2013 (10) TMI 1098 - HC - Central Excise

Waiver of Pre-deposit Appeal u/s35F Held that - It is for the appellant to establish undue hardship and the mere fact that the demand of duty and penalty may appear to be excessive, is irrelevant if the appellant has not been able to establish undue hardship - The expression undue hardship relates not only to the economic wellbeing of the appellant but also to the merits of the case, thus, requiring the CESTAT to also prima-facie appraise the merits and record an opinion for or against the appellant - An appellate forum cannot where the opinion recorded does not suffer from the aforesaid defects, impose its own perception of the merits of the case whatever be the nature of undue hardship . The appellant has not pleaded any financial hardship or financial distress in support of its plea of undue hardship and has mainly confined its pleadings to the merits of the demand raised by the revenue - A perusal of the orders passed by the Assessing Officer and the Appellate Authority do not enable us to record an emphatic finding in favour of the appellant that duty demanded and penalty levied are illegal or could not have been imposed. The question whether the duty was levied merely as the appellant and its partner surrendered income to the Income Tax Department, is a matter to be considered and decided after appraisal of the entire voluminous record - The appellant surrendered substantial unaccounted income to the Income Tax Authorities - The duty levied and penalty are based upon this disclosure, documents seized and inventories prepared by the Income Tax Department - affirming with the opinion recorded by the CESTAT, there is no reason to vary the order to grant any further relief to the appellant Decided against Petitioner.

Issues:
Challenge to order by Customs, Excise & Service Tax Appellate Tribunal regarding deposit amount; Consideration of undue hardship under Section 35F of the Central Excise Act, 1944; Prima facie case in favor of the appellant; Legal sustainability of excise duty demand; Evidence of clandestine manufacture and clearance of goods; Financial hardship plea by the appellant; Merits of the demand raised by the revenue; Appellate forum's scope of review; Appellant's surrender of income to the Income Tax Department; Duty levied based on disclosure to Income Tax Authorities.

Detailed Analysis:

1. Challenge to Tribunal's Order:
The appellant contested the order of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) directing the deposit of 50% of the amount claimed by the revenue under Section 35F of the Central Excise Act, 1944. The appellant argued that since CESTAT found a prima facie case in their favor, the entire liability should have been stayed, not just 50%. The appellant claimed that the demand of excise duty was legally unsustainable due to lack of evidence of clandestine activities and argued for a modification of the order to stay the entire duty during the appeal.

2. Consideration of Undue Hardship:
Section 35F of the Act mandates the deposit of duty demanded or penalty levied pending appeal, unless undue hardship is established. The appellant failed to demonstrate financial hardship but focused on the merits of the demand. The CESTAT, in exercising its discretion, considered the appellant's plea for stay but required a 50% deposit. The appellant's argument centered on the lack of undue hardship due to the absence of evidence supporting this claim.

3. Prima Facie Case and Legal Sustainability:
The CESTAT found a prima facie case in favor of the appellant, but the revenue contended that the duty demand and penalties were valid as the appellant had evaded excise duty. The revenue authorities had made detailed findings against the appellant, and the CESTAT's decision to allow a partial stay was viewed as a relief granted in good faith.

4. Evidence of Clandestine Activities:
The appellant challenged the excise duty demand based on income disclosures to the Income Tax Department, arguing that there was no evidence of clandestine manufacture or clearance of goods. The lack of recorded statements from relevant parties and the absence of material linking the income disclosures to manufacturing activities were highlighted to invalidate the duty demand.

5. Financial Hardship Plea and Merits of the Demand:
The appellant did not present financial distress as a basis for undue hardship but focused on disputing the legality of the duty demand and penalties. The orders by the Assessing Officer and the Appellate Authority did not conclusively support the appellant's claims, leading the court to refrain from altering the CESTAT's decision.

6. Appellate Forum's Scope and Conclusion:
The court emphasized that an appellate forum's role is limited to reviewing jurisdictional errors, not substituting its judgment on the case's merits. Given the lack of financial hardship evidence and inconclusive findings on the legality of the duty demand, the court dismissed the appeal and upheld the CESTAT's order for the appellant to deposit the specified amount within a month.

This detailed analysis of the judgment from the Punjab & Haryana High Court covers the issues raised regarding the challenge to the Tribunal's order, consideration of undue hardship, the existence of a prima facie case, legal sustainability of the duty demand, evidence of clandestine activities, financial hardship plea, merits of the demand, and the scope of the appellate forum's review.

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