The Central Board of Excise and Customs ( CBEC) has issued an order making it mandatory for companies to pay indirect taxes even if a stay plea is pending before an appellate body, a move some industry representatives describe as 'draconian'.

The circular, issued on January 1, has come at a time when complaints of what industry officials describe as "rampant reopening of past tax cases" are rising as the finance ministry searches for ways to raise revenues to meet the fiscal deficit target.

The circular issued by the Central Board of Excise and Customs, an arm of the finance ministry, is based on a 20-year-old Supreme Court decision and annuls all previous directives on this issue.

Based on the premise that "mere filing of an appeal does not operate as a stay or suspension of the order appealed against", the directive says recovery can be initiated immediately in cases where a tax demand has been confirmed by a commissioner appeals and a stay has not been granted within 30 days by the CESTAT (the Central Customs, Excise and Service Tax Appellate Tribunal).

"There is no proper justification as to why the board has woken up after 20 long years to issue such a draconian circular which will hurt the industry at this juncture," said DS Rawat, secretary-general, Assocham.

Indirect taxes rose 17.2% to Rs 36,081 crore in November, much below the 27% rise assumed in the budget, forcing the finance ministry into a year-end rush to raise revenues to meet the revised fiscal deficit target of 5.3% of GDP. The measure comes soon after Revenue Secretary Sumit Bose issued a warning that those avoiding payment of indirect taxes would invite prosecution, arrest and attachment of property.

A similar warning was issued ahead of the advance tax payment deadline of December 15. Predictably, industry is not amused. "In the absence of a time limit prescribed for the tribunal/courts to decide stay applications, the circular will cause undue hardship to the taxpayers who have filed appeal and stay application and have not received any order on stay application," said Chandrajit Banerjee, director-general, CII.