2021 (12) TMI 905 - HC - Central Excise

Maintainability of petition - requirement of pre-deposit of 7.5% of the penalty imposed - violation of Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - HELD THAT - The petitioners were getting the job of manufacturing/ fabrication of steel done on job work basis from MEPL. MEPL would use self-procured items/inputs as well as items/inputs received free of cost from the petitioners to manufacture excisable goods. It is alleged that MEPL was manufacturing excisable goods on job work basis for the petitioners and discharging duty liability as per the contracted price between it and the petitioners, however, the petitioners were issuing commercial invoices to their ultimate costumers for the same excisable goods at higher price as compared to the contracted price. There is nothing on record to indicate that the duty liability of ₹ 45,29,528/- claimed by the petitioners is accepted by the respondents. The petitioners proceed on the footing that the petitioners supplied goods having duty liability as claimed by them and therefore, penalty is excessive. To arrive at the conclusion that the petitioners supplied goods having the duty liability as contended by them obviously necessitates a fact finding exercise. The requirement for 7.5% pre-deposit of the penalty demanded cannot be said to be exorbitant or onerous, more so when it is well settled that when a statute confers a right of appeal, while granting the right, the legislature can impose conditions for the exercise of such right, so long as the conditions are not so onerous as to amount to unreasonable restrictions. There are no reason to entertain the present writ petitions in view of the availability of the alternative statutory remedy of appeal - petition dismissed.

Issues Involved:

1. Challenge to the adjudication Order-In-Original dated June 16, 2021.
2. Availability and efficacy of the appellate remedy under Section 35F of the Central Excise Act, 1944.
3. Alleged disproportionate penalty imposed on the petitioners.
4. Jurisdiction of the court under Article 226 of the Constitution of India.
5. Factual errors in the impugned order.

Detailed Analysis:

1. Challenge to the adjudication Order-In-Original dated June 16, 2021:

The petitioners challenged the Order-In-Original dated June 16, 2021, passed by the Joint Commissioner of CGST and Central Excise, Thane Commissionerate. The order confirmed the duty demand, ordered confiscation, and imposed penalties and interest on the petitioners and other parties involved. The petitioners contended that the penalty imposed exceeded their due liability and was without jurisdiction.

2. Availability and efficacy of the appellate remedy under Section 35F of the Central Excise Act, 1944:

The petitioners argued that the appellate remedy under Section 35F was not efficacious as it required a pre-deposit of 7.5% of the penalty amount, which they claimed was an onerous condition. The court, however, held that the requirement for a 7.5% pre-deposit could not be said to be exorbitant or onerous. It emphasized that the right of appeal is a statutory right and can be circumscribed with conditions by the legislature.

3. Alleged disproportionate penalty imposed on the petitioners:

The petitioners contended that the penalty amount of ?1,53,03,329/- was disproportionate to their duty liability of ?45,29,528/-. They argued that the penalty should not have exceeded the duty liability as stipulated under Rule 26 of the Central Excise Rules, 2002. The court noted that the petitioners were attempting to bring factual errors to its notice, which would require a fact-finding exercise not permissible under Article 226.

4. Jurisdiction of the court under Article 226 of the Constitution of India:

The court reiterated that resort to jurisdiction under Article 226 is not intended as an alternate remedy for relief obtainable by way of a statutory appeal. It cited the Supreme Court's decision in Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai, which held that alternate remedy will not operate as a bar only in specific contingencies, none of which were satisfied in this case. The court emphasized that entertaining the writ petitions would virtually permit the bypassing of the statutory machinery created by the Central Excise Act.

5. Factual errors in the impugned order:

The petitioners highlighted alleged factual errors in the impugned order, such as the incorrect quantification of duty demand. The court observed that addressing these alleged errors would entail a fact-finding exercise, which is not within the purview of its jurisdiction under Article 226. It suggested that the petitioners could raise these grievances in an appeal.

Conclusion:

The court dismissed the writ petitions, emphasizing that the petitioners have the liberty to avail of the appellate remedy under the Central Excise Act. It clarified that it had not expressed any opinion on the merits of the rival contentions and dismissed the petitions with no order as to costs.

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