CESTAT Upholds Inherent Authority to Stay Orders Detrimental to Revenue

CESTAT Upholds Inherent Authority to Stay Orders Detrimental to Revenue

Introduction

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has delivered a significant ruling, holding that the tribunal possesses inherent authority to stay orders detrimental to revenue. The ruling underscores that while such power exists, its exercise must be based on sufficient cause and not mere presumptions.

Factual Background

The assessee/respondent, M/s. SKOT India, exported mango and guava pulp and claimed a higher RoDTEP incentive (2.5%) by allegedly misclassifying their products under CTH 0804 5040 / 0804 5090.

• The Adjudicating Authority found that, due to sterilization, the products should fall under CTH 2008 9994/9999 as “other fruit pulp”, allowing only a 1.4% benefit.
• On appeal, the Commissioner (Appeals) disagreed and classified the goods under CTH 0804 5040, thereby ruling in favor of the assessee.

Procedural Background

The revenue challenged the Commissioner (Appeals)’s order before the CESTAT and also filed a stay application, seeking suspension of the impugned order pending appeal disposal.

The assessee opposed, contending that the Tribunal lacks statutory authority under the Customs Act, 1962 to grant stay orders since no explicit provision exists.

Issues

1. Does the CESTAT have inherent authority to stay orders detrimental to revenue?

2. Has the revenue established a sufficient case for stay of the impugned order?

Contentions of the Parties

• Revenue’s Contention: The processed export goods do not meet the criteria in the HSN Explanatory Notes to Chapter 08. Hence, Mango Pulp should fall under CTI 2008 9999 and Guava/Fruit Pulp under 2008 9994. The revenue argued that the Commissioner (Appeals)’s ruling is detrimental to tax collection, and a stay is necessary to safeguard revenue interests.
• Assessee’s Contention: The assessee argued that the Tribunal lacks statutory power to grant stay orders, and further, the revenue had not demonstrated any compelling grounds to justify suspension of the order.

Reasoning and Analysis

The bench of P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) observed that:

• The stay application failed to disclose whether the amounts in question had already been collected and would thus require refund pursuant to the impugned order.
• The Tribunal clarified that a stay would not facilitate revenue collection of pending tax, penalty, or fine; such objective could instead be served by requesting an “early hearing” of the appeal.
• The bench emphasized that merely asserting a high probability of success in appeal is insufficient, as every appellant is bound to hold such a belief. Proof of “sufficient cause” is a condition precedent for invoking the Tribunal’s discretionary jurisdiction.

Accordingly, the Tribunal held that while the inherent power to grant stay exists, the revenue had not made out a case to justify exercise of this discretion.

Outcome

The CESTAT dismissed the revenue’s stay application, holding that the plea lacked sufficient cause and appeared to be filed as a mere formality.

Representation

• For the Appellant/Department: Ms. Anandalakshmi Ganeshram, Advocate
• For the Respondent/Assessee: Mr. Hari Radhakrishnan, Advocate