As per excerpt published in Excise Law Times, 90% of the appeals filed by the Customs, Central Excise & Service Tax department against assesses, who had received a favourable order at the lower level , have been dismissed by CESTAT, SZB, Bangalore during the year 2008. The position is reportedly not very different (Kolkata has 60% appeals partially or fully upheld) in the previous years or in other benches of CESTAT across the country. There are reportedly more than 39000 cases pending in CESTAT across the country. The excerpt also says that Commissioners or Chief Commissioners of the departments are responsible for initiating frivolous appeals thus causing criminal wastage of the nation’s resources just for the reason that they have no time or may be no wisdom to judge whether the cases appealed require application of mind. The Chief Commissioners who review the orders of Commissioners are themselves of the rank of Additional Secretary to the Government of India & hence it is worrisome that what is happening. The excerpt goes to say that this calls for reviewing the need for maintaining the expensive office of Chief Commissioners as they themselves have exposed the hollowness in discharging the assigned duties & responsibilities.

However, off late there is a very dangerous trend seen emerging in respect of the stay applications in CESTAT, Mumbai. The appellants have to file stay applications for the simple reason that the appeal by itself cannot be hear & decided. Therefore, the appellant is compelled to seek relief from the CESTAT to stay the recovery from depositing the duty, penalty or fine till the appeal is decided. Thus this is only a temporary relief to be granted weighing the merits of the case. Therefore, if there are merits in the case, then it is deemed essential that the recovery be stayed. However, off late, in most of the cases of SME s, 100% of the duty deposit is confirmed. As informed by the old hands in CESTAT this trend has reportedly picked up after the change in leadership. Now, this may not be a big issue by itself if the appeals are decided on expeditious basis i.e. within 6 months but then there is no such provision in the law. However, the fact of the matter is that if the stay application is rejected & the appellant is asked to pay the 100% deposit then the same is gone for 6-8 years. Now, if the deposit of Rs. 50 Lakhs is made by the Small & Medium Enterprise then the question is that how that fledgling enterprise will survive & grow. Therefore, such order has the potential to turn into a death knell for the SMA/entrepreneur. If the enterprise is run on borrowed funds from the public sector bank then again at the end of the day it turns into a National loss. Therefore, there needs to be a solution to this problem. I would like to narrate few instances of my encounter in the CESTAT, Mumbai in particular. In the first instance, the stay hearing did not start at all because the learned Justice on the bench simply asked the Customs department representative what is the case all about & the Customs departmental representative did not have to make any effort to come out with any wrongs/demerits of the case. He simply said that a paltry sum of Rs. Eighty Six Thousand is involved & hearing this itself, the stay application was turned down& the order dictated that the stay application is rejected & report compliance of the deposit by so & so date. Though I do not claim to be a legal expert because I am not a lawyer but I am distinctly clear in my mind that the law does not permit the liberty to the government/judiciary to order the deposit of the entire amount terming it to be a small amount. The fact is that the appellant is left nursing the wound & the loss. Now, if the appellant is saddled with several such frivolous cases in different departments of the government then what is he supposed to be doing. In the second instance, which is a recent occurrence, the hearing for the stay could start at the far end of the day i.e. around 17.30 Hrs. Only. Yes, naturally, you were fated to bear the brunt of the tiredness of the judges but then this cannot excuse the judges from imparting justice. The arguments were being understood. There were merits in the case & partially accepted. The limitation period was squarely applicable & therefore there was no reason to discard the stay request on this ground itself. Secondly, there is a legal pronouncement settled finally & accepted, which holds that the country of export is the country of origin is bad in law. This was well supported by other documentary evidence. However, this was simply brushed aside saying that long winding arguments cannot be considered at the stay application stage. Finally, the point of financial hardship was asked & decision to deposit 34.5 Lakhs was given in addition to Rs. 21 Lakhs already deposited at the instance of the DRI. Now, this effectively means that if the deposit of Rs. 34.5 Lakhs is not made then the appeal does not survive. Think of it, Rs. 34.5 Lakhs is not a small amount of money for a trader therefore the trader is denied justice just because he is not able to cough up the deposit. The Customs departmental representative had to only cite the statement taken by the DRI that the party has accepted that the goods are of Chinese origin & subject to Anti Dumping duty. Just on the basis of this the hearing was deemed to have been completed & no further arguments were allowed. Now, the point is that everybody knows what goes in DRI & these facts appear in the Stay application. Now, if these facts are not given due consideration or the merits cited by the appellant then how justice can be carried out. Finally, just because the time is quarter to six it does not mean that the hearing should be rushed through & stay application rejected. One of the solution suggested in the hearing to the bench was that to secure the revenue of the Government, under such circumstances, Bank Guarantee can be taken because the company is running on borrowed funds after running losses in Mumbai floods on 26 th July, 2005 & documents to that effect can be produced if adjournment is allowed. To my utter surprise the adjournment plea was not considered at all & the justice (Technical) (the justice who is the expert on the law & procedures pertaining to the department to which the case pertains) tossed a shocker saying that “the government is not run by the bank guarantees but needs the Revenue & I should collect my fees from the client by way of a bank guarantee”. This may sound very elementary or simple but then when you analyze the implications of this sentence then it is sure to send shivers down the spine. The comparison of fee to be paid by way of Bank Guarantee vis a vis. deposit to be made with the government is simply preposterous & such ridicule is unwarranted.  The two basic reasons are that what right the government has to demand the 100% deposit & keep the same without paying the interest on it for 6-8 years. You know that interest rates are still very high in this country. As on today also, at the prevailing interest rates, the money will just double in this country in 6-8 years. Therefore, at the end of 6-8 years, even if the case is decided in the favour of the appellant, the appellant still ends to be the biggest fool & the looser as he is not entitled to interest on the money deposited with Government unlike in the case of demands against assessee at commissioner level & at Tribunal stage, when interest becomes payable right from the beginning under section 11 AB of C. Ex. Act or section 28 AB of Customs Act 1962 but there is no such corresponding provision when an assessee wins case and entitled to refund. He does not get any interest, thus law governing interest on refunds is totally against assesee. Practically, you have lost what you deposited with the tribunal or more than that. Therefore the appellants are fast losing faith in the administration of justice. This then again gives rise to the culture of finding a broker who will fix the problem for a price to be paid under the table. Thus there is absolutely no way out of this conundrum. If this is indulged into rampantly then where is the justice being carried out? Secondly, can the denial of stay be seen as a Revenue Collection exercise by the judges who are to impart justice. Under these circumstances, what is the difference between an Assistant Commissioner of Customs (overzealous revenue minded official) who has passed an illegal order & the justice who has considered the stay application, if both are just bothered about augmenting the coffers of the government, whether rightfully or wrongly?

