2000 (11) TMI 161 - HC - Central Excise

Summary

Issues:
Challenge to order under Section 35F of the Central Excise Act, 1944 by the Tribunal in stay application. Financial hardship due to payment demand. Assessment of prima facie case for waiver of pre-deposit. Interpretation of Section 35F regarding undue hardship and safeguarding revenue interest.

Issue 1: Challenge to order under Section 35F:
The petitioner contested the order passed by the Tribunal under Section 35F of the Central Excise Act, 1944, regarding a demand of Rs. 72,27,073.20 for unpaid Central Excise duty on soap stocks manufactured during a specific period. The Tribunal directed a deposit of Rs. 35 lakhs, with a waiver of the balance duty and penalty until the appeal's disposal. The Tribunal's decision was based on the assessment of financial stability and the petitioner's compliance history.

Issue 2: Financial Hardship due to Payment Demand:
The petitioner argued financial hardship, citing its status as a sick company under the Sick Industrial Companies (Special Provision) Act, 1985. The petitioner contended that the Tribunal erred in considering the financial position of a related concern and emphasized the alleged undue financial burden if the demand was enforced. The respondent disputed the financial distress claim, asserting that the duty amount had been withheld through dubious means.

Issue 3: Assessment of Prima Facie Case for Waiver of Pre-deposit:
The Tribunal evaluated whether a prima facie case existed for a total waiver of pre-deposit. It found that the petitioner had voluntarily paid duty on soap stocks but had not paid the correct total value. The Tribunal concluded that the plea of the petitioner, claiming the soap stock was not marketable or excisable, was not substantiated. Given the pending appeal and disputed facts, the Tribunal refrained from making definitive findings in favor of either party.

Issue 4: Interpretation of Section 35F regarding Undue Hardship and Safeguarding Revenue Interest:
Section 35F of the Act addresses deposit pending appeal, allowing the appellate authority to dispense with the deposit if undue hardship is established, while safeguarding the revenue's interest. The Court clarified that "undue hardship" implies a burden disproportionate to the requirement and benefit derived. The Tribunal's decision to direct a deposit of Rs. 35 lakhs against the demand of Rs. 1.5 crores, inclusive of penalty, was deemed legal. The Court extended the deposit deadline to the end of December 2000, dismissing the writ petition with the mentioned direction.