2015 (9) TMI 775 - HC - Central Excise

Waiver of pre deposit - large scale evasion of central excise duty - clandestine production of excisable goods and removal of the same without payment of excise duty - Held that - all the facts were within the knowledge of the appellants and/or its Director and/or its employees vis-a-vis all incriminating documents were found in the possession of the appellants/Director/employees and such aspects certainly need to be considered at the appellate stage and the CESTAT in the order impugned, after considering the facts placed on record and submissions made by both the sides, prima-facie, has come to the conclusion that no undue hardship would be caused to the appellants if the amount of ₹ 4 crores ₹ 10 lakhs is deposited by the appellants and simultaneously would safeguard the interest of the revenue-respondent. The CESTAT granted an opportunity initially of hearing on 01/07/2013 to counsel for the appellants to get proper instructions from the appellants as to the quantum of pre-deposit that shall be made by the appellants at the interim stage to protect the interest of revenue. CESTAT has also considered, while passing the order impugned, about the factors stated by counsel for the appellants and has, prima-facie, come to the conclusion that the respondent had thoroughly analyzed the material recovered from Jai Ambika Dharamkanta, records of Dharamkanta and slips recovered there from, do prove the nexus about the clandestine clearance and removal of the goods made by the appellants in collusion with others and which was based with Dharamkanta weighment slips of goods of the appellants. It has been further observed that even the Director, in the statement recorded under section 14, demonstrated that weighment slip containing details of truck No. RJ05G2289 and RJ21G1014 related to the appellants, which were used for clandestine removal of goods. All the assets are already pledged/mortgaged with the Banks and, therefore, the interest of revenue cannot be safeguarded merely by the submission of counsel for the appellant that the appellants will not dispose of the assets, to be sold or alienated. When the same are already mortgaged with the Banks and bank would have first charge as rightly submitted by counsel for the respondents. We have already observed the observations of Hon ble Apex Court in the case of Indu Nissan Oxo Chemicals Ind. Ltd. (2007 (12) TMI 220 - SUPREME COURT OF INDIA) and in our view, even if there is financial hardship, the same cannot be a ground in isolation to dispense with the condition of pre-deposit amount. Appellants are granted further one months time to deposit the amount fixed by the CESTAT. If the said amount is deposited by the appellants within the time granted, as aforesaid, the appeal would be considered by the CESTAT on merits and if it is not deposited within the aforesaid time, the appeal before the CESTAT shall stand dismissed - Decided partly in favour of assessee.

Issues Involved:
1. Legality of the CESTAT order requiring pre-deposit.
2. Alleged evasion of central excise duty by the appellants.
3. Adequacy of evidence and procedural fairness.
4. Financial hardship claimed by the appellants.
5. Consideration of undue hardship and safeguarding revenue interests.

Detailed Analysis:

1. Legality of the CESTAT Order Requiring Pre-Deposit:
The appeal challenges the CESTAT order dated 15/07/2013, which directed the appellants to deposit Rs. 4 crores and Rs. 10 lakhs as a pre-deposit against a total demand of Rs. 12,96,41,817. The CESTAT's order stipulated that the balance of the disputed demand would remain stayed until the disposal of the appeal if the appellants deposited the specified amount within six weeks.

2. Alleged Evasion of Central Excise Duty by the Appellants:
The appellants were accused of large-scale evasion of central excise duty. The Directorate General of Central Excise Intelligence conducted a search on 23/12/2009, uncovering incriminating documents and seizing them. Follow-up searches at various locations, including raw material suppliers and transporters, revealed that the appellants were involved in clandestine production and removal of excisable goods without payment of duty. The Commissioner of Central Excise confirmed the evasion of duty amounting to Rs. 6,26,62,091, with a total demand of Rs. 12,96,41,817, including penalties.

3. Adequacy of Evidence and Procedural Fairness:
The appellants contended that the respondent did not provide necessary material to substantiate the allegations of evasion. They argued that the order was based on surmises and conjectures and that there was a violation of natural justice principles. They claimed that they were not given access to all documents or the opportunity to cross-examine witnesses. The respondent, however, maintained that adequate material was provided and ample opportunity was granted to the appellants, who failed to offer proper explanations.

4. Financial Hardship Claimed by the Appellants:
The appellants argued that they faced undue hardship and were unable to deposit the pre-deposit amount due to a lack of liquid funds. They highlighted their overdraft facility with Canara Bank as evidence of financial constraints. The respondent countered that the appellants had not demonstrated undue hardship or provided acceptable evidence of their inability to deposit the amount. The court noted that the appellants did not present their balance sheet or other financial documents to substantiate their claim.

5. Consideration of Undue Hardship and Safeguarding Revenue Interests:
The court referred to Section 35-F of the Central Excise Act, which mandates pre-deposit of duty or penalty pending appeal. The proviso allows for waiver of pre-deposit if it causes undue hardship, subject to conditions safeguarding revenue interests. The court cited various judgments emphasizing that undue hardship typically relates to financial hardship and must be established by the appellant. The CESTAT had considered the facts and concluded that no undue hardship would be caused by the pre-deposit, which would also safeguard revenue interests.

Conclusion:
The court dismissed the appeal, finding no merit in the appellants' arguments. It granted the appellants one month to deposit the amount fixed by the CESTAT, failing which the appeal before the CESTAT would stand dismissed. The court emphasized that its observations would not influence the CESTAT's independent consideration of the appeal on merits.

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