My another humble point is that the government does not run on bank guarantees but then the government cannot run by butchering the Small & Medium Enterprises & killing the spirit of entrepreneurship in this country. These small & medium enterprises are single man show on whose many families depend. Therefore, their cases need to be dealt with in proper manner & legal remedies legitimately administered. The point of limitation & ratio of decisions are not long winding arguments, which cannot be considered at the stay application stage. These are sure shot reliefs in terms of the law which need serious consideration. The backbone of the Indian industry is really the small & medium enterprises; therefore nurturing them is a serious responsibility of the government through proper administration of justice.

If the government or Ministry of Finance does not provide the right number of benches in spite of the highest pendency in Mumbai & in spite of appeals filed in the year 2003 being heard as on date then how can the appellants be made to bear the brunt of coughing the 100% of the deposits & when appeals will take 6-8 years to be heard. Can this be termed as justice or daylight robbery? Yes, the judges are human beings & they will be tired at the end of the day hearing people day after day but then it is the prime responsibility of the government that such a state of affairs does not prevail & the conclusions are not rushed, which result in the miscarriage of justice.

The CHA s carry out the work in the customs department & many a times, CHA licences are suspended on frivolous grounds by over-zealous commissioners. Now, it is a question of livelihood for the CHA but then with the stay being not allowed & the pendency being high, how do you survive even if you have committed no wrong. Therefore, the golden rule is that no CHA should dare the Customs at any point of time whether the Customs department is right or wrong. Where do you find justice in this system! 

Finally, the most significant point is that if these institutions do not function well then people will have no faith in the government. These institutions therefore need to deliver. Failing this people will cheat & corruption will continue to climb & India will continue to be one of the most corrupt nations in the world. The government may boast of 9 % GDP growth but then in real terms no growth in delivery of justice in society is achieved. There will be no need for professionals but only deal fixers. Therefore sanctity of these institutions should be restored before it is too late. Justice is not to be done but also seen.   

Another solution, which can be possible to implement is that the appellant instead of giving the money to the government puts the money in fixed deposit/ government security assigned in favour of the courts/government so that the appellant will continue to earn the interest because that money legitimately belongs to the appellant. If the appellant is successful then the appellant gets the deposit as well as the interest. However, this option should be at the option of the appellant in lieu of the Bank Guarantee.

The winning of the appeal does not solve the problem for the appellants. There is a herculean exercise awaiting the refund. The government permits itself extra 3 months to refund the deposit. Not only this, the government wants that the appellant files the refund application serving the copy of the order for seeking refund. The refunds are not automatic even after filing the refund application but there are further stumbling blocks thrown in the way of the refund such as Unjust Enrichment. The government is not bound to pay interest for these 3 months but even if the refund of deposit is made after 3 months, no interest is paid though it is provided for in the law. If you have to claim your interest then there will be another round of litigation. Normally, the appellant is so exhausted by this time that few show the courage to recover the interest. Thus the government enriches itself through such unfair practice. The government of India is in the reform process actively since the year 1991 & the present Prime Minister is credited for bringing in the reforms then it is very difficult to comprehend that why such blatant misuse of the law is permissible.

