2009 (6) TMI 29 - HC - Central Excise

Stay of Demand - Mechanical order of tribunal without application of mind - order of tribunal to grant part stay in mechanical manner without considering the questions whether the case is covered by precedents holding the field and binding upon the tribunal and whether the appellant has prima facie case and is likely to succeed on merit and direction to make any pre-deposit would cause undue hardship or not, and returning a finding on the issues accordingly, is not liable to be sustained - matter remitted back to tribunal for reconsidering the material on record before granting or denying stay.

Issues Involved:
1. Demand and recovery of Education Cess and interest.
2. Imposition of penalty under Rule 25 of Central Excise Rules, 2002.
3. Demand and recovery of wrongly availed and utilized CENVAT Credit.
4. Recovery of interest on wrongly availed and utilized CENVAT Credit.
5. Imposition of penalty under Rule 15 of CENVAT Credit Rules, 2004.

Detailed Analysis:

1. Demand and Recovery of Education Cess and Interest:
The appellant was issued a notice demanding Education Cess amounting to Rs.3,58,717/- under Section 11A and interest under Section 11AB of the Central Excise Act, 1944. The Commissioner of Central Excise confirmed this demand and imposed an equal amount as a penalty under Section 11C of the Act.

2. Imposition of Penalty under Rule 25 of Central Excise Rules, 2002:
The notice also proposed a penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. The Commissioner confirmed this penalty in the order dated 23.09.2008.

3. Demand and Recovery of Wrongly Availed and Utilized CENVAT Credit:
The appellant was accused of wrongly availing and utilizing CENVAT Credit amounting to Rs.6,21,39,585/-. This was demanded under Rule 14 of the CENVAT Credit Rules, 2004, read with Section 11A of the Central Excise Act, 1944. The Commissioner confirmed this demand and imposed an equal amount as a penalty.

4. Recovery of Interest on Wrongly Availed and Utilized CENVAT Credit:
Interest on the wrongly availed and utilized CENVAT Credit was also demanded under Rule 14 of the CENVAT Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944. This demand was confirmed by the Commissioner.

5. Imposition of Penalty under Rule 15 of CENVAT Credit Rules, 2004:
A penalty under Rule 15 of the CENVAT Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944, was proposed for the amount of credit wrongly availed and utilized. This penalty was confirmed by the Commissioner.

Tribunal's Decision:
The Customs, Excise, and Service Tax Appellate Tribunal, New Delhi, directed the appellant to deposit Rs.1 crore within 8 weeks, waiving the balance amount of duty and penalty, and staying recovery until the appeal's disposal.

Appellant's Arguments:
1. Prima Facie Case: The appellant argued that they had a strong prima facie case, which should warrant a waiver of the pre-deposit condition.
2. Financial Hardship: The appellant claimed that insisting on the pre-deposit would cause undue hardship and irreparable loss.
3. Precedents and Binding Judgments: The appellant cited the Punjab & Haryana High Court judgment in Ambuja Cements Ltd. and a larger Bench decision of the Tribunal, arguing that these precedents supported their case for availing CENVAT Credit against onward transportation of goods.

Respondent's Arguments:
1. Ability to Pay: The respondent argued that the appellant, being a profit-making company, could afford the Rs.1 crore deposit.
2. Refund with Interest: The respondent noted that if the appellant succeeded, the pre-deposit amount would be refunded with interest.
3. Statutory Requirement: The respondent emphasized that the statute required a pre-deposit for filing an appeal, and courts should not interfere with this requirement.

Court's Analysis and Conclusion:
1. Prima Facie Case and Precedents: The court noted that the Tribunal failed to consider the binding effect of the Punjab & Haryana High Court's decision and the larger Bench's judgment, which supported the appellant's case.
2. Undue Hardship: The court emphasized that "undue hardship" encompasses not only financial difficulty but also situations where the appellant has a strong prima facie case.
3. Legal Obligation: The court stated that the Tribunal must balance the interests of revenue with the rights of the individual and should not mechanically insist on pre-deposits without considering the merits of the case.

Final Judgment:
The appeal was allowed, and the Tribunal's order dated 01.05.2009 was set aside. The matter was remitted back to the Tribunal to decide the stay/waiver application afresh, considering the observations made by the court, within three weeks from the receipt of the court's order.

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