) or tribunal for periods prior to August 6, 2014, no recovery should be made during its pendency. For the subsequent period, the mandatory pre-deposit provision will apply. For demands confirmed by a tribunal or HC, where a stay application is pending before an HC or Supreme Court, recovery proceeding may be initiated only after a period of 60 days from the date of order of the tribunal or HC. Earlier instructions stand amended and the circulars issued between 1988 and 2004 on the subject remain rescinded.
Many assessees feel no recovery proceedings should be initiated even when a stay application is pending before an HC or Supreme Court. For now, they have to rest content with whatever relief they have got.
E-mail: tncrajagopalan@gmail.com
