2000 (6) TMI 34 - HC - Central Excise

Summary

Issues Involved:
1. Dispensation of pre-deposit requirements.
2. Discrimination in granting exemptions.
3. Limitation period for duty demands.
4. Financial hardship and reasonableness of pre-deposit.

Detailed Analysis:

1. Dispensation of Pre-Deposit Requirements:
The petitioners sought relief from the requirement of pre-deposit, arguing it would cause undue hardship. Section 35F of the Central Excise Act, 1944, and Section 129E of the Customs Act, 1962, provide that the Tribunal has discretionary authority to dispense with pre-deposit if it causes undue hardship. The Tribunal directed a pre-deposit of Rs. 20 lakhs, failing which the appeal would be dismissed. The court emphasized that the Tribunal should consider prima facie cases and balance convenience and reasonableness when deciding on dispensing with pre-deposits.

2. Discrimination in Granting Exemptions:
The petitioners argued that they were discriminated against as other similarly placed entities were granted exemptions. They cited cases to support their claim that tax authorities should follow judicial discipline and not discriminate between parties. The court noted that one job worker was granted exemption while the petitioner was not, indicating a clear case of discrimination. The court held that this ground was sufficient to exonerate the petitioner from pre-deposit requirements.

3. Limitation Period for Duty Demands:
The petitioners contended that the extended limitation period under Section 11A(1) of the Central Excise Act, 1944, should not apply as there was no intent to evade duty. The Supreme Court has held that the extended period applies only if there is fraud, collusion, or wilful mis-statement or suppression of facts with intent to evade duty. The court found that the Tribunal failed to consider this well-settled legal position and that the petitioners had a bona fide belief that their goods were exempt. Therefore, the demand under the extended limitation period was not justified at this stage.

4. Financial Hardship and Reasonableness of Pre-Deposit:
The Tribunal had questioned the financial position of the petitioners based on discrepancies in their balance sheets. The petitioners argued that the factory's balance sheet and the company's balance sheet are not the same and cited cases to support that financial hardship should be considered appropriately. The court agreed that the Tribunal should consider the financial hardship and the arguable nature of the appeal before insisting on pre-deposit.

Conclusion:
The court concluded that the petitioners had established a strong prima facie case, including discrimination and issues with the extended limitation period. It held that the petitioners should be exempted from the pre-deposit requirement and directed the Tribunal to hear and dispose of the appeal within two weeks. The default clause of dismissal for failure to deposit was set aside, and the Tribunal was instructed to proceed accordingly. The writ petitions were disposed of with no order as to costs.