2014 (9) TMI 528 - HC - Central Excise

Waiver of pre deposit - Undue hardship - Held that - The appellant is a manufacturer of various types of castings at their factory. They have purchased MS scrap and SS scrap from registered dealers and they have availed CENVAT Credit. In this case, which is the subject matter of this appeal, the Department Representative submitted that the appellant has availed credit on the basis of invoices showing the description of material MS Round, M.S. Wire, M.S. Wire coils etc., and on investigation it was found that the dealers supplied non-duty paid scrap procured from the market and issued invoices of M.S. Rounds, M.S. Wire, etc., in order to claim CENVAT Credit. The Tribunal after taking note of the statement given by the Managing Director of the appellant regarding the receipt of virgin materials and treated them as scrap, held that it is difficult to accept that a prudent businessman would use virgin material as scrap and such statement is contrary to the statement of the dealers and such material cannot be used in melting scrap in the furnace. Further, the Tribunal pointed out that in terms of Rule 9(5) of Cenvat Credit Rules, 2004, the burden of proof relating to admissibility of CENVAT Credit lies upon the appellant/manufacturer, who avails such credit. The Tribunal, on going through the statement, was prima facie satisfied that the appellant had not made out a prima facie for complete waiver of pre-deposit. Decided against assessee.

Issues:
1. Direction to deposit pre-deposit amount of Rs. 13,00,000 for hearing the appeal.
2. Validity of the Tribunal's order in directing the pre-deposit amount.
3. Consideration of "undue hardship" by the Tribunal.
4. Financial burden on the appellant.
5. Comparison with a previous order granting 100% waiver of pre-deposit.
6. Burden of proof on the manufacturer for availing CENVAT Credit.

Analysis:
1. The appellant challenged the Tribunal's order directing a pre-deposit of Rs. 13 lakhs for hearing the appeal, arguing that they are not liable to pay the Excise Duty demanded by the respondent. The appellant contended that the pre-deposit condition imposed by the Tribunal hindered their right of appeal and access to a forum for redressal, rendering the statutory remedy illusory.

2. The appellant's counsel emphasized that the pre-deposit amount was a severe financial burden and presented statements from the Managing Director to support their case. They also referred to a previous case where 100% waiver of pre-deposit was granted, seeking similar relief in this appeal.

3. The Department Representative alleged that the appellant availed credit on non-duty paid scrap using misleading invoices. The Tribunal found discrepancies in the appellant's statements regarding the use of virgin materials as scrap, stating that the burden of proof for CENVAT Credit admissibility lies with the manufacturer. The Tribunal was not convinced of a prima facie case for complete waiver of pre-deposit.

4. Despite the appellant's financial difficulty plea, no substantial evidence was provided to support the claim. The Tribunal's decision to order pre-deposit of Rs. 13 lakhs, lower than the total recovery amount, was deemed appropriate given the circumstances.

5. The comparison with the case of Sam Turbo Industries Ltd., where 100% waiver was granted, was dismissed as the previous order was interim and discretionary. The Tribunal clarified that the different facts of the cases warranted varied decisions, and the appellant failed to establish grounds for interference based on the previous order.

6. Ultimately, the Civil Miscellaneous Appeal was dismissed, and the appellant was directed to pre-deposit the entire amount within eight weeks. The judgment highlighted the lack of merit in the appellant's arguments and closed the connected miscellaneous petition without costs.

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