2010 (3) TMI 973 - AT - Central Excise

Summary

Issues:
Challenge to impugned order based on failure to establish production capacity for alleged manufacture of mosquito nets, consideration of evidence including machinery and suppliers, reliance on Chartered Accountant certificate, denial by supplier, reliance on Delhi High Court decision, interpretation of Section 35F for deposit of duty.

Analysis:
1. The main issue in this judgment revolves around the challenge to the impugned order based on the failure to establish the production capacity for the alleged manufacture of a significant quantity of mosquito nets. Despite the Tribunal's clear observation regarding the necessity for the Department to prove the production capacity before imposing duty liability, the authority proceeded to reiterate the demand against the appellants. The impugned order considered various factors, including production capacity, evidence on record, lack of proof of purchase from suppliers, and transportation logistics, such as the type of vehicles used.

2. The defense raised by the appellants was deemed unbelievable as even in instances where the Department established the use of scooters instead of trucks for transportation, the total quantity supplied to HSCC was not disputed. The appellants were known manufacturers of defense overalls, possessed sewing machines capable of manufacturing mosquito nets, and a Chartered Accountant certificate confirmed their capacity to produce such nets. Additionally, a supplier denied the alleged supply of mosquito nets to the appellants, further weakening the appellants' case.

3. The appellants sought to rely on a decision by the Delhi High Court in a similar matter, emphasizing the maintenance of the earlier order during subsequent litigation rounds. The High Court's decision highlighted the importance of considering the circumstances of each case when directing pre-deposit amounts, emphasizing the need to avoid undue prejudice to the party involved.

4. Section 35F of the Act mandates the deposit of duty demanded or penalty levied pending an appeal, unless the Tribunal deems it would cause undue hardship. The Tribunal has the discretion to reduce the deposit amount based on the party's satisfaction of undue hardship conditions. The judgment clarifies that the High Court's direction was specific to the circumstances of that case, emphasizing the discretionary nature of such decisions.

5. Considering the facts and circumstances of the case, the Tribunal directed the appellants to deposit a further amount of Rs. 15 lacs within a specified period, while waiving the remaining duty, interest, and penalty until the appeal's disposal. This decision was made after evaluating the evidence, financial statements, and the lack of substantial material showing financial hardship to the appellants.

In conclusion, the judgment delves into the intricacies of establishing production capacity, reliance on evidence, interpretation of legal provisions for deposit requirements, and the discretionary nature of tribunal decisions based on the specific circumstances of each case.