2012 (1) TMI 89 - HC - Central Excise

Plea for waiver of pre-deposit of Rs 70 lakhs - clandestine removal and production has been established against the assessee and clubbing of turnover of assessee firm with turnover of sister concern was made Held that - Appellant has made out the prima facie case by insisiting that due to its financial position constraints & adverse market conditions it is not in a position to pay the pre-deposit and thus would be deprived of his right to be heard and press their appeal. Further appellant have accepted to furnish surety or create a charge on its immovable property so that recovery can be made in case the demand is accepted. Thus directions of the tribunal are modified. Appellant is required to pay Rs 40 lacs as per schedule specified and is required to deposit papers/title documents of its property. The appellant will also file an undertaking that they shall not dispose of sell or encumber or rent out property Decided in favor of assessee to the extent indicated above.

Summary

Issues:
1. Condonation of delay in filing the appeal under Section 35G of the Central Excise Act, 1944.
2. Whether the Customs, Excise and Service Tax Appellate Tribunal was right in directing the appellant to deposit Rs.70 lakhs as a pre-condition for hearing the appeal.

Issue 1: Condonation of Delay:
The appellant filed an application for condonation of delay of 105 days in filing the appeal under Section 35G of the Central Excise Act, 1944, impugning two orders passed by the Customs, Excise and Service Tax Appellate Tribunal. The delay was attributed to a pending rectification application. The Central Excise advocate waived the right to file a reply, and considering the facts presented, the court allowed the application, condoning the delay in filing the appeal.

Issue 2: Pre-condition for Hearing the Appeal:
The substantial question of law framed was whether the Tribunal was correct in directing the appellant to deposit Rs.70 lakhs as a pre-condition for hearing the appeal. The appellant, a partnership firm, was engaged in manufacturing activities, and the case involved allegations of clandestine removal of goods and under-declaration of production. The Commissioner's order computed the demand, penalties, and interest against the appellant and its partners. The Tribunal examined contentions regarding administrative control and financial flow between the appellant and another partnership firm. The appellant argued against the findings, emphasizing the independence of the two entities and challenging the computation of clandestine sales.

The appellant contended that the turnover of the two partnership firms should not be clubbed, emphasizing financial difficulties and adverse market conditions affecting their business. The court found a prima facie case in favor of the appellant, noting the need to protect the Revenue's interest while allowing the appellant to press their appeal. Consequently, the court modified the Tribunal's directions, requiring the appellant to make a reduced pre-deposit of Rs.40 lakhs in installments and providing property documents as security. The court allowed the appeal to the extent indicated, answering the question of law accordingly and emphasizing the protection of Revenue's interest.

This detailed analysis of the judgment covers the issues of condonation of delay and the pre-condition set by the Tribunal for hearing the appeal, providing a comprehensive overview of the legal proceedings and decisions made by the court.