CESTAT Chennai: Tribunal Has Inherent Power to Grant Stay, But Revenue Must Show Sufficient Cause
Pranav B Prem
The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), comprising P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member), has held that the Tribunal possesses inherent authority to stay orders detrimental to the revenue. It observed that the power of taxation, including its collection, is an inherent attribute of sovereignty, and therefore, the right of the revenue to seek a stay of an order adverse to tax collection cannot be lightly dismissed. The ruling came in the context of a dispute concerning the classification of exported mango and guava pulp for the purpose of claiming higher benefits under the Remission of Duties and Taxes on Export Products (RoDTEP) scheme.
Factual Background
The assessee had exported mango/guava pulp and claimed a higher RoDTEP incentive of 2.5% by classifying their products under Customs Tariff Headings (CTH) 0804 5040/0804 5090. The Adjudicating Authority, however, held that due to sterilisation, the correct classification would be under CTH 2008 9994/9999 as “other fruit pulp,” which would entitle the assessee to only a 1.4% benefit. On appeal, the Commissioner (Appeals) reclassified the goods under CTH 0804 5040, ruling in favour of the assessee. Aggrieved by this, the revenue approached the Tribunal and sought a stay on the impugned order, citing a strong chance of success in their appeal.
Arguments of the Parties
The revenue contended that the processed export goods did not meet the criteria in the Harmonised System of Nomenclature (HSN) Explanatory Notes to Chapter 08 and that mango pulp should be classified under Customs Tariff Item (CTI) 2008 9999, while guava/fruit pulp should be classified under CTI 2008 9994. It argued that the Tribunal had inherent powers under Rule 41 of the CESTAT (Procedure) Rules, 1982, to grant a stay against an order or part thereof.
Conversely, the assessee argued that the Tribunal lacked statutory authority under the Customs Act, 1962, to grant stay orders in the absence of an explicit enabling provision.
Tribunal’s Observations
The Bench noted that Rule 41 of the CESTAT (Procedure) Rules, 1982, confers inherent powers on the Tribunal to make orders necessary to meet the ends of justice, which includes the power to grant stays. It emphasised that such power is inherent even without an express statutory provision.
However, the Tribunal observed that the stay application did not disclose whether the amounts involved had already been collected and would require refund pursuant to the impugned order. It further remarked that granting a stay in such circumstances would not facilitate the collection of pending tax, fine, or penalty and that an ‘early hearing’ request could have served the revenue’s purpose more effectively. The Bench criticised the revenue for merely asserting the probability of success in its appeal without providing substantial cause. It stated: “Merely stating the probability of revenue succeeding in their appeal is a bald statement which cannot be stated to be a reasonable plea and is just not enough. Every appellant is bound to have such a conviction on the probability of his success in the appeal proceedings. The proof of there being ‘sufficient cause’ is a condition precedent to the exercise of discretionary jurisdiction by this Tribunal on a stay application and it is lacking in these applications. Some more homework needs to be done by revenue if such applications are to succeed and are not seen to be filed as a mere formality.”
Finding that the revenue had failed to establish sufficient cause, the Tribunal dismissed the stay application. It clarified that while the power to grant a stay exists inherently within the Tribunal’s jurisdiction, such discretion must be exercised judiciously, supported by a proper factual foundation.
Appearance
Counsel for Appellant/ Department: Anandalakshmi Ganeshram
Counsel for Respondent/ Assessee: Hari Radhakrishnan
Cause Title: Commissioner of Customs V. M/s. SKOT India
Case No: Customs Appeal No. 40893/2024
Coram: P. Dinesha [Judicial Member], M. Ajit Kumar [Technical Member]
