2014 (5) TMI 531 - HC - Central Excise

Waiver of pre deposit - Duty demand - Splitting up of demands - Held that - The enquiry according to the tribunal revealed that the appellant had availed cenvat credit of service tax paid on services which were used for trading activity of imported goods and relating to their real estate business and the credit so taken was utilized towards discharge of excise duty on goods manufactured at their factory at Alibag. Prima facie some admissions have also referred and in the statements of the officers of the appellant. Taking an overall view of the matter, the tribunal has found that out of the duty, interest and penalty demanded a case for complete waiver has not been made out. One can t at this stage break up the demand and hold that in so far as the sum of ₹ 3,23,00,000/- out of the sum of ₹ 6 crores there is a strong prima facie case. The demand cannot be considered after broken up and in isolation. It may be, that the appellant would ultimately succeed. However, what the tribunal has gone by is the principle that prima facie case is not a case which would ultimately succeed but which merits require serious consideration and deeper investigation. It is in doing that the tribunal has observed that the interest of both sides can be protected by its interim order - appeal does not raises any substantial question of law - Decided against assessee.

Summary

Issues:
Appeal under section 35G of the Central Excise Act against the order of the Customs, Excise and Service Tax Appellate Tribunal directing the appellant to deposit Rs.3 crores, substantial question of law regarding registration of head office as Input Service Distributor, reliance on tribunal decisions, exercise of discretion by the tribunal, fraud allegations, prima facie case, waiver of duty, interest, and penalty, protection of interests through interim order, examination of contentions, extension of time for compliance.

Analysis:

1. The appeal challenges the tribunal's order directing the appellant to deposit Rs.3 crores. The appellant argues that a substantial question of law arises as the tribunal did not consider the argument based on the registration of the head office as an Input Service Distributor during the relevant time. The appellant cites procedural lapses that are remediable and questions the tribunal's reliance on a single-member bench order instead of two-member bench decisions, as per the case of Doshion Ltd. v/s. Commissioner of Central Excise (2013).

2. The tribunal found a prima facie case in favor of the appellant regarding a demand of Rs.2.88 crores out of a total demand of Rs.6 crores. The appellant had reversed credit worth Rs.3 crores, leading to the argument that directing the deposit of Rs.3 crores would mean depositing the entire amount, thereby vitiating the order. On the other hand, the respondent argues that the tribunal's discretion was not exercised arbitrarily, highlighting fraud allegations and the seriousness of the case.

3. The High Court examined the tribunal's order, noting the contentions raised by both parties. The tribunal granted partial relief to the appellant concerning the demand related to the denial of input service credit. The court observed that the tribunal's decision was based on protecting the interests of both sides due to serious fraud allegations, and the interim order was made to ensure fairness pending further investigation.

4. The court disagreed with the appellant's assertion that the matter should be remitted back to the tribunal for further examination, emphasizing that the contentions should not be viewed in isolation at the prima facie stage. The court upheld the tribunal's decision, stating that the appeal did not raise any substantial question of law. The appellant was granted an extension of time for compliance with the tribunal's direction.

5. The court directed that if the appellant complies with the tribunal's order, the appeal will be taken up for disposal on merits. In case of non-compliance and dismissal of the appeal, the appellant would be permitted to revive the appeal for a hearing on merits, provided compliance is made within the stipulated time frame.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the arguments presented by both parties and the court's reasoning in reaching its decision.