2018 (11) TMI 1516 - HC - Central Excise

Relief of waiver of condition of pre-deposit of duty and penalty amount for filing appeal - technical hardship - whether for refusal to use discretion, there were some circumstances including the conduct of the party and whether case of undue hardship is made out by the appellant? Held that - Apparently false record was prepared for evasion of duty. In spite of these circumstances, the concession is given by the Tribunal in condition of pre-deposit and the order shows that the order was made after 'keeping in view the financial condition and also the admitted liability'. Thus, other things like admitted liability in respect of duty are also considered by the Tribunal and financial condition is also considered. Due to the orders made by this Court of allowing the petitions, the Tribunal gave more concession and the pre-condition amount was reduced. Unfortunately, such orders are made by the Tribunals and the Courts after the order of remand of the matter made by this Court. By filing proceedings in this Court and by filing applications for waiver of the pre-condition, the petitioner has apparently misused the process of law and petitioner has successfully avoided the payment of huge amount of duty, penalty and interest for more than 10 years. Proceedings dismissed.

Summary

Issues:
Challenge to orders of Custom, Central Excise and Service Tax Appellate Tribunal (C.E.S.T.A.T.) regarding pre-deposit of duty and penalty amounts for filing appeals.

Analysis:
1. The petitioner challenged two orders made by C.E.S.T.A.T. regarding pre-deposit conditions for filing appeals under section 35(f) of the Central Excise Act, 1944. The first proceeding involved a duty liability of around ?1.0032 Crore, initially requiring a deposit of ?25 lakh, later reduced to ?12 lakh. The second proceeding dealt with a duty liability of ?2.73 Crore and a penalty of ?1.35 Crore, with the pre-condition amount reduced from 50% to 25% by C.E.S.T.A.T. Both proceedings were challenged in court due to alleged technical hardship.

2. The petitioner contended that their company was declared a sick industry under the Sick Industrial Companies (Special Provisions) Act, 1985, by the Board of Industries and Financial Reconstruction, preparing a rehabilitation scheme. They argued that C.E.S.T.A.T. did not consider this circumstance despite court directions, leading to the challenge of the orders in both proceedings.

3. The court noted that the petitioner had multiple pending petitions challenging duty and penalty assessments totaling over ?20 Crore. The delay in depositing amounts was attributed to pending proceedings and changes in legal representation. The court vacated interim reliefs, allowing arguments to proceed in both matters.

4. The court analyzed the discretionary power of C.E.S.T.A.T. under section 35-F of the Central Excise Act, emphasizing the need for undue hardship to dispense with pre-deposit conditions. The court's role was to assess if there were valid reasons for the refusal to use discretion, considering the conduct of the party and the claim of undue hardship.

5. The court reviewed the Tribunal's orders in detail, highlighting instances of evasion of duty through false records and diversion of funds to fictitious units. Despite increased sales, the petitioner's conduct indicated fraudulent practices, leading to evasion of duty. The court concluded that discretionary power cannot favor companies engaging in criminal activities to avoid duty liabilities.

6. The court rejected the petitioner's reliance on previous cases, emphasizing the unique circumstances of each case in discretionary matters. It noted that despite undeserving circumstances, C.E.S.T.A.T. had provided concessions to the petitioner. Ultimately, the court dismissed both proceedings, citing misuse of legal processes and successful avoidance of duty payments for over a decade.

In conclusion, the court upheld C.E.S.T.A.T.'s orders, emphasizing the need to consider the conduct of parties and the gravity of offenses in discretionary matters related to duty pre-deposits.