2006 (8) TMI 596 - HC - Central Excise

Maintainability of the writ application - Waiver of pre-deposit - Deemed credit - undue hardship - Challenged the Order of the CEST Appellate Tribunal - Refusal to waive the requirement of pre-deposit of the disputed duty - HELD THAT - In the instant case, the CESTAT has neither recorded the submissions made on behalf of the petitioner nor given its findings thereon. Furthermore, the impugned order does not disclose why the petitioner was required to deposit only ₹ 1,50,000/- as against demand of over ₹ 3,00,000/-. The Tribunal cannot exercise its power to waive pre-deposit of the duty disputed, even in part, in the absence of reasons. The power of dispensation cannot be exercised arbitrarily or whimsically or for the asking. Satisfaction that pre-deposit of the duty demanded could cause undue hardship is the condition precedent for exercise of the power to dispense with pre-deposit either fully or in part. Section 35F of the Central Excise Act, 1944 provides that, where in any appeal under Chapter VIA of the said Act, the order appealed against relates to any duty demanded in respect of goods which are not under the control of the Central Excise authorities or any penalty levied under the said Act, the person desirous to appealing against such order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied. An order directing the pre-deposit or an order waiving pre-deposit may not involve any question of law, far less a substantial question of law and hence may not be appealable. In any case, such an order cannot be said to be an order in the appeal but is an order incidental to the hearing of the appeal. An order directing deposit of disputed duty or penalty either in full or in part is not ordinarily appealable. It cannot, therefore, be said that the petitioner has an adequate efficacious alternative remedy. The order impugned is, therefore, set aside. The Tribunal shall consider the question of waiver of pre-deposit afresh in accordance with law, after considering all relevant factors and in particular the submissions of the petitioners with regard to the prima facie case in appeal as also the financial capacity of the petitioner.

Issues Involved:
1. Challenge to the order of the Central Excise and Service Tax Appellate Tribunal (CESTAT) regarding pre-deposit requirement.
2. Entitlement of the petitioner to avail CENVAT credit as deemed credit.
3. Allegations and findings related to the disallowance of CENVAT credit.
4. Maintainability of the writ application in the High Court.

Issue-wise Detailed Analysis:

1. Challenge to the Order of CESTAT Regarding Pre-Deposit Requirement:
The petitioner challenged the CESTAT order dated 19th April 2006, which refused to waive the requirement of pre-deposit of the disputed duty of Rs. 3,10,188/- and directed the appellant company to deposit Rs. 1,50,000/- within eight weeks. The statutory requirement under Section 35F of the Central Excise Act, 1944 mandates pre-deposit of the duty demanded or penalty levied unless it causes undue hardship. The Tribunal must consider the prima facie merits of the case and the financial capacity of the appellant. The CESTAT failed to record the submissions of the petitioner or provide reasons for its decision, making the order non-speaking and arbitrary.

2. Entitlement to Avail CENVAT Credit as Deemed Credit:
The petitioner claimed entitlement to avail CENVAT credit on stocks of ingots and billets of non-alloy steel lying on 31st March 2000, on which duty had been paid under Section 3A of the Central Excise Act. The petitioner availed deemed credit amounting to Rs. 3,10,188/- on ingots captively consumed for manufacturing hot rolled products. The Joint Commissioner disallowed the credit, stating that the notification covered inputs purchased from outside parties, not captively consumed inputs.

3. Allegations and Findings Related to the Disallowance of CENVAT Credit:
A show-cause notice dated 13th February 2001 alleged that CENVAT credit was not available to the petitioner for inputs lying in stock as on 1st April 2000. The Joint Commissioner disallowed the credit of Rs. 3,10,188/- for captively consumed steel ingots, stating that the notification did not cover such inputs. The Commissioner of Central Excise (Appeal 1) upheld the disallowance, stating that the petitioner did not declare the invoice price of inputs correctly, which was beyond the scope of the show-cause notice.

4. Maintainability of the Writ Application in the High Court:
The respondent raised a preliminary objection to the maintainability of the writ application, arguing that the order was appealable under Section 35G(1) of the Central Excise Act, 1944. The High Court held that not all orders are appealable, only those involving substantial questions of law. The impugned order was incidental to the hearing of the appeal and did not involve any substantial question of law. The High Court can entertain a writ application where the order is non-speaking, arbitrary, or in violation of principles of natural justice.

Conclusion:
The High Court set aside the impugned order of the CESTAT and directed it to reconsider the waiver of pre-deposit afresh, considering all relevant factors, including the prima facie case and the financial capacity of the petitioner. The Tribunal may impose conditions to safeguard the interests of revenue. The appeal should be heard and disposed of expeditiously.

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