The story of mischief is not yet over. Just see the position in case the stay was granted & no deposit was made. If the appellant loses the case then he has to pay the penal rate of interest, which could be as high as 15% per annum. In law, there has to be parity, therefore when the governments asserts its right to collect interest then it should bear the responsibility of paying the interest on the deposits. If this is done/implemented then the lethargy & wrong decision making will automatically vanish to a large extent. The lower authority needs to be held accountable for the wrong decisions given & the interest required to be paid by the government of the day. This would have a healthy effect of less litigations & less clogging of the courts.

There is yet another surprise in store, which I came to know about. The Government of India undertakings are now claiming as per the decision of the Mumbai high Court that the cash deposit or bank guarantee even need not be given but only a bond will suffice. This is simply for the reason that there is stake of the government in these companies. However, the tribunal is still not convinced that this is an omnibus order & therefore not implementing the decision in favour of the PSU s. Now, if the PSU s can be such a favourable position in the eye of the law then the government should at least be considerate about the Small & Medium Enterprises also.

In law, the punishment should be commensurate with the crime. If you have parked your car on the wrong side of the road, you can be fined a small amount as per the law. However, the traffic police cannot tow your car & dump it in the sea for wrong parking. Similarly, in case of Stay application, if the limitation or ratio of decisions are in favour of the appellant cannot then be just brushed aside & therefore relief legitimately due should not be denied. Just because the appellant is not able to cough up the deposit, it does not mean that the bench/courts acquire automatic rights to hang the defaulter. If that is the way than the Ansari’s or Kasab’s should not be in jail but in hell. Therefore the proper decision needs to follow at the top end of the judiciary.

In CESTAT, Mumbai there are three benches. However, because of the paucity of the justices, there are times when there may not be hearing for a considerable period just because a bench cannot be constituted. This is despite the fact that Mumbai CESTAT has the highest pendency & as on today, appeals filed in the year 2003 are reportedly being heard. Why the Government or Ministry of law (though not responsible) should be bothered about such sorry state of affairs. The Ministry of Finance is responsible for the administration of CESTAT. However, the pendency/vacancy is self fulfilling objective because the revenue, which is otherwise not legally due to the government, is collected & kept interest free for a period of 6-8 years. The government is keeping several thousand Crores of Rupees legally not due to the government in this manner. This problem is more pronounced in the case of SME s but in case of the big boys, such problems are less because in their case, there seems better consideration prevails as they hire the best brains at the highest prices. If the administration is beefed up & the pendency is wiped out then the Ministry of Finance/government will lose a huge pile. Therefore intervention of the Law Ministry may be the right course of action. The systemic reform to free the administration of justice by the nodal ministry should be adopted. I am not saying that the judiciary or the government is not aware of this but then if they are aware of it then why are they continuing with it.

There are several other serious problems/hurdles faced by the appellants in the CESTAT. One such problem is in respect of the live B/E. In some cases the Customs department acts like a traffic police who hides behind an obstacle & then catch the culprits instead of conducting the responsibility of directing the traffic & ensuring smooth movement. In the case of customs, what they do is let the B/E proceed & let the importer pay the duty & when the delivery is taken, the goods are confiscated. Thus the importer is put into serious trouble because the goods are cleared & duty paid but finally the result is that the goods are confiscated. Therefore, the duty & goods are both stuck & this disturbs the complete business cycle of the small & medium enterprise. When such live cases are taken up in the Tribunal, for early hearing then it is said that there is no provision that Live B/E s are to be granted early hearing. Therefore importers are compelled to pay hefty fines penalty and customs duty and clear the goods or abandon the same as they have no hopes of getting their appeals heard by Hon’ble Tribunal for years to come. Under these circumstances, where do the small & medium enterprises go! It is said that justice delayed is justice denied & in case of SME s, this is very true because the delay may render the enterprise economically unviable then please tell me where is the justice in the basic law.

I am of the view that in any developed country, if the tax is recovered on the higher side, the refund will follow. I think, the basic premise is unauthorized tax collection is bad in law & cannot be legitimized. However, in India, you have not only to claim refund but you are required to challenge the order separately. Now, it is common sense that the department cannot take advantage of its own mistake but then tribunals are not bothered. The judge has no hesitation in saying that they are not willing to change their mind & will follow the past precedent though this may not be the correct position. Now, this stubborn attitude in itself is killing. Why do the appellants come to the Tribunal is to get justice legitimately due to them & not for past precedents to be observed blindly even if they are wrong. In case of an unconditional exemption notification, the benefit of the notification has to follow automatically to the importer in case of EDI B/E. If this does not happen then the Customs official is responsible for the wrong committed & not the importer. This is accepted by the CBEC but then the Tribunal is not willing to decide in the favour of the assessee just because in case of M/s. Flock India, it is ruled that challenge of the assessment order is essential.

It is trite that no man should suffer a wrong by technical procedure of irregularities. The Rules or procedures are the handmaids of justice and not the mistress of justice. The tribunals should definitely ensure this as they are the last fact finding body.

rajiv.pec@gmail.com