2008 (7) TMI 33 - HC - Central Excise

Once the Tribunal had quashed OIO on the ground of denial of natural justice (petitioner had been denied an opportunity of hearing by commissioner), Tribunal ought not to have imposed condition of deposit of 30.00 lacs - no penalty leviable against appellant after the setting aside of OIO - when appellant is seeking opportunity of hearing, deposit of 30 lacs is harsh - Commissioner shall hear the appellant as directed by the Tribunal, but without requiring the appellant to deposit 30 lacs

Summary

Issues:
1. Appeal against order of Customs, Excise and Service Tax Appellate Tribunal.
2. Imposition of penalty without duty or demand.
3. Tribunal's direction for deposit of penalty for fresh hearing.
4. Interpretation of Section 35F of the Central Excise Act, 1944.
5. Denial of natural justice and opportunity of hearing.

Analysis:

1. The appellant filed an appeal against the order of the Customs, Excise and Service Tax Appellate Tribunal (Tribunal) dated 31.01.2008, challenging the penalty imposed by the Commissioner of Central Excise on 23.03.2007. The Tribunal set aside the order-in-original due to lack of effective hearing provided by the Commissioner, and directed fresh orders after giving an opportunity of hearing to the appellants. Other parties had also filed appeals, and the appellant sought waiver of pre-deposit.

2. The Tribunal directed the appellant to deposit Rs. 30.00 lacs as a condition for fresh hearing by the Commissioner. The appellant contested this direction, citing Section 35F of the Central Excise Act, 1944, which requires a deposit for hearing an appeal. The appellant argued that since the order-in-original was set aside with no duty or penalty levied, the deposit condition was unjustified.

3. The High Court analyzed the situation and held that once the order-in-original was quashed due to denial of natural justice, imposing a deposit condition was inappropriate. As there was no penalty leviable after setting aside the order, requiring the appellant to deposit Rs. 30.00 lacs for a hearing was deemed harsh and burdensome. The Court set aside the requirement for the deposit, allowing the Commissioner to hear the appellant as directed by the Tribunal without the deposit condition.

4. The Court emphasized that the purpose of setting aside the order was to provide the appellant with an opportunity of hearing, and imposing a deposit condition contradicted this objective. Therefore, the impugned order was modified to remove the deposit requirement, ensuring the appellant's right to a fair hearing without undue financial burden.

5. In conclusion, the High Court's decision clarified the interpretation of Section 35F in the context of a case where the order-in-original was set aside for lack of natural justice. By removing the deposit condition, the Court upheld the principles of fairness and opportunity of hearing for the appellant, ensuring a just resolution of the matter.