2015 (2) TMI 745 - HC - Central Excise

Waive of predeposit- Denail of area based exemption- Condition of predepost is meant to secure the interest of revenue and not to punish assessee- Held that - The Commissioner (Appeals) is empowered, as a pre condition to the hearing of the appeal to call upon an appellant to pre deposit such an amount as may be deemed appropriate. The Commissioner (Appeals) has directed the appellant to deposit ₹ 26.00 lacs as duty i.e. the entire amount of duty claimed by the department and ₹ 10.00 lacs as penalty out of the total penalty of ₹ 26.00 lacs, while staying interest. The Tribunal has affirmed this order by primarily recording that the appellant was not able to commence production by 31.3.2010 and, therefore, the order passed by the Commissioner(Appeals) does not call for interference. We shall not record any final opinion on merits but would reiterate that the appellant did raise arguable points relating to commencement of production on or before 31.3.2010. It would also be necessary to reiterate that once an appeal is admitted for adjudication the application for stay should not be decided by imposing such conditions as are onerous or penal or tend to negate the statutory right of an appeal. The condition of pre deposit is meant to secure the interest of the revenue and not to punish an assessee. The appellant has admittedly deposited ₹ 10.00 lacs as directed vide order dated 10.12.2014. We are satisfied that the interest of the reveune would be suitably saved if the appellant is directed to deposit another sum of ₹ 5.00 lacs. Decided partly in favour of appellant.

Summary

Issues:
1. Quashing of order by Commissioner (Appeals) directing deposit of duty and penalty.
2. Denial of area-based exemptions due to failure to commence production by a specified date.
3. Challenge against order of Customs, Excise & Service Tax Appellate Tribunal.
4. Appellant's argument of incorrect facts in original order.
5. Appellant's deposit of directed amount.
6. Revenue's stance on lack of merit in the appeal.
7. Commissioner (Appeals) and Tribunal's decision on deposit amount.
8. Judicial review of the Commissioner (Appeals) order.
9. Appellant's right to seek adjudication.
10. Purpose of pre-deposit condition.
11. Appellant's compliance with directed deposit.
12. Direction for additional deposit and stay on recovery.

Analysis:
1. The appellant sought to quash the order by the Commissioner (Appeals) directing a substantial deposit of duty and penalty as a precondition for hearing the appeal. The appellant invested over Rs. 20.00 crores for setting up a furnace and rolling mill to claim area-based exemptions. The denial of exemptions due to failure to commence production by a specified date led to the appeal. The appellant challenged the order as onerous, hindering the right to seek adjudication of grievances regarding the production commencement date.

2. The appellant's counsel argued that the appellant had commenced production before the specified date, contrary to the revenue's claim. The revenue contended that the machinery essential for production was received and electricity connected after the specified date, justifying the deposit requirement. The Tribunal affirmed the Commissioner's order, emphasizing the failure to commence production by the deadline.

3. The High Court reviewed the impugned orders and acknowledged the appellant's arguable points regarding the production commencement date. It stressed that pre-deposit conditions should not be punitive but aim to secure revenue interests. The appellant's compliance with the directed deposit was noted. The Court directed an additional deposit of Rs. 5.00 lacs, ensuring the revenue's interest protection while allowing the appeal to proceed without imposing overly burdensome conditions.

4. The Court emphasized that the purpose of pre-deposit conditions is not punitive but protective of revenue interests. By directing an additional deposit while staying recovery, the Court balanced the interests of both parties. The judgment highlighted the importance of allowing appeals to proceed without imposing excessively harsh conditions, ensuring a fair adjudication process.