2014 (9) TMI 479 - HC - Central Excise

Waiver of pre deposit - Evasion of Duty - Attachment of property - Revenue was of the view that the assesse manufactured and supplied the components/parts of Railway wagon without payment of duty to different units of Indian Railways showing the said goods as trading items in their books of accounts and thereby indulged in evading the Central Excise duty involved thereon - Held that - By virtue of the Notification No. 68 of 63, dated 4th May, 1963 issued under Section 12, Section 142 is applicable in case of dues of the Central Excise and its recovery thereof. This Court, therefore, feels that instead of depositing the entire sum of ₹ 70 lakhs the interest of the Revenue can be protected, if the petitioner is directed to deposit a sum of ₹ 20 lakhs and shall keep the said immovable property i.e. the land at Rajarhat attached to the Central Excise departments. Accordingly, the petitioner is directed to deposit a sum of ₹ 20 lakhs within two months from date with the Central Excise authority. However, attachment remain sustained - Decided partly in favour of assessee.

Summary

Issues:
1. Challenge to the order disposing of an application for waiver of the pre-deposit condition.
2. Dismissal of an appeal by the Tribunal for non-compliance of the order.
3. Allegations of undue hardship caused by the deposit condition.
4. Evaluation of property as security for compliance.
5. Interpretation of Section 35F of the Central Excise Act, 1944.
6. Exercise of discretion by the Appellate Tribunal in allowing waiver.
7. Justification of the deposit amount for safeguarding interests.
8. Proposal for deposit and attachment of property for revenue protection.
9. Legal provisions for attachment and recovery of dues.
10. Direction for deposit and attachment to protect revenue interests.

1. Challenge to the order disposing of an application for waiver of the pre-deposit condition:
The High Court dealt with a writ petition challenging the Tribunal's order directing a deposit of Rs. 70,00,000 as a condition for waiver. The petitioners argued that the Tribunal overlooked their financial situation and the impact of the deposit on their commercial activities.

2. Dismissal of an appeal by the Tribunal for non-compliance of the order:
While the writ petition was pending, the Tribunal dismissed an appeal for non-compliance with its order. This action was also contested through a supplementary affidavit, questioning the basis of the dismissal.

3. Allegations of undue hardship caused by the deposit condition:
The petitioners claimed that the deposit condition of Rs. 70 lakhs would cause undue hardship and disrupt their commercial activities. They argued that the Tribunal did not consider their financial documents and the purpose of the fixed deposits held as security for orders from the Railways.

4. Evaluation of property as security for compliance:
The Court directed the petitioners to obtain a valuation report for a property they owned in Rajarhat, Kolkata, valued at over Rs. 1.5 crores. The report indicated that this property could serve as security for compliance with the Tribunal's directions.

5. Interpretation of Section 35F of the Central Excise Act, 1944:
Section 35F requires a deposit of duty demanded for appealing against an authority's decision. The Tribunal has the power to dispense with this deposit based on conditions that safeguard revenue interests and prevent undue hardship, with no fixed formula for dispensation.

6. Exercise of discretion by the Appellate Tribunal in allowing waiver:
The Court observed the Tribunal's discretion in allowing waiver of a Rs. 70 lakhs deposit against a duty of Rs. 5 crores and penalties. It emphasized the need to balance the petitioner's hardship and revenue protection.

7. Justification of the deposit amount for safeguarding interests:
Considering the balance sheets and documents, the Court found no reason to reduce the deposit amount. It suggested securing the amount through the property valued at Rs. 1.5 crores to protect both the petitioner's interests and revenue.

8. Proposal for deposit and attachment of property for revenue protection:
The petitioner proposed depositing Rs. 20 lakhs and attaching the Rajarhat property worth over Rs. 1.5 crores to protect revenue interests. However, the respondent authorities expressed concerns about potential litigations in case of default.

9. Legal provisions for attachment and recovery of dues:
The Court referenced Section 11 of the Central Excise Act, 1944, and the Customs Rules for property attachment and recovery of dues. It highlighted the mechanisms for attachment and sale of property for recovery purposes.

10. Direction for deposit and attachment to protect revenue interests:
Instead of the full Rs. 70 lakhs, the Court directed a deposit of Rs. 20 lakhs and attachment of the Rajarhat property to the Central Excise authorities. Compliance with these directions would vacate the Tribunal's dismissal order and allow the appeal to proceed on merit.

The judgment extensively analyzed the challenges to the waiver order, the impact of non-compliance on appeal dismissal, the petitioner's financial situation, property valuation for security, legal provisions for deposit conditions, discretion in allowing waivers, and the balance between hardship and revenue protection. Ultimately, the Court directed a reduced deposit and property attachment to safeguard revenue interests and ensure appeal consideration on merit.