1994 (5) TMI 28 - HC - Central Excise

Issues Involved:
1. Jurisdiction of the High Court under Article 226.
2. Compliance with exemption conditions under Notification No. 175/85.
3. Applicability of the extended period of limitation under Section 11A(1) proviso.
4. Financial hardship and dispensation of pre-deposit.

Issue-wise Detailed Analysis:

1. Jurisdiction of the High Court under Article 226:
The High Court's jurisdiction under Article 226 is limited to scrutinizing the correctness of the order passed by the Customs, Excise, and Gold (Control) Appellate Tribunal (CEGAT). The Court acknowledged this limitation and proceeded to review the facts briefly to determine if the CEGAT's decision warranted interference.

2. Compliance with exemption conditions under Notification No. 175/85:
The O.N.G.C. was granted exemption from duty under Notification No. 175/85, subject to conditions such as proving the intended use to an officer not below the rank of the Assistant Collector of Central Excise and following the procedure set out in Chapter X of the Central Excise Rules, 1944. The CEGAT concluded that the O.N.G.C. had not complied with these conditions, particularly noting that the O.N.G.C. did not file separate classification lists claiming exemption and did not follow the Chapter X procedure for lean gas supplied to Kribhco and the Gas Authority of India.

3. Applicability of the extended period of limitation under Section 11A(1) proviso:
The O.N.G.C. argued that the extended period of 5 years under Section 11A(1) proviso was not applicable as there was no collusion or suppression of facts. They contended that they had filed classification lists under Rule 173B, which were approved by the Central Excise authorities, and had paid the duty of Rs. 19 lakhs and odd in 1988. The High Court observed that the CEGAT did not adequately address whether the extended period of limitation was prima facie applicable and whether the conditions for invoking the proviso to Section 11A(1) were satisfied.

4. Financial hardship and dispensation of pre-deposit:
The O.N.G.C. sought dispensation of the pre-deposit of Rs. 4.27 crores and the penalty of Rs. 75 lakhs, citing financial hardship. The CEGAT dispensed with the penalty but required the duty deposit. The High Court noted that the CEGAT erred in stating that financial hardship was not pleaded, as the O.N.G.C. had indeed mentioned it in their application. The High Court emphasized that the CEGAT should consider the public sector status of the O.N.G.C. and its sufficient property and assets as security for the duty involved.

Conclusion:
The High Court quashed the CEGAT's order directing the deposit of duty and remanded the matter for fresh consideration of the stay application, taking into account the compliance with exemption conditions, the applicability of the extended limitation period, and the financial hardship plea. The Court also allowed the CEGAT to dispose of the appeal directly if deemed fit, and continued the stay granted earlier pending the appeal's disposal.

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