2012 (9) TMI 875 - AT - Central Excise

Compilation of documents - Whether the security offered by the appellant in the form of deposit of title deeds pertaining to the landed property would subserve the revenue s interest in terms of Section 35F of the Central Excise Act - Held that - security in any form whatsoever offered by the appellant should be one enforceable against the appellant in the event of their losing their appeal. A bank guarantee is, indisputably, one such enforceable security - The deponent, who has verified and filed the appeal, should categorically undertake that he has no objection to the respondent enforcing this security against the appellant in the event of the latter losing the case. We, therefore, expect the deponent to file such undertaking in unequivocal terms within a reasonable time. They shall file this undertaking with the respondent so as to enable him in due course to enforce the security which is being furnished in the form of title deeds by the appellant, in the event of the appellant losing this appeal. The appellant shall do this without any delay, at any rate before 27-9-2012, and report compliance to this Bench on 27-9-2012. The counsel for the appellant shall permit the learned Special Consultant for the respondent to peruse the relevant documents in the meanwhile - Decided in favour of assessee.

Summary

Issues: Compliance with Stay Order, Security for Pre-deposit, Enforceability of Alternative Security

Compliance with Stay Order:
The judgment involves a compliance report with a Stay Order issued by the Appellate Tribunal, modified by the Karnataka High Court. The appellant was directed to deposit Rs. 5 crores, which was later modified by the High Court to allow furnishing a bank guarantee or valuable security. The appellant submitted various documents, including Sale Deed, Gift Deed, Encumbrance Certificate, Tax Paid Certificate, Valuation Report, Partnership Deed, and an affidavit. The High Court extended the time for compliance, and the matter was pending as of the judgment.

Security for Pre-deposit:
The key issue debated was whether the security offered by the appellant, in the form of title deeds of landed property, would sufficiently protect the revenue's interest as per Section 35F of the Central Excise Act. The Tribunal emphasized that any security must be enforceable against the appellant in case of an adverse outcome. The appellant's submission of title deeds was deemed insufficient as it lacked a clear undertaking for enforcement. The Tribunal directed the appellant to provide an unequivocal undertaking for enforceability within a specified timeline, failing which the security would not be considered adequate.

Enforceability of Alternative Security:
The Tribunal compared the enforceability of the alternative security (title deeds) with a bank guarantee, highlighting the statutory requirement for security to be enforceable against the appellant. The affidavit filed by the appellant lacked a clear commitment for enforcement, prompting the Tribunal to demand a specific undertaking from the appellant to ensure the security's enforceability. The appellant was instructed to file the necessary undertaking promptly and report compliance by a specified date, emphasizing the importance of enforceability in safeguarding the revenue's interest.

This detailed analysis of the judgment highlights the nuances of compliance with the Stay Order, the adequacy of security for pre-deposit, and the critical aspect of enforceability concerning alternative security measures in the context of the Central Excise Act.