2009 (2) TMI 228 - HC - Central Excise

Stay/Dispensation of pre-deposit - Held that - Admittedly, in the case of consignee - M/s. S.R. Industries, who had obtained goods under CT-3 certificate from the petitioners and others and, in the case of M/s. Riba Textiles Limited where goods were supplied by the petitioners, duty was demanded from the consignees. Demand was confirmed in the hands of the consignees. No appeal was preferred by the revenue. In spite of this, in this case, duty is claimed from the petitioners, who are consignors. In the circumstances, we are of the prima facie opinion that the petitioners are entitled to unconditional waiver especially when the Tribunal has granted unconditional waiver in the case of M/s. S.R. Industries. Pre-deposit order dated 16-7-2007 and order dated 27-10-2008 rejecting modification application of the petitioners must be set aside and the matter must be remanded to respondent 2 for de novo consideration on merits. We, therefore, set aside the impugned orders dated 16-7-2007 and 27-10-2008 and direct respondent 2 to consider the case on merits without any pre-deposit.

Summary

Issues:
Challenge to pre-deposit order and rejection of modification application by respondent 2.

Analysis:
The petitioners, a 100% Expert Oriented Unit (EOU) engaged in manufacturing Synthetic Yarn, challenged a pre-deposit order dated 16-7-2007 and an order dated 27-10-2008 rejecting their modification application. The issue arose when the Central Excise conducted searches at certain 100% EOU premises, including the petitioners'. Show cause notices were issued alleging that goods supplied by the petitioners to a consignee did not reach the consignee but were sold in the local market. The Commissioner (Adjudication) Central Excise confirmed duty demands and penalties, leading the petitioners to file appeals before respondent 2 under Section 35B of the Central Excise Act, 1944, along with applications for waiver of pre-deposit and stay of recovery.

Respondent 2, on 16-7-2007, directed the petitioners to deposit a specific amount within eight weeks, granting waiver of the remaining duty amount and penalties. The petitioners filed a modification application citing a similar case where unconditional stay was granted to the assessee. However, respondent 2 rejected this application on 27-10-2008, extending the pre-deposit time by eight weeks. The petitioners challenged these orders, arguing that inconsistent assessment orders should not be passed. They highlighted cases where duty was demanded from consignees but not from consignors, emphasizing the need for unconditional waiver.

Upon analysis, the High Court found that duty was demanded from consignors in this case while consignees were held liable in similar situations. The Court opined that the petitioners were entitled to unconditional waiver, especially since the Tribunal had granted such waivers in comparable cases. Consequently, the Court set aside the pre-deposit order and modification rejection, remanding the matter to respondent 2 for reconsideration without any pre-deposit requirement. The Court clarified that it had not expressed a final opinion on the merits of the petitioners' submissions, directing the Tribunal to handle the matter independently and in accordance with the law, with a stipulated disposal timeframe.

In conclusion, the High Court's judgment addressed the challenge to the pre-deposit order and modification rejection, emphasizing the need for consistent treatment in duty demands. The Court's decision to set aside the impugned orders and remand the matter for fresh consideration without pre-deposit underscored the importance of fair and equitable treatment in such cases, ensuring a just resolution within a specified timeframe.