2013 (3) TMI 237 - HC - Central Excise

Pre deposit demanded for the purposes of entertaining the appellant s two appeals - as per dept. cost of the materials consumed to manufacture the intermediate goods has not been correctly taken leading to undervaluation - Held that - As the deposit of Rs. 1.38 crores out of the aggregate demand of Rs. 9.04 crores in both the appeals as confirmed by the Commissioner of Central Excise is reasonable. This is particularly so as the issue of revenue neutrality would have to be examined on merits after ascertaining what is the exact amount which is paid by units at Pimpri, Goa and Rorkee receiving the intermediate goods on which credit of duty paid is taken. As the appellant has given details only with regard to Pimpri and Goa units and not with regard to the Rorkee unit. Consequently, the same would be a matter of examination at the time of final hearing of the appeals. Further the issue whether there was any intent to evade duty on the part of the appellant or not warranting invocation of extended period is itself a debatable issue. Therefore, the deposit of the admitted amount of Rs. 1.38 crores as per the final CAS-4 Certificate submitted by the appellant cannot be said to be arbitrary and perverse. Therefore, as the issues raised in the applications are contentious and require examination in greater depth at the time of final hearing of the appeals, no reason to interfere with the order of the Tribunal directing the appellant to deposit an amount of Rs. 1.38 crores on a prima facie view. However, the time to deposit the amount is extended by a period of another six weeks from today i.e. upto 11-1-2013.

Summary

Issues:
Whether the Tribunal was justified in directing the appellant to make a pre-deposit of Rs. 1.38 crores for the purpose of entertaining the appellant's two appeals arising out of a common order of the Custom Excise and Service Tax Tribunal.

Analysis:
The appellant, having two divisions, cleared intermediate products to sister units for captive consumption, discharging duty as per Valuation Rules. The revenue alleged incorrect cost of production for captively consumed goods, leading to undervaluation, for the period in question. The Commissioner of Central Excise confirmed the notices, invoking the extended period of limitation, which the appellant appealed to the Tribunal (para 2-3).

The appellant argued for complete waiver of deposit, claiming revenue neutrality, proper monthly filings, and knowledge of audit objections by the department. The Tribunal, however, found deficiencies in the appellant's filings and upheld the pre-deposit of Rs. 1.38 crores for hearing the appeals on merits (para 4-5).

The revenue contended that the pre-deposit was reasonable as per the final CAS-4 Certificate submitted by the appellant. They argued that the issues raised by the appellant required detailed examination during the final hearing (para 6).

The High Court noted that while financial hardship is a factor, the deposit of Rs. 1.38 crores out of the total demand was reasonable, considering the need for further examination of revenue neutrality and intent to evade duty. The Court extended the time for depositing the amount and upheld the Tribunal's decision, emphasizing the contentious nature of the issues raised (para 7-8).

In conclusion, the High Court upheld the Tribunal's decision, allowing an extension for the deposit and stating that the appeals would be heard and disposed of on merits upon compliance with the deposit requirement (para 9).