2014 (2) TMI 4 - HC - Central Excise

Waiver of pre deposit - Imposition of penalty - Financial hardship - Held that - when the stay application was called out for hearing before the Tribunal, none appeared for the petitioner. The Tribunal also records that on four earlier occasions, the petitioner had sought adjournments which is disputed by the Learned Counsel for the petitioner. However, we are not inclined to go into the above controversy. The fact is that on 11 November 2013, when the impugned order was passed, the petitioner was not represented and it is the case of the petitioner that no notice of hearing was received by the petitioner. Thus, the earlier adjournments even if taken by the petitioner does not answer its grievance that no notice for hearing was received by it and it had no knowledge of the hearing when the stay application was heard. Moreover, the impugned order does not deal with the petitioner s stay application with regard to financial difficulties/ hardship. if the notice of hearing has been received by him, he would have appeared before the Tribunal and produced the income tax returns for the Assessment Years 2011-12, 13 and 2013-14 which is produced before us to indicate that his income was approximately ₹ 16,000, ₹ 34,000 and ₹ 24,000 respectively for the last three years. In the above circumstances, it would be in the interests of justice if the petitioner is heard on its stay application and particularly with regard to his submission of financial difficulties/ hardship before an order is passed on his application seeking dispensation with predeposit - Decided in favour of assessee.

Summary

Issues: Challenge to Tribunal's order directing deposit of penalty amount for appeal

Analysis:
1. The petitioner challenged the order of the Customs, Excise and Service Tax Appellate Tribunal (Tribunal) dated 11 November 2013, which directed the petitioner to deposit a sum of Rs. 3,12,500 out of a penalty imposed of Rs. 12.50 lakhs for entertaining the appeal on merits from the Commissioner of Central Excise's order dated 31 December 2012.

2. The High Court acknowledged that ordinarily, the petitioner should file a statutory appeal under the Central Excise Act, but due to the peculiar circumstances of the case, including the order being passed without hearing the petitioner and the financial hardships claimed by the petitioner supported by income tax returns, the Court exercised its extraordinary jurisdiction.

3. The Commissioner of Central Excise had imposed a penalty of Rs. 12.50 lakhs on the petitioner for aiding in evading excise duty by another company. The petitioner filed an appeal and a stay application before the Tribunal, citing inability to pay the penalty amount directed by the Commissioner's order.

4. The Tribunal, in its order dated 11 November 2013, noted the absence of the petitioner during the hearing and directed the petitioner to deposit 25% of the penalty amount. The petitioner contended that they did not receive any hearing notice and had pleaded financial hardship, which the Tribunal allegedly did not consider.

5. The Court considered the submissions of both parties and found merit in the petitioner's argument that they did not receive a hearing notice, preventing them from presenting evidence of financial difficulties. The Court emphasized the importance of hearing the petitioner on their stay application, especially regarding financial hardships, before passing any order on the deposit of the penalty amount.

6. Consequently, the High Court set aside the Tribunal's order dated 11 November 2013 and directed the petitioner to submit income tax returns and other documents supporting their financial difficulties to the Tribunal. The Tribunal was instructed to schedule a hearing after 12 February 2014, and the petitioner agreed not to seek adjournments. The Court also ordered a stay on coercive recovery actions by the respondents until the Tribunal decides on the petitioner's application.

7. The writ petition was disposed of without costs, emphasizing the importance of considering financial hardships and ensuring a fair hearing for the petitioner before deciding on the deposit of the penalty amount.