2010 (6) TMI 384 - AT - Central Excise

Waiver of pre-deposit sick companies plea of proceedings pending before BIFR and financial hardship - Appellant companies in proceedings before BIFR, not genuinely sick company - Appellant companies was not the commercial operation of the companies but to illicitly take as much advantage as possible of the exemption notification - Appellants have neither been able to establish prima facie case in their favour on merits nor they have been able to establish financial hardship

Issues Involved:
1. Waiver of pre-deposit requirement under Section 35F of the Central Excise Act, 1944.
2. Financial hardship claims by the appellant companies.
3. Allegations of duty evasion and misuse of exemption notifications.
4. Appellant companies' status as "sick units" under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).

Detailed Analysis:

1. Waiver of Pre-deposit Requirement under Section 35F of the Central Excise Act, 1944:
The appellants sought a waiver from the requirement of pre-deposit of duty, interest, and penalties under Section 35F of the Central Excise Act, 1944. The Tribunal had initially directed the appellants to deposit the entire amount of duty demands confirmed against them within eight weeks, with the condition that compliance would waive the requirement of pre-deposit of interest and penalties.

2. Financial Hardship Claims by the Appellant Companies:
The appellants claimed financial hardship, arguing that they were sick units under SICA and thus merited protection from coercive recovery actions. They cited various judgments to support their plea, including:
- Sangfroid Remedies Ltd. v. UOI: Protection from coercive recovery for sick companies.
- Real Value Appliances Ltd. v. Canara Bank: Registration with BIFR provides protection from recovery processes.
- Tata Davy Ltd. v. State of Orissa: Coercive recovery not permissible without BIFR consent.
- New Vinod Silk Mills Pvt. Ltd. v. UOI: Sick companies should not be required to pre-deposit for appeal hearings.

However, the Tribunal noted that the BIFR had rejected the applications of NPPML, NPML, and CKML for registration as sick units, citing that their net worth had not entirely eroded. NPPL was declared sick, but BIFR later issued a notice for winding up due to non-cooperation, indicating that the company was not genuinely interested in rehabilitation but sought to evade creditors.

3. Allegations of Duty Evasion and Misuse of Exemption Notifications:
The Tribunal observed that the appellant companies, controlled by the same family, were essentially operating as a single entity but had split into four entities to exploit duty exemptions under various notifications. The Commissioner's findings indicated that this splitting was intended to evade duty, and the companies had not established a prima facie case in their favor.

4. Appellant Companies' Status as "Sick Units" under SICA:
The Tribunal reviewed the status of the appellants' applications before BIFR:
- NPPML: Application rejected; appeal to AAIFR pending.
- NPML: Application rejected; remanded by AAIFR to BIFR.
- CKML: Application rejected twice; appeal pending before AAIFR.
- NPPL: Initially declared sick, but BIFR later issued a winding-up notice due to non-cooperation.

The Tribunal concluded that the appellants were not genuinely sick companies and were using SICA provisions to avoid obligations. The conduct of NPPL before BIFR, as well as the similar behavior of CKML, suggested that the companies were not genuinely interested in rehabilitation.

Conclusion:
The Tribunal found no grounds to deviate from its earlier order directing the appellants to deposit the entire amount of duty demands. The appellants failed to establish a prima facie case or demonstrate genuine financial hardship. Consequently, the Tribunal directed compliance within eight weeks, with the condition that upon deposit, the requirement of pre-deposit of interest and penalties would be waived and recovery stayed until the disposal of the appeals.

(Order pronounced in open court on 18-6-2010)

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