2015 (1) TMI 540 - AT - Central Excise

Waiver of pre deposit - evasion of Excise duty - Clandestine removal of goods - Held that - K/s K.P. Pouches were found to have indulged in clandestine removal of Gutkha evading Central Excise duty of more than ₹ 10 crores. It is not denied that marking Rajshree and Safal were found on the bags kept in the godown at Raipur. Prima facie, clandestine removals of such magnitude from this kind of factory could not have happened without the knowledge and approval of its two Directors. While any pre-deposit ordered will feel like causing some financial hardship which in any case is the consequence of the appellant s own acts/omissions, pre-deposit needs to be so calibrated as not to cause undue hardship. - Partial stay granted.

Issues:
1. Failure to comply with pre-deposit under Section 35F of the Central Excise Act.
2. Wilful violation of the mandate of Section 35F.
3. Appeal against CESTAT order dated 3.4.2012.
4. Stay application and pre-deposit requirements.
5. Responsibility of Directors in clandestine removal of goods.
6. Financial hardship due to pre-deposit requirements.

Issue 1: The appellant failed to comply with the pre-deposit requirement under Section 35F of the Central Excise Act. The Tribunal dismissed the appeal due to non-compliance, as the appellants did not appear or intimate compliance with the order for deposit. The non-compliance was considered a wilful violation of Section 35F, which necessitates pre-deposit as a condition for hearing an appeal.

Issue 2: The Tribunal's order dated 3.4.2012 was challenged by the appellant and others before the Hon'ble High Court. The High Court emphasized that each appellant's case should be considered individually, and separate orders should be passed based on their circumstances. The High Court directed the Tribunal to grant a hearing to the appellants regarding the waiver of pre-deposit and to pass orders in accordance with the law.

Issue 3: In compliance with the High Court's order, the Tribunal re-evaluated the case. The appellant contended that the demand against the company was based on presumption, and the markings on the packages did not conclusively link them to the alleged evasion. The appellant also argued against personal liability for penalties and highlighted potential financial hardship due to pre-deposit requirements.

Issue 4: The Tribunal acknowledged the appellant's submissions but noted the substantial evasion of duty by the company. Considering the circumstances, the Tribunal ordered a pre-deposit of 50% of the impugned penalty amounting to Rs. 50 lakhs within six weeks. The recovery of the remaining penalty amount was stayed pending the appeal, with dismissal threatened in case of default.

Issue 5: The argument regarding the responsibility of directors in clandestine activities was addressed by the Tribunal, noting that such significant evasion could not have occurred without their knowledge and approval. The Tribunal balanced the need for pre-deposit with the potential financial hardship faced by the appellant, ordering a specific pre-deposit amount to proceed with the appeal.

Issue 6: The Tribunal's decision aimed to balance the requirement of pre-deposit under the law with the appellant's financial circumstances. The order for pre-deposit was set to prevent undue hardship while ensuring compliance with legal obligations, ultimately allowing the appeal to proceed contingent on meeting the specified pre-deposit amount within the given timeframe.

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