1994 (12) TMI 85 - HC - Central Excise

Summary

Issues Involved
1. Withdrawal of permission to remove scrap/waste without payment of duty.
2. Demand for duty on scrap/waste removed without payment of duty.
3. Waiver of pre-deposit under Section 35F of the Central Excise Act.
4. Consideration of undue hardship and interest of revenue in waiver of pre-deposit.
5. Determination of applicable rule (Rule 57F(2) vs. Rule 57F(4)) for brass waste.

Detailed Analysis

Issue 1: Withdrawal of Permission to Remove Scrap/Waste Without Payment of Duty
The petitioner, a manufacturer of valves and valve cores, was initially permitted by the Excise authorities to remove scrap/waste without payment of duty under Rule 57F(2) of the Central Excise Rules. This permission was withdrawn on 10-1-1994. The petitioner appealed this withdrawal, and the Collector of Appeals allowed the appeal on 21-4-1994. No fresh order was passed by the Assistant Collector of Excise thereafter.

Issue 2: Demand for Duty on Scrap/Waste Removed Without Payment of Duty
The Excise Authorities issued a series of show cause notices between 24-4-1989 and 10-6-1993, claiming a total of Rs. 95,12,779/- as payable by the petitioner for the scrap/waste removed without payment of duty. The department based its claim under Rule 57F(4). The petitioner disputed this liability. Both the Assistant Collector and the Collector of Excise (Appeals) confirmed the demand for payment of duty. The petitioner then filed an appeal before the Central Customs, Excise, Gold (Control) Appellate Tribunal, Madras-17.

Issue 3: Waiver of Pre-Deposit Under Section 35F of the Central Excise Act
The petitioner applied for a waiver of pre-deposit under Section 35F of the Act. The Tribunal rejected this application and directed the petitioner to deposit Rs. 50,00,000/- by 30-9-1994. The petitioner filed a writ petition against this order.

Issue 4: Consideration of Undue Hardship and Interest of Revenue in Waiver of Pre-Deposit
The petitioner argued that the Tribunal failed to exercise its discretion under Section 35F properly and did not consider relevant factors for waiver of pre-deposit. The Tribunal noted contrary rulings on whether waste is subject to duty and whether Rule 57F(2) or 57F(4) is applicable. The petitioner claimed undue hardship, stating that the amount directed for pre-deposit was nearly one and a half times its paid-up capital and equal to its annual profit. The Tribunal relied on the petitioner's financial data, including Rs. 2 crore due from sundry debtors and Rs. 2 crore set aside for depreciation, to conclude that no great hardship would be caused.

Issue 5: Determination of Applicable Rule (Rule 57F(2) vs. Rule 57F(4)) for Brass Waste
The short point in the appeal pending before the Tribunal was whether Rule 57F(2) or Rule 57F(4) applies to brass waste obtained during manufacturing and recycled. The facts were not in dispute.

Judgment
The High Court considered the undue hardship to the petitioner and the interest of revenue. It noted that the Tribunal did not properly consider the adverse impact of the pre-deposit requirement on the petitioner's operations. The debts due to the company were not a reliable indicator of its capacity to make the deposit. The High Court set aside the Tribunal's order and directed the petitioner to deposit Rs. 10,00,000/- within four weeks and furnish a bank guarantee for Rs. 20,00,000/- within the same period. The guarantee should provide for immediate payment if the appeal is dismissed.

The petitioner was directed to appear before the Tribunal on 18-1-1995 and cooperate for an expeditious disposal of the appeal, which the Tribunal should endeavor to decide by 28-2-1995. The petition was allowed on these terms, with parties bearing their respective costs.