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Saturday, Sep 10, 2005

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`Arm customs tribunal with power to award penal costs'

K.R. Srivats

New Delhi , Sept. 9

INDIA Inc wants the customs, excise and service tax appellate tribunal (CESTAT) to be armed with the power to award costs. At present, the tribunal does not enjoy such powers.

As part of its suggestions for reducing pending cases at the CESTAT, India Inc has submitted to the Finance Ministry that vexatious and frivolous appeals could be discouraged by award of heavy penal costs. It has been claimed that awarding of costs was a well-established practice in many western countries. The Government had sought industry views on how to reduce pending cases at CESTAT. Industry's suggestions have been on two fronts — how to bring about reduction in existing cases pending before CESTAT and steps to reduce the cases being filed before the tribunal.

One of the suggestions for reduction of workload related to the aspect of recovery of amount involved in the dispute. Industry has submitted that the recovery of the amount involved in the dispute may be stayed during the period when the appeal is pending.

Further, it has also been proposed that Section 35F of the Central Excise Act be amended and made applicable to appeals involving duty and/or penalty of more than Rs 10 lakh. Such a move would benefit a large number of small assessees as it would reduce their cost of litigation.

It has also been contended that there would be no loss to the revenue as the duty would be recovered with interest at 13 per cent if the appeal of the assessee was rejected.

At present, Section 35F provides that an appeal cannot be heard by CESTAT, until the amount of duty and penalty is deposited or waived by it. This provision, according to industry, results in two hearings before the CESTAT in most of the cases. It is estimated that about one-third of the time of the CESTAT is spent in hearing applications for waiver of the pre-deposit and consequential administrative work.

The CESTAT hears appeals against orders and decisions passed by the commissioners of customs and excise under the Customs Act 1962, Central Excise Act 1944, and the Finance Act 1994 (relating to service tax).

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